BJ's Restaurants, Inc.

Good afternoon, and welcome to the BJ's Restaurant's fourth quarter 2025 earnings 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, then one on your telephone keypad. To withdraw your question, please press star, then two. 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 Year 2025 Fourth Quarter Investor Conference Call and Webcast. After the market closed today, we released our financial results for our fiscal 2025 fourth quarter. You can view the full text of our earnings release on our website at www.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 guaranteed a 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 Lyle Tick, our Chief Executive Officer and President, followed by Todd Wilson, our Chief Financial Officer, after which we will take your questions. And with that, I will turn the call over to Lyle Tick. Lyle?

Good afternoon, everyone, and thank you for joining us today. Q4 was another strong quarter for BJ's, delivering our sixth consecutive quarter of sales and traffic growth, as well as our fifth consecutive quarter of profit and margin expansion. From a top line perspective, in Q4, we delivered 2.6% same store sales growth, driven by 4.5% in traffic growth. On the profit side, we delivered 16.1% restaurant level operating margins, and 10% adjusted EBITDA margins, representing an improvement of 70 and 40 basis points, respectively, year over year. Given the strong performance in Q4 2024, I'm particularly proud of how the team worked together to deliver a strong finish to 2025. Worth double-clicking on is the implied check compression between the comp sales and traffic in Q4. Our traffic momentum builds on the progress we have made throughout the year and underlines the continued improvements in operations, the resonance of the Pazuki meal deal, and BJ's relevancy in the holiday and social splurge occasion. Two additional drivers in Q4 beyond these foundational elements are the buzz around our LTO Pazukis, which brought in a hard-to-reach younger demographic and drove an increase in the number of what we call Pazuki trial checks. as well as our continued outperformance in late night. While both of these occasions carry a lower dollar check, they help us continue to introduce BJ's to new customers, give existing guests new reasons to come back, and sustainably grow sales and profit dollars. For the full year 2025, on the sales side, we ended at 2% same store sales growth, driven by 2.8% in traffic, And from a profit perspective, we landed at 15.5% restaurant-level operating margins and 9.6% adjusted EBITDA margins, representing an improvement of 110 and 100 basis points, respectively, year over year. As I've talked about previously, 2025 was a year of strengthening foundations and learning, guided by our four strategic priorities. We created alignment, understanding, and shared ownership of our strategy. We built trust, improved accountability, and showed resilience when encountering performance challenges. We added three strong new leadership team members who have integrated well and made a difference, with Jen Jaffe, our Chief People Officer, Tom Kowalski, our Chief Supply Chain Officer, and most recently, Todd Wilson, our Chief Financial Officer. We clarified our growth drivers and continued to refine how to leverage them most effectively. In Q4 specifically, the combination of better execution, value rooted in the Pizookie meal deal, and compelling product news driven by seasonally relevant Pizookies and the renovated pizza platform allowed us to continue to deliver strong traffic driven growth. We evolved our marketing strategy, leaning more heavily into social and word of mouth to support our product news, while leveraging broader paid channels to deliver value through the Pizookie meal deal messaging. further refining how we deploy media and message most effectively. Throughout Q4, consistent with 2025 overall, our key metrics continued to build confidence in our progress with improvements across our NPS scores, our team member retention, operational metrics, and frequency across age and income cohorts. Some key callouts with respect to Q4. On the team member experience side, we completed the rollout of our new manager and hourly team member training. On the menu front, we built on our seasonal pizookie momentum with two successful LTOs with the return of the monkey bread pizookie and the introduction of the Dubai chocolate pizookie, which also had an accompanying martini. We launched the renovated pizza platform, which is resonating well with guests and performing consistently with what we saw in test markets, with incidents up just under 10% and check-in margin in line with expectations. We ended 2025 with a net reduction of six menu items and four ingredient SKUs. From a brand perspective, our marketing teams continue to do a great job optimizing how we deploy our media and messaging. In Q4, we leaned more heavily into word of mouth and social, with relevant product news which drove significant dialogue, interest, and trial as reflected in our traffic numbers. Together, these launches generated a four times increase in Pizookie impressions quarter over quarter, outperforming what had previously been our strongest social performance with Spooky Pizookie in Q3. It also drove overall organic social impressions up 12 times year over year in Q4. On the operations front, We continued to lean into our core initiatives to drive everyday table stakes improvements and made further progress across our key guests and team member metrics. With NPS recommend scores up just