BJ's Restaurants, Inc.

Good afternoon and welcome to the BJ's restaurants first quarter 2025 earnings release conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and one on your telephone keypad. To withdraw your question, please press star then to please note this event is being recorded. I would now like to turn the conference over to Ronna Shermer, director of SEC reporting. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to our fiscal 2025 first quarter investor conference call and webcast. After the market closed today, we released our financial results for our fiscal 2025 first quarter. You can view the full text of our earnings release on our website at .bjrestaurants.com. I will begin by reminding you that our comments on the conference call today will contain forward looking statements within the meaning of the private securities litigation reform act of 1995. Investors are cautioned that forward looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. These statements are based on management's current business and market expectations and our actual results could differ materially from those projections in the forward looking statements. We undertake no obligation to publicly update or revise any forward looking statements or to make any other forward looking statements, whether as a result of new information. Future events or otherwise, unless required to do so by the securities laws investors are referred to the full discussion of risks and uncertainties associated with forward looking statements contained in the company's filings with the securities and exchange Commission. We will start today's call with prepared remarks from Brad Richmond, our interim chief executive officer, followed by a Lyle tick our president and chief concept officer and Tom Hoteck our chief financial officer. After I prepared remarks, we will take your questions and with that, I will turn the call over to Brad Richmond Brad.

Thank you, Ronna and good afternoon. Everyone. We appreciate you joining us today to discuss our performance for the fiscal first quarter of 2025 and updated and outlook to 2025. Our first quarter comp sales performance was strong driven by significant traffic growth, which meaningfully outpaced the industry. While sales were a bit behind our internal expectation. The shortfall was isolated to February or monthly comps were negative due to adverse weather and the delay in federal income tax refund processing. But January and March comp growth was strong at approximately plus 3% in line with our expectations. Importantly, our operating initiatives delivered improved guest satisfaction scores, which bodes well for future sales growth and we expanded margins beyond the normal sales growth leveraging expectations. As a result of the stronger margin performance we've raised our earnings expectations and increased our plan share buyback range Tom will take you through those details in a minute. Even amidst the potential macro economic headwinds in 2025 we believe we are well positioned to continue to be a share taker and expand margins as we look across the remainder of the year. Underlaying this are well developed near term sales growth drivers initiatives around operational excellence and executing at our best while also supporting investments in our longer term strategic initiatives to create shareholder value beyond 2025. Before I turn it over to allow to walk you through a few of those key highlights. I want to thank our restaurant operators who make this happen every day at every restaurant for every guest. Our support team centers who have raised their level of support to enable our operators to perform better. And the rest of our leadership team who have been very agile and adaptive on developing and implementing near term actions and have put in the extra effort. To develop our broader strategic initiatives as we move this business ahead with more clarity and certainty and a big thanks to allow for his guidance through the early phases of this journey. His insight and leadership have been instrumental in our progress and we believe BJ's is well positioned for the long term. With that, let me turn it over to allow to talk more broadly about our brand

refresh and growth initiatives.

Thank

you, Brad.

