Labor Shortage Hampers BJ's Growth Trajectory

Part of the delayed growth lies in the inability to seat every BJ’s table.

August 2, 2021 Suzanne Blake

BJ’s Restaurants must emerge from the labor shortage before the brand can hit its full stride again post-pandemic, executives said Thursday.

This reflected in the chain’s growth prospects: In 2022, BJ’s plans to open eight to 10 units, a number well below some past levels, where it’s targeted as many as 16–17 stores.

The pipeline for unit development not only relies on real estate and the restaurant sales environment, but also having enough team members and managers to meet that demand.

“As we exit the pandemic and we build up our manager pipeline, we are not going to sacrifice on our manager pipeline in regards to not having the people that can operate frankly $6 million averaging volume restaurants,” CFO and incoming CEO Greg Levin said during the company’s Q2 earnings call (current CEO Greg Trojan is retiring). “So, for us to get back to where we want to grow our business, we're going to do it in a very deliberate manner that allows that quality and consistency.”

BJ’s currently operates 212 restaurants in 29 states, leaving whitespace for future growth.

In Q2, BJ’s opened two locations in Merrillville, Indiana, and Lansing, Michigan, with plans to reopen the Richmond, Virginia, location after its temporary closure and remodel next month.

Much of BJ’s performance in the period showed staffing challenges plaguing restaurants across the country.

Overall, BJ’s saw comparable restaurant sales jump 121.9 percent from Q2 2020. Compared to 2019, same-store sales declined about 6 percent. But figures trended upward. Same-store sales (versus 2019) climbed from negative 17 percent in March to negative 7.6 percent in April and May. Momentum continued in June as BJ’s improved to negative 3.8 percent and, finally, July returned to the black at positive 1.6 percent. July benefited from 90 percent nearly recovered dining room sales and off-premises sales, which continue to be more than double pre-pandemic levels.

Total revenue for BJ’s jumped 126.7 percent to $290.3 million compared to Q2 2020. Sales saw considerable growth from April to June, rising from average weekly sales per restaurant of $102,000 to $110,000 as dining room restrictions were eliminated.

BJ's growth pattern falls well short of casual-dining competitors. For example, Texas Roadhouse's comps skyrocketed 21.3 percent in the second quarter, while Outback Steakhouse's domestic comps rose 11.3 percent versus two years ago.

Part of the delayed growth lies in the inability to seat every BJ’s table. The restaurants with lower staffing are unable to do so because this would lead to overworked servers or cooks, diminishing the hospitality and execution Levin said BJ’s wants to provide. Operators say capacity is somewhere in the 80 percent range, even though technically all seats are now open in restaurants.

“In our restaurants where staffing is most challenged, we are limiting the tables we seat in the near term, as we are uncompromising in delivering a best-in-class experience to each guest we serve,” Levin said. “We believe our approach is the right long-term strategy to meet and exceed the expectations of our loyal guests and keep them coming back.”

flickr: brokentaco

In order to drive sales back, BJ’s must be fully staffed, Levin said.

It’s happening already. BJ’s fully staffed units drove “meaningfully” higher same-store sales at high-single and double-digit comps. BJ’s stores in Southern California, Arizona, and Ohio markets stood out with comparable sales higher than BJ’s average, while stores in Northern California and the Pacific Northwest found more difficulty.

In Q2, BJ’s increased its hourly employee count by 15 percent but many stores continue to be understaffed. Levin said BJ’s went down the path of many other restaurants with job fairs and hiring incentives, but the priority is current employees and retaining them.

“I think the best thing that we tend to look at is, really, is how do we incentivize and reward our current team members?” Levin said. “We don't think the right thing to do is to offer bonuses for somebody new joining us when we've had somebody working for us for five, six, seven years. So our general viewpoint is really to make sure we're taking care of our current team members, building on that culture within the four walls of our restaurants. And that in of itself, feeds on itself to bring other people into BJ’s.”

Ideally, Levin would like BJ’s to be fully staffed tomorrow. The timeline of when the company realistically believes that will be the case, however, takes into account that BJ’s Q3 traditionally brings lower sales as summer schedules get disrupted. The goal would be to have BJ’s at full staff before Q4, when weekly sales historically rise with the advent of the holiday season, but Levin admits it’s going to be a challenge. Still, with federal unemployment benefits ending in September and the back-to-school season commencing, he forecasts a better hiring scenario in the future.

If BJ’s can achieve full staffing levels Levin predicts a decrease in overtime and training, impacting labor margins. In Q2, restaurant-level operating margins improved by 330 basis points from Q1 to 14.8 percent.

BJ’s current improvement in sales was driven by capacity and demand, incoming CFO Tom Houdek said. In April, more than 70 percent of dining rooms still operated with capacity limitations, but by June, stores were fully reopened. With declining COVID-19 cases and household balance sheets stronger than ever, guests have more to spend on experiential dining like BJ’s, he said.

BJ’s added it’s not seen any recent changes in business despite increased COVID-19 cases of the Delta variant, even in Southern California where mask mandates are back in place. In the scenario more virus restrictions occur, BJ’s has the flexibility of reintroducing pull-down patios it implemented in the past restriction period. Of the dayparts, afternoon and dinnertime sales continue to outpace 2019, but late night still lags behind with slight improvement stemming from the NBA playoff calendar and the end of social distancing policies.

“While we continue to monitor the COVID landscape including the Delta variant, we remain optimistic in our ability to continue to grow sales into Q3 and the rest of this year,” Houdek said.

BJ’s Restaurant & Brewhouse

“The dedication, resilience, and focus of our restaurant level teams at all levels from dishwasher to general manager has been a stalwart of our success throughout the years, and never been on display more than through the pandemic challenge of the past year and a half,” said outgoing CEO Greg Trojan.

Even while awaiting an end to the labor shortage, innovation is on the horizon at BJ’s.

A new beer club subscription service launched at the majority of California stores in March. The program provides members two months of unique and exclusive beers from the BJ’s brewery team and additional food and beverage benefits for $30. Membership signups are trending up, and Levin is encouraged by its ability to drive visits and profit. With Texas and Florida adopting laws enabling alcohol to-go permanently, these states offer high potential.

Another key initiative BJ’s took on is its own virtual brand, Slo Roast. Currently piloting in 30 stores, orders are adding up with a 20 percent range overlap between BJ’s regular guests and Slo Roast customers. The next phase of testing will involve menu iteration, but BJ’s hopes to build staffing levels closer to pre-pandemic levels before larger expansion.

Moving into Q3, BJ’s is gearing up for new leadership as Levin takes on the CEO role of his predecessor Trojan in September.

Throughout Trojan’s tenure, BJ’s grew from 127 restaurants to 212, launched its Project Q initiative to boost efficiency, and added the healthy enLIGHTened menu, loaded burgers, and slow-roasted protein platform to BJ’s offerings. Technology was a key driver of growth during this time period, too, with a mobile app created and handheld server tablets implemented in the dine-in experience.

“The dedication, resilience and focus of our restaurant level teams at all levels from dishwasher to general manager has been a stalwart of our success throughout the years, and never been on display more than through the pandemic challenge of the past year and a half,” Trojan said. “A great concept together with a first-class team is a combination that's hard to beat. But when you add to that, a brand that because of this eclectic menu, and timeless design, can continue to evolve without losing the core of its essence, along with a long runway for organic growth, I think you really have something.”