under 10% in the fourth quarter, led by improvements in pace, value, and food scores. We deployed our AI-based activity-based labor model to 30% of the system at the year end and intend to deploy to the full system in 2026 and pilot a follow-on use case. With respect to keeping our atmosphere fresh, in 2025, we completed 19 remodels, bringing the total to just shy of 50% of our pre-2016 fleet as of year end. We also modernized our facilities program, tagging and tracking all of our equipment, moving from a more reactive to a more planful approach to ensuring that our team members have the tools they need to deliver on our high standards and we can put our best foot forward with our guests. As we enter 2026, we've continued to see positive momentum in the business. While calendar shifts and weather always create noise in Q1, I'm pleased with our performance so far in the quarter and our performance versus Black Box, which continues to outperform on both sales and traffic year-to-date. As I look ahead through 2026, I'm confident in our plans, and we remain focused on delivering consistent growth and improving shareholder value by putting the guest and team member at the center of everything we do. Our four strategic priorities remain unchanged. We will continue to focus on investing in our people, ensuring they have the tools and support needed to bring our brand to life every day. We will advance our operational excellence initiatives, focused on making BJ's better and easier for both team members and guests. We will progress our menu renovation work and set the foundation for future net unit growth. Our team members are the heart and soul of BJ's. In 2026, our key priorities with respect to the team member experience will be training, embedding the new manager and team member training, ensuring our teams have the right support to deliver for our guests. Leadership development, refreshing our high potential development programs as we continue to build restaurant and above restaurant management pipeline to support future growth and culture. continuing to build engagement and alignment around our values and behaviors. With respect to handcrafted food and beverage, we will progress our menu renovation work across our priority categories. We kicked off the year building on 2025 momentum with the Butterfinger Seasonal Pizookie, our first LTO pizza with Mike's Hot Honey, which quickly became our third most popular flavor out of nine, and a Korean sticky rib appetizer, leveraging an existing wing sauce and ribs to create an easy and craveable new option. We also removed two lower performing items that were heavy on single-use SKUs, which resulted in the removal of five single-use ingredient SKUs. As we move forward in 2026, our culinary priorities will be to continue to drive buzz and engagement with seasonal pizookies, and I'm excited about the pipeline we've built. Continue to renovate our core categories, refresh strong sellers with clear NPS and executional opportunities, and continue to find opportunities to simplify while maintaining and protecting the turf coverage that allows us to win across so many occasions and consumer groups. We're currently in market in the early stages of testing refreshes to our burger category and chicken sandwiches. Our culinary team has been hard at work, and we have a pipeline of category and core item improvement tests, that will follow suit. These refreshes are still in their early stages, and like we did with pizza, we will follow a structured approach to gain operational and guest feedback and make adjustments ahead of rollout. And also, like with pizza, I will provide further updates as appropriate. Our third priority is delivering WOW hospitality. Our focus in 2026 is to build off the foundations we've laid and continue to improve our guest satisfaction, throughput, and efficiency. We'll continue to focus on great fundamentals and not ceding conquered ground by continuing to drive accountability through our directors of operations and GMs, having clear and consistent KPIs, lifting up our outliers, and driving best practices. Our simplification team continues to work to remove unnecessary barriers and complications. Things like integrating Apple Pay into Pay at the Table, simplifying split check procedures for our team members, simplifying pizookie and cocktail ordering and ring-in processes, and so on. As mentioned previously, we'll continue to advance our technology initiatives to help our GMs and managers have the right people in the right place at the right time. 2026 is an important year for our fourth strategic pillar, keeping our atmosphere fresh. We're going to continue to invest in our remodel program, which has shown strong results, and pilot a refreshed BJ's prototype, setting the foundations to grow our restaurant portfolio. With the progress we're making on the core business, we're now laying the groundwork to reignite net unit growth. We're actively building a flexible pipeline as we target up to two new openings in the second half of 26 to pilot a refreshed prototype and set the foundation for further growth in 2027 and beyond. You will see this reflected in our capital allocation for 2026, which Todd will talk about in more detail. Before I close, I would like to once again express my thanks to all our BJ's team members from our restaurants through the support center for their passion and commitment. I'm proud of the progress we made in 2025 and excited about the road ahead. I will now turn it over to Todd to provide further color on how we close the year and our 2026 outlook.