Good afternoon everyone and thank you for joining us today. I'm happy to report another quarter of positive sales driven by .7% traffic growth. Which beat the black box industry average by approximately 320 basis points. As well as margin expansion resulting in 16% restaurant level operating margins and .2% adjusted even a margins representing improvements of 100 basis points and 150 basis points respectively year over year. I'm also pleased with the progress we're making across both our short and long term strategic initiatives. While we're still in the early innings of this journey, we're increasingly confident in our actions and continue to believe the work we're putting in place. Now we can build upon going forward. Before I look ahead, I will take a moment to briefly double click on Q1. We continue to put the guest and team member experience at the center of everything we do. And I believe that is reflected in our sales performance, particularly our continued traffic out performance as well as our margin expansion. On the sales side, we continue to leverage one of our core brand equities, the Suzuki. The Suzuki meal deal continues to resonate with guests, providing a great value and an accessible everyday splurge opportunity that consumers need now more than ever. I also want to give a shout out to our marketing and operations teams for their agility and recognizing and building on the emerging social media interest in our Suzuki platter, which combines for regular size. Into one huge treat this off menu jumbo Suzuki started to gain traction in January on tick dot and the teams moved quickly on both the marketing and operations side to leverage the momentum. So far, the platter has generated over 57M in organic social impressions and we've sold over 24,000, physical platters, a 17 times increase from the previous run rate. This compelling value combined with increased social relevancy was reflected in traffic growth, not only during the week when the physical meal deal was offered, but also throughout the weekend. On the margin side, we continue to focus on helping our team members be more effective and efficient to enable better execution and get satisfaction. Outside our typical sales leverage gains, we continue to make practical improvements to our POS and KDS systems to help make it easier for our team members to enter menu items, improving accuracy and speed for the guests. And helping us reduce our comp food and beverages, which has seen a 13% reduction year over year a win win for the team member and guest experience. I also want to highlight our proactive facilities program, leveraging our equipment tagging. We put in place in the 2nd half of last year and preventative maintenance programs that mitigate emergency repairs and ensure our team members have the tools to deliver. These programs combined with other facilities initiatives have delivered an overall 4% R and M spend reduction for the quarter while helping our team members execute better. All of the work we're doing culminates in our guest satisfaction metrics, including food value and recommend scores, all hitting multi year highs, making us increasingly confident that the work we are doing has a runway to build upon. As we head into our celebration season during the 2nd quarter, our momentum provides us a great opportunity to further drive sales and grow profit. I want to thank our teams for their dedication and agility navigating a choppy sales quarter that started strong in January, followed by a challenging February driven by weather and some delayed tax returns processing. And then March that bounced back with strong top line trends that are continuing to hold. This kind of choppiness requires a lot of agility by our operators to forecast staff and manage the business efficiently and effectively and they did just that in Q1. With respect to the consumer, clearly there's a lot of uncertainty out there, which no one loves. Having said that, we're not seeing any mark changes in our guest behavior across income cohorts traffic or check management. Well, we have seen a nominal increase in physical meal deal incidents. The increase we have seen in traffic combined with a great job. Our team is doing leveraging the incremental sales have delivered strong results overall. I feel confident that between the physical meal deal improvements and operations and our product roadmap, we're in a good place to compete and win at a time when consumers will be focused on ensuring when they go out that it's worth it. On the tariff front, Tom will get into more details, but about 85% of our food is sourced from either US, Canada or Mexico under USMCA and not subject to the proposed tariffs. We do not see much impact in Q2, but have contemplated some modest incremental inflation in the second half. At this point, we feel comfortable with what we have done. We are not planning any extraordinary changes to our pricing or promotional optimization initiatives. We are, of course, keeping a close eye on the evolution of the policy and will adjust accordingly. Looking ahead, we recently completed our brand positioning work and while it's only been 10 weeks since we reported Q4, our cross functional teams are diligently working to move our plans from strategy to action and I continue to be pleased with the progress. We'll begin to see the impact of the work across our menu operations marketing in the second half of the year. I will now provide a brief update on progress across our four strategic priorities. Starting with the team member experience, we continue to focus on simplification and training. As I mentioned before, we are working from a relative position of strength here. Our turnover continues to be below pre pandemic levels, significantly below industry averages and the trend is improving. Plus, we see a high correlation between manager, manager tenure and restaurant performance. I just returned from some visits last week in California and Colorado and the engagement and energy in the field is great. They feel the momentum in the business and are excited about the changes on the horizon, many of which have come from them. And I think this energy is reflected in the improvements we're seeing across guest metrics that I mentioned earlier. Simplification is going to be an ongoing journey for us, led by operations and supported by our cross functional support center teams. In addition to continuing the work we're doing to optimize our POS ordering screens. We set up a working group led by operations with the participation of our directors of operations, general managers and team members. This task force task force has identified 50 plus potential process and procedure improvements that come directly from the restaurants and we are working through prioritizing and sequencing impact and effort. On the training front, we continue to refine our new team member training and that feedback continues to be very positive. This is particularly true with respect to the first 90 day retention as new team members get buddied up from the beginning and more quickly feel part of our community. Our next big training initiative is rolling out new manager training and a refresh certified training manager program. Our aim is to roll this out and our GM conference in Q4. With respect to our menu and handcrafted food and beverage offering on our last call, I mentioned that the brand work we have done has reinforced that we have some very powerful core pillars of our menu with strong brand equity and association as well as some emerging opportunities. Our signature pizza, our world famous Suzuki and our award winning craft beverages are clear areas of strong association and equity. Our shareable items stakes and slow roasts are strong traffic drivers and emerging areas of strength. In these platforms where we choose to compete to win. We want to ensure we have the best offering and we can deliver it consistently great. To enable this. We've also identified an opportunity to optimize menu offerings around these core pillars. We're taking a structured category management approach to this work with the first category being a renovation of our signature pizza platform. Pizza is a core equity and strong brand association, but it's had a road and get satisfaction and incidents in recent years. We've dissected the feedback and our culinary team has renovated the product from round up. Starting with the crust to ensure it's crispy and light every time through the new sauce, the cheese, pepperoni and so on. Our operations and central location testing were very strong and we recently moved into an expanded market test with encouraging initial results. Along the journey. We're also taking advantage of our natural menu cycles to implement low hanging food opportunities to drive guest engagement and our simplification opportunities. On April 17th, we introduced 2 new wing sauces honey barbecue and honey Buffalo expanding turf coverage with the sauces. The main driver of choice in this category without adding any operational complexity. Wings remain our number 1 ordered shareable appetizer. We also launched our LTO Snickers, Pizzucchi, which is driving a lot of brand buzz and trial. Looking ahead to our June menu, we've identified 9 skew reductions and 5 prep simplifications that we're moving forward as we continue to plan for further category optimizations, which require more thorough testing like pizza. Our 3rd priority is delivering wow hospitality hospitality is always been at the heart of BJ's and a big reason why our loyal guests keep coming back. We continue to be focused on putting our managers and team members in the best position to deliver wow hospitality to our guests both on and off premise. We continue to evolve and calibrate our forecasting model and labor scheduling. It's all about having our team members in the right place at the right time to wow our guests. We're seeing opportunities to be more efficient and effective, particularly around the shoulder periods. While also identifying labor mix and peak our opportunities in an expanded pilot in an expanded pilot in certain restaurants in Texas and Northern California. We're leveraging AI to drive not just the forecasting, but also our labor scheduling and we're seeing encouraging improvements in both labor hours and guest sentiment versus control. We will continue to calibrate and scale throughout 2025, but we believe we have a definite opportunity going forward. Lastly, we have our 4th priority keeping our atmosphere fresh BJ's atmosphere has always been a differentiator for the brand investing in keeping our atmosphere fresh to remodels will continue to be a priority as we move through 2025 and we continue to rebuild our new restaurant pipeline. Are on remodels we've completed 8 so far in 2025 with approximately 20 more plan for the remainder of the year. Our remodeled restaurants continue to perform as expected with improved performance versus control. On new restaurants, we open a new restaurant in Queen Creek, Arizona, just outside of Phoenix. It was our 2nd highest sales opening week ever after Tracy California in 2024 and reinforces our hypothesis of focusing our near term development in geographies where we have an existing footprint infrastructure and awareness. Our capital expenditures in 2025 related to new restaurant openings continue to depend on how quickly we can develop a more robust and targeted pipeline that aligns with our refined criteria for new locations. We're excited about the future unit growth for BJ's and will keep you updated as we move through the year. I'm proud of our teams and the progress today, the energy engagement and alignment behind our strategic initiatives that has allowed us to create early momentum and lay strong foundations for an exciting and ambitious agenda still on the horizon. Thank you and now I'm going to turn it over to to Tom to provide more details on 1st quarter results and an updated outlook for 2025.

