Lunch and late-night, the most impacted dayparts, weighed on three-year comps by more than 4 percentage points in the first quarter. However, both times of day are showing signs of growth in early Q2. Lunch has returned to flat versus 2019, thanks to a new value menu that’s bringing in more weekday traffic. Late-night is trending positively in April because hours of operation are now only 30 minutes less per day than pre-COVID.
Levin also sees opportunity with technology, like mobile pay and QR codes, which have appeared “fairly sticky” in restaurants. They’re not at the same levels as the peak of COVID, but the simple availability of those innovations quicken transactions for guests and table turns for employees.
“I don’t see any reason why we wouldn’t get our dining room back,” Levin said. “The trend toward historical dining patterns seems to be playing out. And I know everybody wanted it to happen yesterday and so forth, but as we look at our business and people get more comfortable going out, we, all of a sudden, see late-night now in a positive comparable restaurant perspective. I don’t believe there is any issues there.”
BJ’s is also piloting remodels that add three large booths for extra seating capacity and new design elements that bring more entertainment value, such as bigger TVs. Levin said early results are “encouraging” and providing a “very attractive return.”
“There’s a model of our restaurants that’s about somewhere in the quarter to a third of our restaurants that had some unused space that we can rebuild and turn into three large booths,” CFO Tom Houdek said. “And when we look at where we have the most capacity constraints or we run waits at dinner time, the extra sales that we’re driving, again, early data here, but we’re seeing up to $1,000 or $2,000 more of sales per week.”
In terms of development, BJ’s hopes to debut as many as eight restaurants in 2022. The chain opened in Charlotte, North Carolina, in March, and held another opening in San Antonio, Texas, earlier this week. Five more stores are under construction, and the company plans to break ground on a sixth unit by the end of April.
The near-term goal is to reach 5-7 percent in annual unit growth. Chief Development Officer Greg Lynds said B sites are increasingly available with landlords offerings more flexibility and tenant improvement allowances. Opportunities are rising for second-generation builds inside former restaurants and retailers, as well.
“With only 213 restaurants today in 29 states, you think about Olive Garden with 800-plus, Texas Roadhouse with 600-plus, we have plenty of room within our 29 states or adjacent states to really keep our expansion within our existing markets and where we can leverage our supply chain, our supervision, our brand awareness,” Lynds said. “And that’s our goal certainly for the next two years. But we’re excited about the opportunity to not only expand in our existing markets, but also take on a few new markets as we grow in the coming years.”
Food cost inflation was in the high-single digits in Q1 year-over-year, and in the low-single digits versus Q4. Labor costs, at 38.9 percent of sales, were unfavorable to 2021 and 2019. To mitigate this impact, BJ’s took 1.8 percent pricing in February and plans to take an additional 1.4 percent in June.