Thank you, Lyle, and good afternoon, everyone. As Lyle has just outlined, the BJ's brand and business are healthy and thriving. In fiscal 2025, BJ's delivered growth across all key financial measures, sales, traffic, restaurant-level profit, net income, EPS, and adjusted EBITDA. Comparable restaurant sales increased 2%. Restaurant-level profitability increased 110 basis points to 15.5%. and adjusted EBITDA increased 14.5% to $134.1 million. Turning now to the fourth quarter. In the fourth quarter, we generated total revenue of $355.4 million, a 3.2% increase versus last year. Comparable restaurant sales increased 2.6%, led by 4.5% traffic growth and a 1.9% lower average check led by the drivers Lyle outlined earlier. Restaurant-level operating profit increased from 15.4% last year to 16.1% this year, led by the leverage benefit of growing sales and continued efficiency gains captured by our operators. Cost of sales was 25.5%, 40 basis points favorable to last year. The favorability was led by menu price increases and continued gains from our gross to net initiative focused on simplifying the efforts of our team members and more consistent execution for guests. This favorability outweighed food cost inflation led by beef costs of approximately 14% higher than last year and increases in produce costs partially offset by favorable poultry prices. Total labor expense is 35.8% of sales in the fourth quarter. While this result is unchanged versus last year, our restaurant teams continue to operate more efficiently while also delivering higher guest satisfaction. The efficiency gains are a credit to the great work of our operators and overall simplification efforts with contribution from the activity-based labor management tool that is rolled out to approximately 30% of the system at year end. These efficiency benefits were offset by increased bonus costs for restaurant management as a result of the sales and profit growth, and we continue to see higher workers' compensation expense due to rising medical costs despite our progress in reducing the number of claims. Occupancy and operating expenses, which include marketing, was 22.6% of sales in the fourth quarter, a 30 basis point improvement versus last year. sales leverage more than outweighed inflationary pressure across the category. General and administrative costs are $25.1 million and 7.1% of sales, an increase of 20 basis points compared to last year. The increase is a result of two primary factors. First, we determined that certain previously capitalized expenses no longer held future value and expensed them in the quarter. Second, We incurred costs related to different aspects of leadership transition, particularly in the finance function. Excluding these unusual expenses, our run rate for the quarter would have been approximately $22 million, or 6.2% of sales, in line with expectations. Depreciation expense increased 30 basis points compared to last year as a result of our investments in restaurant renovations and new restaurant openings. These components delivered growth across all profitability measures. Net income in the quarter increased to $12.6 million in 2025 as compared to a loss of $5.3 million in 2024. Adjusted EPS increased 40% to 66 cents per diluted share from 47 cents last year. And adjusted EBITDA increased to $35.6 million, a 7.4% increase compared to $33.1 million last year. In the fourth quarter, we repurchased and retired approximately 167,000 common shares for $5.4 million. During fiscal 2025, we repurchased approximately 2 million shares at an average price of $33.80. With over $90 million of board authorization to purchase additional shares remaining, we have significant capacity funded by the business's durable and growing cash generation to repurchase shares when the market price is at a meaningful discount to its intrinsic value. Importantly, our balance sheet remains healthy as we ended the fourth quarter with net funded debt of $61.2 million, comprised of a debt balance of $85 million and cash and cash equivalents of $23.8 million. Now turning to 2026, our financial guidance for 2026 is as follows. First, comparable restaurant sales growth from 1% to 3%. We expect continued traffic growth and a marginal increase in average check as we anniversary promotions that affected check in 2025 and implement prudent pricing action to address inflation. I would note comp sales results to date in the first quarter including the impact of Winter Storm Fern in late January, are in line with this annual guidance. Second, restaurant-level operating profit of $221 to $233 million. We expect sales gains and further efficiency from initiatives including gross to net and cost of sales, activity-based labor management, and multiple initiatives from our supply chain team to drive this growth versus 2025. and outweigh approximately 2% to 3% inflation in our commodity basket, labor rates, and other costs. Third, adjusted EBITDA of $140 million to $150 million. In addition to the restaurant-level operating profit, we anticipate total G&A costs will normalize near $90 million, or 6.2% of sales, a 30 basis point improvement versus 2025. This G&A estimate is inclusive of approximately $11 million in stock-based compensation expenses. Fourth, capital expenditures of $85 to $95 million. This is an accelerated pace from 2025 and represents incremental investments in IT and a restart of our new restaurant opening pipeline. On the new restaurant front, we expect to open up to two restaurants in the second half of 2026. with additional restaurants under construction in 2026 slated for 2027 opening. Fifth, we may repurchase up to $50 million of stock depending on market conditions. This is an important lever that demonstrates the cash generating power of the business. We expect cash from operations to fund our CapEx, including an accelerated pace of new restaurant openings, and have flexibility to return excess cash to shareholders through the share repurchase program or use it to further strengthen our balance sheet. As we demonstrated in 2025, we have the financial capacity and intent to put our capital to work, buying back stock when the market undervalues our shares. Finally, as we model the quarterly shape of 2026, I would note two items. First, inflation accelerated in the second half of 2025, led by beef commodities and we expect that elevated inflation to carry through the first half of 2026 before moderating in the second half. Second, we expect a more even spread of G&A across the quarters in 2026 than 2025, resulting in a G&A increase in the first half of the year and reduction in the second half. While we expect to increase our profitability in all quarters, As a result of these factors, we expect growth to be more measured in the first half of the year than accelerate in the second half. In closing, 2025 was a tremendously successful year for the BJ's business. Financial results across all key measures increased significantly as the team executed across all aspects of the strategic plan. Congratulations and thank you to our restaurant team members, field operators, and everyone at the Restaurant Support Center. As we look forward to 2026, we are confident in our strategic direction and our ability to continue to sustainably grow the business to create value for shareholders. With that, we'll turn the call over to the operator for 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 is from Jeffrey Bernstein with Barclays. Please go ahead. Great. Thank you very much.