Thanks Lyle and good afternoon everyone. In the 1st quarter, we generated sales of 348Million, which was .2% higher than last year. On a comparable restaurant basis, Q1 sales increased by 1.7%. Driven primarily by .7% traffic growth. We had a solid start to the quarter with comp sales up approximately 3% in January. Winter weather impacted our February results with comp sales down approximately 1%. Then we ended the quarter much like it started with March comp sales up approximately 3%. As Lyle mentioned, we have not seen any material change in guest behavior in recent weeks. April comp sales are up in the mid 2% area and up more than 3% when excluding the Easter week with the mismatch holiday lap. Our restaurant level cash flow margin was 16% in Q1, which was 100 basis point improvement from a year ago. We effectively leveraged our sales and improved our operational efficiencies, delivering improving margins while also investing in marketing. Our restaurant level operating profit increased 10% to 55.6Million, which marks our most profitable Q1 ever. We are pleased with our progress improving margins to date and as Lyle outlined, we have a range of strategies and initiatives to continue to grow margins both on a dollar and percentage basis going forward. For more detail on restaurant expenses, our cost of sales was 25% in the quarter, which was 20 basis points favorable compared to a year ago. Food cost inflation was approximately 3% year over year, but deflationary from Q4 levels driven by lower sequential costs for bone in wings, steak and produce. Labor and benefits expenses were .1% of sales in the quarter, which was 100 basis points favorable to last year. Our restaurant teams hit their stride, leveraging higher sales and boosting efficiencies while improving our guest sentiment scores as we drove solid traffic in the quarter. Remember that winter weather had a meaningful impact on sales and operations during the quarter, so we delivered a solid labor performance despite operational headwinds during periods of less predictable traffic. Occupancy and operating expenses were 23% of sales in the quarter, which was 20 basis points unfavorable compared to last year. The difference versus last year was due to investing 20 basis points in additional marketing to drive incremental traffic to our restaurants. GNA was 21.8 million in the first quarter, was 1.2 million lower than a year ago and in line with our expectations. As a reminder, our Q1 2024 GNA was elevated due to legal expenses related to our shareholder cooperation agreements, higher deferred compensation expense and severance totaling approximately 1.9 million. As a reminder, the higher deferred compensation expense last year of approximately 800,000 had a matching amount in the other income line where the offsetting market gain is recognized. Adjusted EBITDA was 35.4 million and .2% of sales in the first quarter. Q1 EBITDA was 6 million higher than last year, while we also made longer term investments in our brand positioning, which Lyle highlighted. We reported net income of 13.5 million and diluted net income per share of 58 cents on a gap basis for the quarter. Diluted net income per share increased by 80% compared to 32 cents per share last year. During the quarter, we repurchased and retired approximately 404,000 shares of common stock at a cost of 14.1 million. At the end of Q1, we had approximately 72 million available under our share repurchase program. And in April, we repurchased an additional 324,000 shares at a cost of 10.5 million. Turning to the balance sheet, we ended the first quarter with net debt of 66.5 million, comprised of a debt balance of 85.5 million with cash in equivalence of 19 million. We successfully upgraded to a new ERP system at the end of Q1. To prepare for the migration, we released all invoices for payment, which created a temporary working capital need and was the key driver of the step up in our revolver balance. Now, four weeks after we closed Q1, we have paid down our revolver by $13 million and expect to continue to reduce the balance as our working capital position further normalizes. Next, we provided an updated 2025 financial outlook today in our earnings release. Given our performance to date, we are raising our profit guidance. We now expect restaurant level operating profit of 210 million to 219 million and adjusted EBITDA of 131 million to 140 million. We are also raising our expected share repurchase range by 5 million to 45 million to 55 million given the higher expected operating profit. We continue to anticipate full year comparable restaurant sales in the 2 to 3% range and capital expenditures of 65 million to 75 million. Our updated guidance takes into account our current inflation expectations, including the potential impact from tariffs as understood today. For context, approximately 85% of our food is sourced either domestically or from Mexico and Canada under the USMCA and exempt from any new tariffs. For the remaining 15% of our food basket, we expect only modest impact in Q2, but potential for extra food inflation in the 1% area in the second half, including certain beef and seafood items. Tariffs could also impact other costs, including small wares, to-go packaging and equipment used for repair and maintenance, as well as building new restaurants. All in, the run rate impact could be about 30 basis point headwind to restaurant level margins starting later this year, assuming no change from current tariff policy or before any mitigating actions. We have also preemptively purchased critical equipment to mitigate costs and ensure availability of these key items. We expect the tariff situation to remain fluid and we will continue to explore how to best position our business in a range of environments. In closing, we are proud of our first quarter results and the strong foundation we are building for sustainable, profitable growth. We have a clear path to sales and profit growth ahead and our long-term strategy and the strong consumer appeal for the BJ's brand positioned us well to continue building on our successes. With strong and improving cash flow, expanding margins and a healthy balance sheet, we are well positioned to execute multiple initiatives aimed at enhancing shareholder value. Thank you for your time today and we'll now open the call to your questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to

assemble our roster. The first question comes

from Alex Slegel with Jefferies. Please go ahead.

Thanks. Congrats on the quarter. Really good margin performance. The cost of goods and labor really stood out. Maybe you could help us frame up the magnitude of the impact from some of the incremental simplification and process changes you've taken. Just trying to get a sense for where restaurant level margins maybe would have been if these actions were in place for the full quarter. I imagine they were implemented over the course of the quarter, but maybe you could update us on that. Just to see any opportunities to reinvest some of these savings back into the guest experiences as you look ahead.

