BJ's Tinkers with Quick-Service Model

BJ’s Restaurants is testing quick-service style ordering at a handful of locations, offering guests the option to place their order at a counter when they walk in. 

Customers that order before they’re seated aren’t necessarily trying to get in and get out as quickly as possible. In fact, they’re still spending about an hour inside the restaurant and often return to the counter to order additional items. 

For CEO Greg Levin, that’s proof-positive that the brand’s “brewhouse theater” positioning is a key differentiator that will help it achieve ambitious growth goals. 

“We know from our consumer research that guests come to BJ’s for an experiential dining experience that is rooted in our brewhouse theater environment with a best-in-class bar statement,” he said during the company’s Q1 earnings call on Thursday. “They make their decision based at their house, not necessarily driving down the street going, ‘Is it [quick-service] or is it BJ’s?’”

The company’s Q1 results further demonstrate the affinity guests have for the BJ’s concept, he added.

“We are unmatched in the industry given our polished-casual position, with AUVs of more than $6 million and growing,” Levin said. 

The company delivered record Q1 revenue of $341.3 million, up 14 percent from the same period a year ago. Same-store sales grew 9 percent. From a weekly perspective, BJ’s averaged more than $121,000 per restaurant, more than $12,000 higher than in Q1 of 2022. Ongoing cost-cutting initiatives aimed at achieving $25 million in annualized savings helped the company grow restaurant margins to 12.6 percent, an improvement of 280 basis points compared to last year, when restaurant margins were 9.8 percent. 

The sales momentum is giving Levin confidence in the company’s long-term ability to double its footprint and become a $2 billion business, even as it slows down the pace of new restaurant openings in the near-term. The 216-unit chain opened six stores last year and plans to open five new locations this year, including one relocation. So far, it has opened two new stores in Illinois and Texas. 

New units are performing well, with the class of 2022 and 2023 stores delivering average weekly sales that are 20 percent higher than existing restaurants, but the cost of construction has continued to move higher coming out of the pandemic. Levin said the cost to build a new store was around $6 million in 2021. Now, that number is north of $7 million. 

“Myself, our board of directors, and our executive teams really don’t want to be spending $7.5 million to build a restaurant,” he said. “We’re continuing to look for ways to bring that down but still maintain the elements of the brewhouse theater which are so important to differentiate our concept.”

Ultimately, the company wants to get back to growing its footprint at a 5 percent clip, which would mean building 10 or more new restaurants a year. 

“I don’t think we are going to get to the 5 percent growth for next year, but I fully believe that we will get back to that target,” Levin said. 

In the meantime, BJ’s is pushing ahead on its remodel initiative. It plans to remodel at least 30 stores this year, representing around 15 percent of its total footprint. The initiatives centers around expanded booth seating capacity as well as updated bar areas, with investments ranging from $150,000 to $750,000. Fourteen remodels have been completed so far. Both the smaller- and larger-scale projects are delivering a strong return on investment. 

On average, restaurants are adding more than $1,500 per week in sales following the lower-cost remodels, which include adding three extra booths and enhanced lighting. Restaurants are adding “multiple thousands” of weekly sales after the more costly remodels, which include an updated bar statement as well as “many other upgrades,” according to CFO Thomas Houdek. 

Along with providing an experiential environment, Levin said offering moderate prices and a deeper menu than the typical mass-casual concept are two key attributes that attract guests to BJ’s. So, the company is treading carefully when it comes to raising prices and cutting down on menu complexity. 

BJ’s is running pricing in the mid 7 percent range, slightly below the full-service average of 8 percent. It has focused on maintaining a “good, better, best” pricing strategy that allows guests to receive value across all price points while having the option to indulge in more premium offerings. Daily brewhouse lunch specials and happy hour pricing contributed to outsized growth in both dayparts during the quarter. Those value propositions were balanced by higher prices for differentiated proteins like prime rib and salmon, which Levin said are more aligned with the strong demand the company is seeing for experiential dining. 

BJ’s is gearing up to launch a smaller menu in July. The new menu will have 10 percent fewer items and is expected to improve daily execution while reducing inventory and prep hours in the kitchen. 

“It’s very difficult to rationalize the menu and grow sales,” Levin said. “It takes a little bit of time. It’s probably one of the reasons we’ve been testing this for a while and have gone through different iterations.” 

As an example, BJ’s tried taking off certain appetizers but quickly saw add-on sales go down, so it brought them back. It similarly saw a decline in side salads when it removed its wedge salad, so that item will be sticking around, too. 

“We feel comfortable in the fact that we've taken the right amount of testing,” Levin said. “Later this year, we are planning another test with the removal of additional items.”

The smaller menu will allow for faster service. Other efforts to speed up the guest experience include updating server tablets so they’re capable of taking payments. BJ’s also has a mobile pay option that is speeding up table turns by up to ten minutes. 

“We want to be as efficient as we can with our table turns, and give the guests that want to be faster the ability to be faster,” Levin said. “At the same time, we understand that we are there for experiential dining for our guests, and therefore, we want to make sure that we’re doing everything we can to make sure that they have a great experience.”