BJ’s Restaurants CEO Greg Levin feels nothing but encouragement as the calendar glides through April, and for good reason.
After seeing two-year same-store sales sink 3.3 percent in December and 6.4 percent in January, comps returned to positive at 1.2 percent in March and mid-single-digit growth in April. Restaurants are averaging $118,000 in weekly sales, a 1.2 percent increase compared to 2019. It’s a far cry from the $96,000 stores were pulling in at the start of 2022.
Even with Omicron, BJ’s earned a Q4 record $291.3 million in total sales, and the casual-dining chain followed up with a Q1 record $298.7 million.
For Levin, the bounce back paints a bright future, one where BJ’s expands to at least 425 restaurants nationwide and more than $2 billion in sales. For reference, the restaurant sits at 213 stores and earned $1.1 billion in sales in 2021.
“And look, between all of us on the call, we hope to get to $2 billion in sales with less than 425 restaurants,” Levin said during the chain’s Q1 earnings call. “That’s our goal. We’re not just wanting to get there by a double of the BJ’s restaurants. We want to grow that weekly sales average up.”
“I think we have a good opportunity in off-premises,” he added. “And I think we still have a good opportunity in the dining room.”
To Levin’s point, in 2021, average weekly off-premises sales lifted to more than $20,000 per restaurant—doubling pre-COVID levels—and it remains just as strong in April. To differentiate its takeout/delivery experience, BJ’s will soon introduce an advanced order tracker with real-time progress information to complement its text message alerts. Additionally, the brand is improving its printed order labels to increase accuracy.
Dine-in traffic is still down 10-20 percent versus 2019, proving BJ’s has meaningful capacity it can add to already accelerating comps.
That starts with bettering the labor situation within restaurants, and BJ’s did so by reducing the number of understaffed locations. The numbers show how much of a difference that makes; in the first quarter, restaurants with pre-pandemic staffing levels saw 2.2 percent growth in comp sales against 2019, which was 10 percentage points better than those still rebuilding their teams.
“Your staffing levels might feel pretty good when we look at them on a piece of paper, but we still end up with callouts and other issues, just whether it’s COVID or something else that plays into it,” Levin said. “That will impact sales for that day or for a couple of days. So, staffing is not where it was in ‘17, ‘18 or ‘19 from that perspective. But, if I had to think about looking back on the last year plus, 15 months or so, we’re in a much healthier place today than where we’ve been over that time frame.”
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.