I want to talk a little bit about the comp components. Clearly, the traffic is very strong and seems to be driven by a lot of compelling value. But on the flip side, I guess you talked about how the mix shift seems to be down somewhat large in the fourth quarter. I'm just wondering how you think about your mix of sales on value, however you define it. What where that is now versus where it was a year ago and if you're comfortable with the balance of value versus premium or whether the value mix might be too high. Just trying to think about the mix shift in general and what your expectation is as we look through 26.

Yeah, sure, Jeffrey. This is Lyle. I'll start off and, Todd, you can build. I mean, as you look at Q4, I wouldn't actually – I mean, personally, I wouldn't characterize it as value – particularly in Q4, taking a larger role, right? Because it wasn't, in Q4, it's not like the Pazuki meal deal suddenly took a much larger role and that's what drove it. It's the Pazuki meal deal continues to resonate and have growth. But actually what drove some of that delta between sales and traffic, which is the implied check compression, was the kind of resonance of the seasonal Pazukis that we had And so we have people coming in. They're not buying the Pazookies on a discount per se. They're just coming in to try Pazookies. And what we see is a younger cohort coming in, which I'm pleased with. It's a hard group to get, and we have more of those folks coming in. you combine that with better operations, hopefully more of those folks will then choose to potentially come back. But we are seeing more of those checks where it's them coming in and having a pizookie or not everybody's having an entree or you're having a pizookie and some drinks. And so we saw a resonance and real movement there in Mix. And then we continue to see the outperformance of late night in Q4. So you know, the things that drove more check compression in, in, in Q4, I wouldn't necessarily think about as, as headwinds, right. So to speak, or like more from a discounting perspective, um, you know, there's other small things in there, like, uh, in our features for the holiday season this year, we featured salmon over the ribeye given, what was going on with the cost of stake. That carried with it a bit of a lower check, but a better margin. So there's a number of little things in there, but I wouldn't say it was driven by a sudden jump in reliance on value in Q4 versus what we've been seeing.

