The chain said sales volumes are running ahead of staffing levels.
At this time last year, full-service brands were in the early stages of upgrading technology, streamlining menus, creating outdoor seating, and offering family meal deals—anything and everything to pull them through what was likely the toughest environment they’ve ever faced.
BJ’s Restaurants did all of those things, particularly with the later introductions of its beer subscription program and new virtual brand, Slo Roast. Same-store sales were even within 7 percent of 2019 levels through the first three weeks of April.
So yes, April 2021 is a much different environment. But the challenges remain, and the major one looming over everyone is the ongoing labor crisis. BJ’s estimates that in order to return to pre-COVID sales levels on a sustainable basis, it needs to recruit more than 5,000 additional hourly employees and more than 125 managers. Pre-pandemic, BJ’s had roughly 23,000 employees across its more than 200 stores. Right now, they’re around 17,000 to 18,000.
“These restaurant leaders are critical to both strong execution today and to fuel our future growth as we ramp up our new restaurant openings,” CEO Greg Trojan said during BJ’s Q1 earnings call. “Much like our long-standing philosophy on opening new restaurants, where we always have prioritized the quality of openings over quantity, we will not compromise our hiring criteria as we seek only the best hospitality-focused team members.”
BJ’s isn’t facing a unique obstacle—labor is a significant issue across segments. Major chains like Firehouse Subs, IHOP, and Taco Bell have planned large job fairs. Some operators are going to different extremes. For example, a McDonald’s in Florida is offering $50 for candidates to come for an interview.
CFO Greg Levin said sales are running ahead of BJ's ability to hire the right amount of people.
“They're not where we like them to be in regards to our traditional staffing models as much as our [Net Promotor Scores] are up and everything seems to be going in the right direction,” Levin said. “The ability to hold on to those from a long-term perspective or sustainability, as we said, really comes down to making sure we've got the right team members on there. They're working the correct amount of hours and the right shifts so that they like and love working at BJ's from that standpoint.”
In Q1, labor was 36.6 percent of sales, which is only 40 basis points higher than Q1 2019. This was accomplished with $81,000 in average weekly sales compared to $111,000 two years ago. Levin noted that labor productivity has been a result of several adjustments, including a slightly smaller menu, changes in management staffing levels based on weekly sales results, strength in off-premises, and leverage from growing weekly sales as capacity restrictions ease.
Regarding what’s permanent and sustainable, Levin isn’t sure he has an answer because the amount of training expected to return in the coming weeks will be “much more substantial” than what BJ’s has seen in the past year. The CFO said one also has to consider this: As dining rooms open, a server is attached to that additional sale as opposed to leveraging off-premises. He thinks those factors will move labor percentage up somewhat versus what was seen in Q1.
“We know us, as well as the rest of the industry, are all fighting to get good people back into the restaurants, and that will put some inflationary pressure on there,” Levin said. “So it's hard to kind of quantify labor hour savings versus what the dollar rates may be.”
As BJ’s searches for its 5,000 team members, a big question is how BJ’s can find and retain the right people. Trojan said because of BJ’s high sales volumes, the chain has always been an attractive place, especially for servers. But culture also plays a role, and the CEO explained BJ’s has worked hard toward that. With that said, BJ’s has been successful as of late; the chain hired roughly 750 workers in the past three weeks. Stores haven’t shortened hours of operation or removed dining room seats.
“I mean, our team is handling the pressure well, and we are seeing success in hiring people,” Trojan said. “So the core of operations is creating the right place to work and the right conditions if you will. And so far, we're still optimistic. We remain optimistic we'll be able to negotiate through it all, but it's tougher. It’s tougher right now.”
Levin said BJ’s is not only competing with its peers to hire the best workers, but also increasing unemployment insurance from the government. The CARES Act, passed in late March 2020, gave unemployed workers a $600 weekly boost. That eventually changed to $400 per week. This past March, President Joe Biden’s $1.9 trillion American Rescue Plan gave unemployed individuals a $300 weekly bump through the beginning of September.
BJ’s wants people that have high integrity and hospitality and can handle the larger volumes. And generally, it tends to look for individuals that have restaurant experience. It’s just a matter of convincing those workers to come back.
“There might be a little bit more of an influx of people that come at that [September] time frame,” Levin said. “This set of unemployment insurance that's been given through the pandemic, and frankly, not going to debate whether right and wrong or indifferent from that standpoint, but it was given at a rate to really supplement or bring people in lower-paid job or in service-type jobs to make them whole."
“So there's less of an incentive sometimes for people to get back into some of these positions that are in the $15 to $20 hourly wage rate right now,” he continued. “And I think that might change in the September time frame as the unemployment insurance expires from the federal level.”
In recent years, kitchen positions have been harder to fill, but the opposite is true during the pandemic. As Trojan explained, there’s a fixed amount of hours needed to run a kitchen, so back of house has continued to be fairly staffed. However, when dining rooms aren’t open, there aren’t nearly as many front-of-house employees. Trojan said BJ’s isn’t going from zero, but it’s close. There were some workers facilitating takeout, but not close to the number needed to run a dining room.
BJ’s doesn’t know when it will reach the staffing level it prefers. The hope is that by the holiday season, BJ’s will be in a more normalized place and that labor and sales will have reached a better equilibrium. Indeed, it will be a busy time for BJ’s coming up, as Mother’s Day, Father’s Day, and graduation season approaches.
“The key to continuing to deliver our gold standard service as our sales volumes recover is hiring and retaining talented restaurant managers and hourly team members,” Levin said. “Great people delivering our gold standard food, service, and hospitality is how we grow our sales volume beyond our prior levels, which enables us to manage labor as a percentage of sales at levels that productively contribute to bottom-line growth.”