Alex,

thanks for the question. I'll say with the 100 basis point margin improvement year over year, about half of that was leveraging sales, the extra traffic and sales that we drove. Then we saw some really great performance really on the labor side. I would say we finished 2024 strong. We had a strong finish to Q4 and really saw those benefits continuing into Q1. This really is building to a degree, but I would say that it was fairly consistent through the quarter. As we updated our guidance, it is expecting now a continuation of these levels. When Lyle mentioned rolling out using AI to both forecast and now schedule labor, that's really in a small subset of restaurants. Any of that's incremental. I think of reinvesting in the business, I think we're taking a very balanced approach to getting efficiencies from the business, but we're also taking a fairly modest amount of price. We have a really nice balance right now of being able to drive traffic in with a great value message as well as delivering these profits. It feels like we're in a good balance here of investing in the business, but using that to drive traffic and still being able to deliver these margins. I don't foresee any new investments there.

I also would just start, this is Lyle. I would add that, and I think I mentioned this on the last call, but what we're really trying to do is start initiatives that we can continue to build upon that become just kind of how we operate and help us be more efficient and more effective as we go forward. Simplification, those types of things are ongoing initiatives. I mentioned a little bit of the POS simplification. We have another round of that coming out actually shortly focused on modifiers for our appetizers and our handhelds. And just to give you an example there, as we look at that, we believe we can save our team members about 3 million clicks a year just through simplifying how we do modifiers on apps and handhelds. And the result of that is more accuracy, better guest experience, and us being more efficient managing our comp food and beverage. So, I was talking to our COO, Chris, the other day, he was talking to me about the results and said the thing that he's excited about and encouraged by is we're not forcing the results. We're building off of strategic initiatives. We're holding standards. We have growing tenure in our managers and we have clear focus. And so we're just kind of getting tighter and sharper as we go forward. And so I found that really encouraging.

Good color. Thank you. Just a follow up question on the check and the mix component. Maybe you could just kind of talk about the dynamics behind that. The traffic growth is great. I guess the mix is a little bit lighter. How you see that progressing through the year and any drivers.

Sure. Yeah, she said, I mean, you're looking at both. You know, the pricing element, we were in call it the mid 2% of pricing. So, you know, looking at the mix shift, we did launched our physical meal deal, which is driving a lot of traffic. That's that's some of it. We also lapped this quarter. I'm a very good launch last year and some new menu items. So we had that laugh. We were going up against also just how spring breaks fell and how Easter fell that weight on mix a bit in Q1. So, looking forward, I would, you know, we're thinking that the check piece will be something closer to flat was a little more, a little more of a drag on comp in the 1st quarter. But, you know, a bit of things we've were through. I think going forward, we will still be pushing things like, was it the meal deal? We are looking at ways to use that to build check to build on that promotion. So there's more to come that are check builders that are on top of this. But, but yeah, I think that this moving forward, I would expect to be something more that flat and in

terms of our, our check component. Helpful. Thank you.

The next question is from Brian Bittner with Oppenheimer and company. Please go ahead.

Hi, thank you. Your same source sales trends are just are holding up really well. You talked about the plus 3% of March and then holding up into April. And, you know, obviously you guys are taking share, which is a big positive, but what's your hypothesis on why? The casual dining customer seems to be holding up so much better than the quick service customer and the quick casual customer, which are they're seeing much softer trends in that segment. How are you guys thinking about what's going on?

Hi, this is Lyle, you know, and I'm just polishing up my crystal ball. But the look, I mean, I can speak more to, I think what we're seeing in the BJ's customer than, than I can more broadly. You know, than that, and I think there's a few things when I think about our performance. One is the BJ's customer tends to be a little higher income than the average. And so. And that's for both CDR and QSR. So I think there's some resiliency there. I think overall, we continue to improve our execution and we have a strong value platform and craveable product news in stickers and the wing sauces. And I think all of that is reflected in our consumer scores that I mentioned earlier. So I think those things together are helping us hold up. I also believe that in times of uncertainty, and I think this will be true going forward when consumers may have less transactions to give. They're really focusing on that experience being worth it. And I think our atmosphere service and food is compelling in that regard. And then I guess the last thing I would posit is that, you know, our recently completed brand work underlines that, you know, from a BJ's perspective, we over index and win. In these kind of everyday celebration and treat occasions. So we call them social splurge occasions. They're not like the big celebrations, although we do well there too, but rather those kind of weekly moments when people. You know, plan for going out and they value those and I think those occasions are pretty resilient where I think some other occasions may be more transactional and easier to pass up. So that's kind of my perspective, obviously, through the lens of our consumer and our brand.

Yeah, this is Brad. Just to add on to that is, you know, you gotta get beyond the conventional thinking, if you will, you know, particularly in the casual dining space. It's a very fragmented industry. It wasn't too long ago that the big change for more than half the establishments out there. Meaning there's a good number of small, independent or regional operators out there. Some do well, but a lot of them aren't doing particularly well. And, you know, while touched on it, the social splurge occasions, and I think more of occasions that we're after than the guests that we're after. And these occasions are are very valued by the consumer right now. They're retaining those fairly well. And so, you know, the way we're operating, you know, we continue to think, well, we will be taking share from some of the weaker players and the relevancy of our brand. To what the consumers looking for right now. So, you know, I think that gives us optimism as we look forward and we're early in that journey. We've had a lot of smart people in here with us working on this and understanding it and crafting what it means. But we think we have a plan that is pretty durable for the foreseeable future.

Thanks. I appreciate both those perspectives and just my follow up is the margin performance as Alex talked about in the previous question. Very impressive. And I want to focus on the labor line, the operating leverage there. That you got a hundred basis points, but what stood out to me was also the per store labor costs when you break it down, we're actually down year over year. What's the biggest driver of that dynamic and how sustainable are those impacts?