I'll just quickly add two items of building on Lyle's point of any quote-unquote trade down in check or lower check is just a mathematical equation of We drove incremental traffic at a lower check average with those, especially those seasonal pizookies. The other piece I'd call out, and I think it was part of where you're going, as we look forward to 2026, you know, we do expect, you know, we continue to see PMD grow. And that's obviously a good thing for us as that value message resonates with guests. And so we do expect to see some continued check trade down. but not to the degree that we saw in 2026, meaning we do expect some expansion of net check. And that's just a matter of the pricing to cover off inflation.

Understood.

And can you share just on the inflation side, I think you call that a couple of particular commodities, but just wondering what the commodity and labor inflation was in the fourth quarter and what your outlook is for full year 2026?

Yeah, absolutely. So the total basket in the fourth quarter was about 2.5%. We called out beef, we called out produce as the big drivers of the commodity basket. Labor was a similar ballpark between 2% and 3% in Q4. We think the first half of the year, quite frankly, will be in the 3% to 4% range in terms of total inflation. Those same drivers really drive the start of the year. But then we see that moderating in the back half.

Great. Thank you.

Excuse me. The next question is from Brian Bittner with Oppenheimer & Company. Please go ahead.

Hey, good afternoon. 4% traffic growth in the fourth quarter, really impressive. I think it was your sixth straight quarter of positive traffic. And as you look to 26, your 1% to 3% same-store sales guidance, I think, You know, it clearly builds in a more balanced check in traffic, I think, and that's kind of what you just said to Jeff's question. And just in your internal models, how are you anticipating the overall comp trends to be throughout the year? Do you expect them to be pretty steady throughout the year? Is there any interesting drivers we should be aware of that happen post-first quarter?

I don't think there's anything we call out. There's obviously some movement in our internal models, but I don't think it's enough to call out. You know, I go back to some of the comments we made in the call. You know, Lyle commented on this, and I did as well, that we're pleased with the start of the year. You know, I pointed to our annual 1 to 3 percent guide and that our results to date are in line with that. And so, you know, that gives you a sense of what we're seeing at least so far in Q1. Yeah, I know there's been thought internally and externally about anniversary PMD, which the company did successfully back in 2025. And so we're always looking ahead to make sure that we're planful in those things. I think you see that in the fourth quarter with the seasonal pizookies that kept that momentum going. So we try to be very planful there. But ultimately, I wouldn't call out anything as big movements within the quarters. But to be clear, we are looking to grow comp sales and expect to grow comp sales and traffic. in every quarter.

Okay, thanks. And just follow up on the restaurant profit guidance. I think it assumes kind of a 50-ish basis point expansion in restaurant level margins, if you can just kind of confirm that. And, you know, you've been on this really strong margin expansion path recently. What's going to keep the margins expanding as we look forward to 26, if that 50 basis points is the right kind of base case? Where is that coming from?

Yeah, I'll start and Todd, you can jump in. As we look at next year, I mean, I think there's three components to it, right? One is delivering consistent sales growth, right? And having some leverage on the top line, which I think I've maybe been a little bit repetitive on is that we're really focused on delivering a more consistent and durable BHAs that delivers that kind of consistent growth. So that helps. Number two would be the continued focus on the programs that I've, you know, talked about previously, which is, you know, we have a really strong core set of KPIs that we're driving accountability down through our teams. We're really focused on bringing up our outliers or kind of our bottom line quartile of performance so continuing to bring that bottom up and so you see Ideally everybody getting more efficient, but that bottom coming up and getting more efficient than the rest and then as you look at things like our Gross to net that is going to be a continued focus that we are That we're pushing against with a particular focus on you know, on comp food and beverage, right? That is a continued area for us, you know, of real focus because for me, that is the best indication of when you're moving that, that suggests you're executing better, you have less bad conversations with guests, you can turn tables quicker. So, you know, none of that is totally wrung out. I think also, you know, I've talked about previously, As we look at continuing to roll out the activity-based labor model, that's going to be rolled out over 2026. We're going to do that in a measured fashion, because you kind of roll it out. You need to learn, get adoption from the GMs, and keep going. You don't want to see conquered ground. So it may be more of a 2027 impact. But as that rolls out, The ABLM is suggesting there are some hours that we can save. I think I've talked about this a little bit before, on the shoulders and on our lower shifts and in the high times, we actually need more labor. But the real focus for us on the ABLM has been consumer metrics, right? And are we seeing improvement across, you know, across our pace, across our food quality, across hospitality? That's the real kind of, I think, focus on having the right people in the right place at the right time. But I think as you observed on a lot of those initiatives, I think last year we were able to get, you know, a lot of what was, you know, kind of more obvious, if you will. And then as we come into this year, you are seeing the level of expansion not be quite as big, right? And it's because As we come over that, while there's more to have there, each year we come over that, we expect to get more efficient and effective. But the degree of it is going to evolve over time.

Hey, Brian, just quickly confirming that you mentioned the 50 basis points or so. We're thinking about it the same way, I'd say, in broad strokes. That's in the range of what we would expect. So your math aligns with ours.

Great. Thank you, guys.

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

Hi, thanks for taking the question. You know, it's really interesting to continue to hear about the LTOs on the Pazookies bringing in younger demographics, and it sounds like it really accelerated for you in the fourth quarter. It may be too early, but what does engagement look like with those customers after they do come in for an LTO? Are you seeing kind of a tail of engagement with those cohorts?

You're right. I mean, given average frequency of our business in full service, it's too short of a time for me to feel comfortable saying I definitively am or not. So I want to get more time under our belt. I think big picture as we looked across 2025, we did see increases in frequency across our age and income cohorts with a little bit more on the younger and a little bit more on the older. and more actually on the lower income cohorts. And I think those dynamics to me show, and this is, again, my inference, but you look at it and you look at the growth and you look at the mix, you know, are correlative to the resonance of PMD and the resonance of Pazuki. But it's too early for me, Sharon, yet it definitively tells you that that is truer.

That's completely fair. Are you doing something different in social media? Have you augmented your capabilities there, or is that increase that you alluded to, is that just organic and coming from your consumers?

No, no, no. We've changed kind of the way we go to market. I mean, we did bring on a new team member here who's doing a great job, who is far more socially conversant than anyone, than Todd or I or Rana, anyone in this room, in fairness. We also have looked at some of our agency resources. But when you look at the shift, a lot of our social previously was what I would call a kind of brand-produced top-down that we would then push out. And we've not only increased our investment as a percentage of our overall spend in social and influencer, but now that content is really influencer-produced versus brand-produced. So, you know, people speaking on behalf of us versus us just speaking on behalf of ourselves.

Great. And then last question, now that we've kind of fully lapped the meal deal, how does the weekend traffic look versus weekday?

You know, as we look through Q4, we saw growth through Q4 of all day parts. grew with the highest growth coming from late night. But yeah, I'm looking at it right now. So as we look at all day parts grew and late night was the biggest grower with mid-afternoon and dinner being quite similar and lunch growing, but not quite to the same amount. So that's what we saw from a day part point of view in Q4.

Thank you. Thank you. The next question is from Brian Mullen with Piper Sandler.

Please go ahead.

Hi, this is Allison Arstrom on for Brian Mullen. Thank you for taking the question. On the refreshes to the burger category and chicken sandwiches, I'm curious if you could speak more about what led to the decision on these two platforms and then what opportunity might be there and if we should expect a similar timeline or stage gate process as the pizza relaunch?

Yeah, I mean, so working backwards, In terms of the process, yeah, the process will be similar for, you know, most things that we take to market, right? We're going to identify opportunities through two things. One is as we look at our menu satisfaction, intent to reorder, value perceptions, all of those things, that helps us identify areas of opportunity, right? We look at kind of what are driver categories, so what categories attach to a lot of checks. And then generally upstream on the big categories, we'll do some screener work to get a sense of conceptually, are we in the right space from a consumer? And then as we go to market, you know, operations feedback, guest feedback, you know, just like with pizza, I would expect we'll have to do some tweaking when we get that and then and then go to market. So the process will be the same. I may have answered both questions there about kind of, you know, how we identify it, but we're too early in it actually being in test market for me to have any material stuff to talk about.