Hi, Brian. Yeah, it's, I would say, very sustainable. This truly is. I mean, it's a combined effort. If we look across the spectrum on labor, this is scheduling better. We looked at the restaurants that were scheduling the best and paired them up with with other restaurants that had opportunities. We really looked at where over time we were spending more there and in certain restaurants than others and found ways to drive that down. And we're just, we have an increased focus on from the traffic that we're getting into to get as much to not take anything away from the guests, but just schedule as efficiently as possible. So it is, and Lyle talked about it too, in terms of the, the tenure of our team members is only growing in our retention rates are well ahead of where the industry is. So it really is coming together nicely. And, you know, is we love seeing that on the financial side. The check on the other side of the equation is to make sure our, our net promoter scores are moving in the right direction. And the overall recommend score is it multi year highs or value score or food score? You know, things that if we were squeezing too hard and we were doing things that that might be helping in the short term, but not the longer term, that would show up in our NPS scores and it's moving the other direction. So it gives us a lot of faith to the second part of your question of how durable this is and sustainable. If anything, we were finding more opportunities to keep efficiencies here. We want to continue to leverage the sales that we're bringing in and we're seeing just that.

Hey, Brian, Brad, I just like to add on to this because it can easily get lost. We tried to highlight when you look at how January is performing and then the steep drop off to February. You know, we're not immune to the weather and all those things. We did drop like many did. And then, you know, the delay in the refunds processing and then it snapped right back when the weather cleared and they caught up on the processing refunds to the marks levels. But I really appreciate what our operators were able, they were proactive, they were agile of managing through that dip, if you will, with really out giving with not giving much up. And so I think it speaks to your operating philosophies and how the team is working together. There's going to be speed bumps along the way here. We know that, but we really believe we're much better positioned to deal with those today.

Great. Thanks, Brad. Thanks, Tom. Appreciate it.

Thanks, Brian. The next question is from Jeffrey Bernstein with Barclays. Please go ahead.

Great. Thank you very much. First question is just on the macro and the value implication. I'm just wondering what you see in your data to showcase more challenging macro at all. And it sounds like you're not really seeing any change in consumer behavior. Which is what led me to think maybe it's in value. I didn't know if you can share how you define value or what the mix of sales is. Sounds like the Pizuki meal deal is one, but I think you mentioned your mix is probably down three and a half points if I back out just the traffic and price. So just trying to get a sense for how you how you would even tell looking at your own data that you're seeing a more challenge macro and then I had one follow up.

Yeah, sure. I'll start and I'll Tom will provide some color. You know, again, I go back to our consumer. So I'm, I'm talking relative to our consumer, but. You know, as I mentioned, we're seeing a little bit of increase in pickup in the in the Pizuki meal deal, but that's more than offset by our traffic gains. And the thing we're seeing is we're seeing traffic gains that are quite similar on the weekday and the weekends. We're seeing traffic gains across all of our cohorts. Maybe a little higher traffic gains actually in some of the lower income cohorts who are taking advantage of the Pizuki meal deal, but net net the way that all comes together. With the traffic and our operations, it's been overall really good results and there really haven't been what I would call like flash point changes in any of those areas that say we're seeing fundamental changes across across traffic in terms of weekday weekend day part check management or income cohorts.

Yeah, and then Jeff is specifically around the, the, the mix piece. Yeah, like, to Lyle's point there, there was no material shifts overall. If we think about more longer term, and we have seen some alcohol incidents decline that started last year and continues a little bit this year. But it's more of just on the fringes really, as we look at this quarter specifically, we were lapping some higher checks. So we anticipated it being a little heavier of a negative mix in the first quarter here. The, the other piece, I mean, the Pizuki meal deal continues to be strong. So it is, it still was, it started strong in Q4 and it's, it grew a little bit in terms of mixed, but nothing dramatic. But there was just a few things like that, that, you know, on that net, it's driving traffic, it's driving sales manifesting a little differently through the build on sales there. Sometimes those get those guests, if they're coming in more at lunchtime, they're ordering less. So the checks a little lower. So it's a bit of a, you know, the contribution of the types of checks that are coming in as well. So, you know, but back to your bigger question around the, the macro and value, you know, we, I think we were smart getting ahead and having this promotion that is very unique and distinctive to BJ's. It's something that's unique to us, to great value. And it is during Monday through Friday when we typically have capacity in our restaurants. So great to see our value scores where they are and be able to drive the traffic. And, you know, we're seeing some great flow through on it, net net. So love, love what the promotion is doing. Looking forward, we are looking at ways to use this promotion to drive some more check as well. So more to come on that. But yeah, really seeing from it.

Got it. And then my, my follow up is just on the, the unit growth opportunity. You know, if I flesh back five or ten years, this call was dominated by how quickly you can open up new stores and how you were, you know, pretty much only halfway to where you thought you could get to in terms of total number of units. And I feel like we're potentially embarking on that conversation once again over the next year. I'm just wondering, you know, your confidence, it sounds like you opened up one unit this quarter and perhaps that's it for this year. But should we expect an acceleration of openings next year? Is that integral to the thesis? You know, if you could snap your fingers, like, what do you think the right rate is? Like, how does your team equipped to handle something like that? Could we expect a big snap back and unit growth? Or should we just assume it's more about fixing the existing and you're going to hold off for the next couple of years in terms of any major uptick? Thank you.

Jeff Brad here. We, we clearly see the opportunity here. We have a lot of white space. We feel good about it. We've been slow to add those. We've done some reassessments and we had to prove the box economics. And so we made great progress on those. As probably disappointing to us and a lot of other folks is the lead time these days from saying you want to be there to actually getting the doors opened is, you know, 20, 22 months, pretty easy these days, unless it's a conversion. But we're very optimistic about where we are and where we can go. And we are out there now, fairly aggressively looking for sites. But realistically, we'll really, we'll see that benefit not into the back half of 2026. And, you know, we'll post you along the way as we get more deals done. But we see that as one of the contributing factors to creating shareholder value. But we also see a lot of opportunity in the interim period here to improve the economics further improve the economics of our box. And to grow the, and we have fairly big facilities and there's still capacity we can utilize there.