Thank you. The next question is from Todd Brooks with Benchmark Stonex.

Please go ahead.

Hey, thanks for taking my questions. First question, on the activity-based labor, I think you talked about a rattleable rollout across the course of this year. 30% was in the barn last year. Does that mean by celebration season this year, you think you're kind of 50% penetrated with having it rolled out?

I don't know if we'll be all the way to 50%. I would say celebration season is probably the season where we are most cautious about creating disruptions. So, you know, I think in the first half we'll have some more rollout. I don't know if we'll get all the way to 50%. You know, I think you're, you know, our windows for rolling something out that we have to kind of intake and get comfortable with, you know, Q1 is a pretty good window and Q3 are pretty good windows. So it's not that we won't advance it at all, but we want to be really judicious about any disruption that we might cause during celebration season as GMs get used to it. Because there is a getting used to it, right? When you go now to getting that labor schedule from the AI and kind of learning how to balance the GM's overlay with AI, there's a bit of a learning process, which we've seen. in terms of getting comfortable with it. So we'll be judicious about how much that happens over celebration season.

And just kind of looking at some of the earlier units that have implemented the platform, you talk about wanting to see a bend higher in certain scores. Can you start to put a framework around how much improvement you do see once the store is on that platform?

I mean, I won't give specific numbers at this point, but when I look at the shape where we're seeing improvement, we're seeing improvement pretty much when you look at the pre-post versus the control group across pretty much all of our metrics. The one that we're actually seeing move the most is pace, which I'm encouraged by because it's about getting the right people in the right place at the right time. So that's where I'd like to see the most movement. The others we're seeing, you know, movement, but, you know, varying degrees of movement. But PACE seems to be the one that's getting the most improvement, which would be, again, as you might imagine, a core metric for getting the right people in the right place at the right time.

Okay, great. And the final one for me, Todd, you said earlier in Q&A that you're continuing to see the Pazuki Mule deal grow. Can you talk to what mix looked like in the fourth quarter maybe versus what you were seeing in Q3 as far as percent of checks on PMD? Thanks.

Yeah, absolutely, Todd.

When we look back at Q4, PMD grew almost 16% of checks in the fourth quarter. That was up almost 2% versus the fourth quarter a year ago and an increase versus Q3. So, you know, broadly that platform continued to grow for us, which, you know, there's obviously been a lot of traffic associated with that over the last five or six quarters. So it's good to see that. That does come. Lyle hit on this. The check is just a little bit lower is what we see on the PMD checks. It's about 5% lower. So there's a little bit of a check trade off there, but obviously getting that traffic in is a big win for our business.

Yeah, and the other things I would build on are the percentage margin of those checks looks a lot like the percentage margin of our other checks. If you look at over the course of all of 2025, it's about 15.5% of checks, and Q4 was a little bit higher than that. And when you look at it as kind of a percentage mix of sales, it's more like 6%. Now, that's full week, Brian. I know we've talked about in the past, which remains true, that during the week you're in kind of a Oh, Todd, sorry, you're in the low 20s, Todd, when you're looking at during the week.

Okay, perfect. Thank you, Todd. Thanks. Thanks, Todd.

The next question is from John Tower with Citi. Please go ahead.

Hey, thanks, guys, for taking the question. Maybe – I'm curious – to hear that you guys are seeing relatively strong late night business. It's good to hear. I'm just curious, one, if you're doing anything special to drive it relative to what you've done in the past. And is that also inclusive of the off-premise business when you speak to the strength there?

Well, so the, I mean, all of late night is growing. I'll let Todd pick up on the channel mix because I don't have that answer to hand. You know, John, I wish I could tell you that we were doing something super unique to drive the late night business. You know, I think we have a great environment. I think we have a good offer because, you know, our happy hour offer we offer at late night. And I think I've talked about this before. I do think some of it is supply and demand. I think on balance in the past several years, if anything, you've seen less people kind of either extend or go back to kind of full hours. And I think there's less late night supply. I think we probably have some demand coming back. And I think we are a great or better alternative to a lot of folks for late night. And I think that's helping us win. But we don't have like a specific marketing push or very specific unique like offer for late night. that is uniquely driving it.

Got it.

John, I'll tag in on, hey, John, just to give you, Todd here, I'll give you some quick color on off-prem versus on. As we look at, if you just split our business into on-prem versus off-prem, the dine-in business, the on-prem business is incredibly strong. Obviously, that's the majority of our business. In the quarter, you know, traffic in dine-in was up almost 7%, a little over 7%. So just tremendously strong there. The off-prem part of our business has seen declines. That wasn't new in Q4. That has been a headwind for us for the past few quarters. And so it's a matter of, you know, we've got folks dedicated to work to address that. But the strength of the dine-in business is particularly strong.

Okay, and just following up on the comment regarding your late night, is that anywhere near, like if you guys were to recover, you know, I guess from an average weekly sales standpoint back to peak, like how much more room do you have to go, or better asked, like how far has late night declined relative to your kind of peak times or peak windows or years?

I mean, honestly, I don't have the number to hand of whether we're there or whether late night. If we look back, I assume we're talking like kind of pre-COVID, like what the late-night AUV was. I mean, you know, what I can say is as part of what we talked about in Q1, which is the continued momentum we're seeing in Q1, the shape of that continues to see particular strength in late-night. So that has continued into this quarter so far.

I don't know, Todd, if you have any questions in terms of that specific AUV. Yeah, John, maybe we can tag that as a follow-up. Okay. Hopefully you guys can still hear me.

Just one last question that I had. Okay, great. You had mentioned, obviously, you're going to be opening new stores in the back half of this year. Can you just speak to what the new prototype might look like, high-level features that are different versus the baseline day? Heck, it could even just be square footage. But I would assume there's probably a little bit of a differential, even off-premise access to the stores versus maybe some of the legacy asset base that you have today, and even the cost to build.

Yeah, so, I mean, as we look at it, right, I mean, from a design perspective, you know, I think – you know, what we're ultimately trying to achieve is, you know, is a contemporized expression of our brand that is familiar to the people who know and love us, but also kind of exciting to new guests. And, you know, we leveraged our brand positioning to do that design work. And so, you know, I think it'll feel familiar, but contemporary. And, you know, we have I think some branding elements that we're bringing in that are evolved and new, I think how we're using some of the nods towards our craft brew heritage with the silos is going to be evolved and new. So there's a number of things, but it won't be, it'll be a familiar but contemporized version. As we look at the footprint of it, you know, I'm a big believer in right size, right cost, right place. Now, the first couple that you build, in my experience doing this, are generally relatively prototypy. And then as you kind of go forward, and so as we look into, you know, the next couple as we move into 2027, you know, I think we will be looking to look at building them not always at the same square footage, maybe in certain markets, it would be relevant to go smaller. I think we're looking at conversions in the appropriate markets. So we're not going to be dogmatic about every time it has to be just a prototype ground-up build. And so part of that influenced the design process, whereby what we're really coming out with is a clear set of brand standards for BJs that we can apply to different sizes, different shapes, but it always looks and feels like a BJs. With that on a cost to build size, I mean, really what we look at by each individual evaluation of a new unit is do we feel like it's delivering an attractive IRR so that we're being good stewards of the capital? But we are obviously conscious of, you know, what has gone on with construction and inflation. And so, you know, as we've built the new design, we are, looking for opportunities with that kit of parts to be able to apply them flexibly and get the kind of cost to build to sales and profit and ultimately IRR where we want it. But I think what you'll see going forward, John, is in certain markets, you're going to see something that looks quite like the size of a BJ's right now because it's appropriate for that market. And in another market, you might see something of a smaller footprint or a conversion that allows us to deliver the right return for the capital we put in.

Great. And have you shared those IRRs before that you're targeting?

I don't know that we've, that I think that we've shared it before. I mean, in the past, you know, I think we talked about like mid-teens IRR would obviously have us at a place where it exceeds our weighted cost of capital, but You know, I think our ambition is for better than that.

Awesome. Thanks for taking the questions.

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