Understood. Thank you. Thanks, Jeff.

The next question is from Sharon Zachia with William Blair. Please go ahead.

Hi, good afternoon. I wanted to follow up on the bazooka meal deal. It sounds like it's been a great customer acquisition tool for you. And I'm curious if you have kind of any data on what kind of customer might be coming in that you were maybe under penetrating before. And if you have any kind of repeat metrics on those customers once they come in.

I mean, as we, hey, this is Lyle as we've looked at our, as we've looked at our consumer data and we were looking at, are we seeing any sort of material mix shifts? So, like, are we suddenly seeing, you know, over the course of the quarter, a big move into kind of mix towards lower income, for example, which might say, you know, we're, we're, we're bringing in a new. Or a different consumer that might be more price oriented. But again, we're really not seeing those major shifts. We're seeing across each of our income cohorts. We're seeing traffic growth. We're seeing growth on the weekday and the weekend. We are seeing a little bit more growth in some of the lower income cohorts during the week. When you net it all out, the shape of our income cohort mix really hasn't fundamentally changed. And again, we're seeing traffic growth across all of those cohorts and seeing it during the weekend on the weekend when the deal isn't, isn't offered. So, you know, overall, we see new customers coming in, but I don't know that it's fundamentally changed or we've seen any sort of fundamental shift of who the BJ's customer is based on the stuff we're

doing. And it's helpful. And then, as you're starting to kick the tires on new sites for 26, is there anything kind of different in the kind of pad you'd look for or the regions you're looking at relative to where kind of the historical BJ's sweet spot would have been?

You know, we're always looking at our current box for opportunities to improve the efficiencies, lower the cost, but also we're underway as we've done a lot of this work on the menu and the positioning of the brand to look at ways to more contemporize the box itself. So that work is underway. So don't know what that's going to yield, but the prototypical site that we have utilized in the past is probably what would be in the in the future. So no dramatic changes there. As we've talked about before, we will Focus more of our attention on existing markets where we already have brand awareness. We have, you know, supervisory abilities, their distribution, all those. They just make more sense from where we are in the growth phase. That's not say everything is going to be there because we do need to get to these other sites, but we'll have a more disciplined balance as we go forward.

Yeah, this is just building upon that. I think probably bigger than the pad shift would be just kind of as we think about sequencing out the priority of geographies over time. And so, as Brad said, we're focusing in on places where. We have existing infrastructure. We have some existing brand awareness and we have operations in place. So, when you, when you think about it, what we've seen Tracy is an example last year as well as Cyprus in Houston last year as well as what just happened in Phoenix is we don't really have any markets. Including California that are fully saturated as yet with our existing footprint. And so for us, as we think about filling in, it helps us on multi unit management efficiency. It helps us on operational excellence. And it actually helps us with something that has come out loud and clear outside of California, which is. We have a real brand awareness and consideration opportunity in our non California markets and we are not going to be carpet bombing marketing everywhere. We're using that very strategically. So, as we build out some of these markets, that also has the effect of helping us drive brand awareness and consideration in some of our existing markets where we have headroom.

Thank you.

The next question is from Brian Mullen with Piper Sandler. Please go ahead.

Thank you. Just wanted to ask about the pizza platform. You know, while can you give us maybe a little bit of a history lesson here, how important is this is the brand? Particularly in California, maybe where did it mix back when when the brand was at its best? And then, you know, just assuming you get the product right and you see that in test. How are you going to communicate to that to your guests and how impactful could this be, you know, to the business over time if you get it working the way that you envision?

Yeah, so I mean, we're, we're very excited about pizza. Pizza is a core association with our brand. It is a strong association with our brand in California and outside, but it's our number one driver association in California. It's also our number one traffic driver in California. It's a traffic driver outside of California, but Pizuki is actually our number one traffic driver outside of California. I'll let Tom potentially build on the exact mixed numbers of where we're coming from to where we are. But the interesting thing about the pizza when we look at it is what we find is it's really great for that group occasion, right? Where we, I think, have really strong equity and over index. The pizza actually provides a great value for feeding multiple people. But the really interesting thing about a pizza check is it looks a lot like our other checks because it has a lot more add on. So, when somebody comes in and they get a pizza for a group, they're getting more drinks and appetizers and things like that than when people that are coming in for, you know, a specialty entre. So, it tends to feel kind of a different and complimentary occasion in need to other things on the menu. So, so we see it as a really great opportunity. Obviously, pizza's also has really strong margins for us from a percentage perspective. And so, as we look at getting that mixed back to where it needs to be, I think that overall would be a positive win for the business. But, but really excited about it because it's a core association and gives us that opportunity because of how core it is to drive a real re energizing story. And to answer your question, once we do bring it to market, you know, as we're pretty choiceful about, you know, when we decide to go out and do external marketing, obviously, we will be doing trial at our restaurants. We'll be building the merchandising, but this will be one of those stories that we will absolutely tell externally as we roll it out to all of our restaurants.

And Brian, just for some of the stats here. So, right now, pizza's mixing in the call it mid to high single digits. If you rewind foreign history before really our menu expansion happened, pizza was a much larger portion of the share. But as you can imagine, slow roast, other other things added, it's naturally come down over time. But I think a good way to frame up the opportunity would be to look at our mix in a place like Southern California, where it's core people grew up with it. We have a lot more usage of pizza. Our mix there is almost double compared to some of the newer markets that we've entered in. So, we know when people try it, we can develop some really good fans and especially with the new pizza that is it is a great product. So, I think when we have the product ready, we talk about it more. It's just it's something that if you look across the competition that nobody else can match. It's something that's core to us and just it's such on trend now with just good high quality pizzas that we think this has a lot of legs and we can drive a lot of traffic in core markets. But knowing that this is something that people eat across the country. So, there's plenty of white space there to to have this better product driving some serious traffic.

Brian bread here, you can tell we're pretty excited about this. I'll pile on answer to here. You know, in my history, one thing that's really important is what Cajuns is the brand relevant for. And so, can you expand that we clearly see pizza as in that category? I mean, think about, you know, where can you get a high quality, high quality pizza and a set down full service dining experience? There are a lot of places and to the degree that they are, there are more your mom and pops or regional places. So we see this as a another facet of this growing a UVs over time. That's not going to happen right now. And as I mentioned, they'll take some promoting around that to do it. But we're looking at these from multiple facets and we see this one as a meaningful linchpin along our journey here.

Okay, great detail. Thank you guys.

The next question is from Todd Brooks with the benchmark company. Please go ahead.

Hey, thanks for taking my questions. Want to lead off kind of following up on Sharon's question and drilling down on an infill strategy going forward for new units. If you think about the overall white space for the brand, you've always sized it kind of 400 plus and that number has been there for a long time. But if we if we look at a pivot to an infill driven strategy and trying to get to scale on some of these non Californian markets. Have you sized what the infill unit opportunity is just so we can get our mind around okay with an infill strategy, we have X years worth of of growth that we can kind of exploit higher, higher return higher awareness type of openness.

Thanks. Tom,

I'll start with this one. I would say, I mean, if we talk about our near term strategy is in the next couple of years, it will be focused on on the infill. But looking out longer than that, I would say that the market expansion is is part of that strategy. So we're not taking the the expansion piece off the table. We're just saying at present where we can get the when we're when we're ramping up and building our pipeline, it's going to be more focused on on until now. But as we look forward, it will be both. So, you know, it's a good question to think through this because we look at our markets and we look where our restaurants are and where we can build. And there's plenty of open space in in every market that we operate in. So there's plenty of white space for infill. And, you know, we love that because everything that was mentioned before, but really, as we think about how portable the brand is when we, you know, everything Lyle just mentioned from California to Phoenix to Texas, where we've had some really great openings. You know, it travels well. This is a brand of brew house that, you know, Midwest to East Coast to Florida to the home base in California. We've we've got some great restaurants out there and can put up some great, great sales and profits. So, yeah, we're not limiting ourselves to one versus the other. Just want to be clear that that was just more than the near term side will be the, you know, the infill focus.

Yeah, Tom, let me just, sorry, Todd, let me add a little more color to that is, yeah, we're going to get to those spaces, but each one of these is a pretty significant investment. And so we want to get it right. So we're going to go at the right time and at the right place. I think also to your ultimate unit potential is and I've seen this over my career that you start with a number, but it tends to grow. If the brand is working right, the box model is working right and the economics of that you start improving it. It makes for more trade areas where you can, you know, economically be there and create shareholder value. So we haven't revisited the number that we don't need to revisit that number right now. We have other things that we're working on. But, I mean, it's not too far on the rise and we'll have to figure that out. But there's so much white space right now that we can just go after what we have. But we'll do it more. I think of a concentric circle around our existing hubs and more of a scatter deployment. We don't really see first mover advantage into going to some of these places. It's better to work from our existing strengths.

Okay, fair enough. Thanks. And a quick follow up May. Tom, you mentioned kind of April same store sales running in the mid twos. Obviously, there was a real dislocation with the California restaurant consumer. Starting kind of early April last year with the many price increases in the industry and that consumer just going on strike for a period of three to four months. I'm just wondering, as we look at what we're lapping as we progress through the quarter. To same store sales comparisons get more difficult as the quarter progresses. So they do they ease. Do they same stay steady. I just want to make sure there's not any sort of nuance that we're missing as we're thinking about where you're running now. Thanks.

It's a good question. I looking at let me ask to answer it two ways looking at regions in California is slightly above. I mean, this is really Q one and through April. California was slightly above our average, but nothing outside. So, it really isn't driven by California having an easy lap or anything like that. You know, as we go into into Q two here, it really does. You know, when we look at one and two year last, we'll even look back to twenty nineteen still just to triangulate internally. The first half of the year looks pretty normal. You know, we had the Easter lap that pushed a little from Q one and Q two. But other than that, it's a pretty clean lap. So, yeah, I wouldn't. I wouldn't worry about it being a tougher lap as we go through this quarter or anything like that. We're okay.

Thanks.

The next question comes from John tower with city group. Please go ahead.

Great. Thanks for taking the questions. Just earlier in the conversation, you talked about the idea of doing some menu work and I think optimizing the menu offerings around the core pillars that you outline pizza, Suzuki, beverages and some of the others. So, I'm just curious if you could talk about what goes from the menu from here. Was there anything in the work that you, the consumer work you did that that surprised you in terms of what you should be pulling off the menu?

You know, I don't know if it's it's surprising. I mean, doing the work is more from my perspective in the past and this time as well about gaining clarity, gaining alignment and gaining kind of shorty in the moves that you're making. So, I think we look a lot like, you know, I think what a number of other restaurants look like, which is we've got a set of items that have a lot of our gross margin and we have a long tail set of items that are a bigger percentage than they represent from a gross margin perspective. And so there there identifies your long tail and then that long tail really exists across categories. There are certain categories with a bigger long tail and certain categories with a smaller long tail. But our goal is to kind of go category by category. So that kind of category management approach looking at the long tail and the outcome ultimately that we want is eliminating the long tail, improving remaining items, bringing some new items in to get to an ultimately smaller, but more productive category. Giving you a specific example is we look towards our next menu in June. We're actually taking our Pazuki platforms down by three. So those were in our long tail. We are keeping a core set of five and then we will have an opportunity to lean into some of these great stories that we have like cinnamon roll or Snickers over time and something may find its way in and out over time, but we'll ultimately have a smaller, more productive category. We think that we can execute better and more consistently. And so that's an example of one of the categories, but each of the categories we kind of look at that same way and we're kind of going to take them one by one. And the idea is you test and scale and right on the back of that, you're testing what you want to scale next and you keep that evolution going forward.

Got it. I appreciate that. Maybe just pivoting to the marketing piece. It obviously looks like it's working well, certainly on the social channels and with Pazuki. I'm just curious how we should think about that spend going forward. It sounds like it's going to be much more regionally concentrated than broad based, but then obviously you're leaning into social. So maybe if you could help us think about dollar spend going forward and even, you know, do you plan on altering mediums at all as you progress throughout the year?

Yeah, I mean, right now I'm there's nothing materially that's changing in terms of we're raising the percentage that we're investing right now. I think we are still in the process from a marketing perspective of what I call codifying growth drivers. So you are right. We are focused geographically. We tend to be pretty surgical about the times we tend to focus less on broadcast media and more on narrow cast media. So, or targeted media. So whether that is CTV instead of broad broadcast TV or digital channels. And then I am a believer that, you know, you need to keep your ear really close to social media these days. Not a lot of brands are actually creating trends, but the brands that do well are listening to what's going on and fanning the flames of them and. You know, probably 9 out of 10 of those flames don't catch on and one of them does, but you gotta be participating in order to do that. And so we're going to continue to do that. We're continuing to evaluate the media. If we codified growth drivers and we say, if we know if we put an extra dollar in here, we're going to get 2 back, then we'll consider that as we get to that point. But, but right now we're not looking at. Materially changing the amount that we're investing or continuing to to play with the mix, codify the growth drivers, get clear on the messages that are moving and and we'll kind of go from there and build from there.

Got it and last one for me, just on the off premise business center. You recently made some alterations to that business. So it's just wondering if you could kind of comment on how that performed during the 1st quarter and. You know, if you're seeing some of the changes that you made translated to better sales and consumer uptake.

Sure, John, the, the off premise business in particular, 3rd party delivery did trend a little bit better than the overall business. So we are seeing. Some bright spots there. I don't think that's equal across the, the industry, but as we're looking at how to best approach our 3rd party delivery business, I think we're seeing some really nice trends there. Again, it's, it's a little better than than our, our overall company average. So seeing a little extra growth coming from the off premise business generally, but really being driven by 3rd party delivery. And,

you know, this is just to build upon that, you know, we actually haven't made any sort of major interventions in our premise business yet. That's kind of a lot of those things are kind of sequenced and will probably be later in this year into next year. I would say that, you know, if we have a material off premise business, I think we have the right products to win in the off premise business. And it's a growing business. And so all of those things are tick tick tick. But if I was going to be hard on us, and I would evaluate our business, there's too much friction in the consumer experience right now. And our merchandising is an optimized towards those items that are best for off premise or towards the occasions for off premise, whether I'm looking to feed myself, which is bigger in the off premise than it is for us in the off in the on premise, or looking for a group occasion. So we're kind of, I kind of think we're at 1.0 of off premise. I see a lot of opportunity there going forward, but a lot, you know, most of our energy so far has been focused on the core brand getting really clear on the core brand strategy and strengthening that. And we'll kind of sequence the work on off premises. We go forward, but the good news is it's it's it's it's growing. And so that's that that gives us some some headroom to to tweak it

and advance it.

All right,

thank

you. The next question is from Andrew Wolf with C. L. King. Please go ahead.

Yeah, thank you. I wanted to follow up on the promotional kind of cadence with regard to, you know, the SAMHSA sales coming in at one seven on two seven traffic. It sounds like you didn't really increase your promotionality. Was that more to do with consumer behaviors consumers naturally trending more to the value side of the menu or is that more to some of the viral things that happened on on social media, those kind of attracting those kind of guests.

Andrew, I think it's, you know, part of it in what you're thinking about physical meal deal in particular is just gaining momentum. It's something that people are coming and seeing and coming back for. So there's a natural boost that happens there. I would say, I mean, we did have some some value cocktails earlier in the quarter that left off. So, I mean, there's there were some things that in the quarter that aren't currently in the mix that are that I can think of that might be part of the question too. But I think more than anything, I mean, just thinking about the the lapse in terms of Easter and spring break, you know, that that also weighed on it.

So, Yeah, and I, this is wild. I would just build on what Tom was referencing the value cocktails are, you know, one example of as we gain traction with Pazuki meal deal and we have a value platform that is working. It gives us the opportunity to lean into those things that are working and take a harder eye on some discounting that may have creeped in along the way. That maybe isn't as strategic or as effective for the brand. And so you look at something, they were these six dollar value cocktails that found their way into the menu and they weren't helping our drink program. Let's just say so, or our overall check. And so, you know, we pulled those away. I look at, you know, our loyalty program when you signed up for our loyalty program, you used to get a free Pazuki that you could redeem right there. We've now made that you get the Pazuki, but you can achieve that on your next visit. What we've seen is a little bit of a drop in signups on loyalty, but we've seen growing those loyalty members that we see two plus times in the first few months of being a loyalty member. So a higher quality loyalty member, and we're kind of looking across the areas where we have less strategic discounting to either manage depth, manage access or eliminate where it makes sense.

Got it. Thanks for that color. Just quick last question on the pizza improvement. Is the value change coming in? You know, taste or recipe or process, I think, maybe changing how you cook it. Or is there also a size component? I mean, is there going to be a value like a value messaging? Better, you know, better servings or calories and so on.

No, I mean, the size is the same, so that's not changing. But, you know, the pans we're cooking it in are changing. The dough itself has fundamentally changed. The sauce has moved to a fresh packed tomato, extra virgin olive oil, kind of a more fresh modern sauce. The cheese has moved to 100% whole milk mozzarella, the pepperoni to a more modern small, cupping and crisp pepperoni, which, by the way, we also had two different kinds of pepperoni and three preps on pepperoni, which will be eliminated when we bring that in. But we'll be upping the quality of the product, the sausage. So there's kind of across the entire thing. There's I think, you know, we're making improvements to that product.

Got it.

Okay, thank you. This concludes our question and answer session and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.