Q4 2019 Earnings Call
Good day, ladies and gentlemen, and what kind of restaurants incorporated fourth quarter 2000 Leaching earnings release Conference call. Today's conference is being recorded at this time much of the conference over to Greg <unk> Chief Executive Officer. Please go ahead Sir.
Thank you operator, good afternoon, everyone loves earnings.
Fiscal 2019 fourth quarter industry Conference calls.
Great Trojan Aegis, Chief Executive Officer.
The call today, it's Greg.
Right.
[laughter], we also have Kevin many or our chief marketing officer.
Right.
After the market close today, we released our financial results for the fourth quarter fiscal 2019, which ended December 31st 2019, you're getting beautiful types of our earnings release on our website at Www <unk> right.
As far as just today, we'll start with a lot of shareholder or director Investor you see reporting.
Providing our standard cautionary disclosure with respect to for <unk>.
Providing an update on our business the current initiatives and then Greg London will provide recap.
Some preliminary views on fiscal 2020.
After that we'll open it up to two questions.
[laughter] finish the call wondering about an hour or not I, usually get to most if not all everyone. On this year next year, then if not where a man hours later.
Later today and a small so lots of ways things right. Our comments on the conference call today will contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1985 sporting statements involve known and unknown risks uncertainties and other factors that may cause actual results performance.
Achievements of the company to be materially different from any future results performance or achievements expressed or implied by forward looking statements investors are cautioned that forward looking statements are not guarantees of future performance and the undue reliance should not be placed on such statements are forward looking statements speak only as of today's date February 2020.
20, we undertake no obligation to capital could you 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 should refer to the whole discussion of risks and uncertainties associated with sports.
Looking statements contained in the company's filings with the Securities and Exchange Commission.
Thanks, Rob.
The strength and growing awareness of VJ spread combined with our successful sales driving productivity initiatives and the daily commitment to excellence from our team members resulted in positive comparable sales this quarter, even until you're up against strong years knows chain restaurants results.
Yeah, it's positive fourth quarter, and full year comparable restaurant sales of 24% and 1.1% respectively.
Extended our long term record of growing our casual dining marketshare, well, marking another period of industry outperformance [laughter].
As measured by Black box.
But it's easy to industry sales and traffic in 2019 by approximately 140 basis points 10, 70 basis points respectively.
Our strong 2019 performance successfully like 2018 410 basis points industry sales be.
And 270 basis point premiums for the industry traffic.
You can't consistent market share gains there not a one quarter phenomenon for each one or two year phenomenon.
In fact for the past five years, we have on average outpaced the industry sales and traffic by over 100 basis points each year.
In addition to our same restaurant outperformance, we continue to expand and diversify our geographic presence.
The seven very successful new restaurants in 2019.
Bringing our system totaled 60 wondering Nate.
We are hoping 55 restaurants in the last five years, which account for roughly 275 million of incremental sales were about a quarter of arch light 20 sales expectation.
Over the last five years, we've also standard our brands, it's having these things.
We're excited that next week, well Mark BJ century, swore 20, Ninee state, Massachusetts.
We continue to build out locations in the northeast in a manner consistent with our cluster development strategy.
Well, we're encouraged by our concepts ability to drive consistent growth 2019 also brought a continuation of wagering pressures and higher than anticipated food cost inflation, which in part in full year restaurant level cash flow margins by approximately 140 basis points.
The stronger economic backdrop, helping build ourselves because they're so double its or.
We expect wage rate inflation in the mingled mid single digits will continue this year [laughter].
As we communicated in the past the most sustainable way to improve our profitability. It's a couple topline growth.
It's a pretty cost controls and restaurant level execution.
Our recently relaunched catering menu our successful expansion of our slow roasted even.
Yeah, we bring how specials and enlightened options.
The introduction of our six dollar take home entrees and the rollout of our gold standard Kitching systems, all continue to improve the guest experience and customers affinity towards our brands and collectively support our strategies to further build marketshare the casual dining.
So that's why our restaurant operators continue to deliver on D.J. its promise of gold standard hospitality in food quality every ship every day.
Our NPS scores set an all time record in both Q4 and for all of 2019.
The ability to bar teams to execute the bedrock of all that when you do.
And even the most robust growth strategies won't matter, if we're not consistently improving our guest experience.
Our 23000 team members could guess servicing hospitality epicenter of everything they do.
And their dedication continues to differentiate DJ so as we further elevate our dining experience deliver on value promise of our brand.
Hi workshop in traffic and expand our restaurant base.
So that to that end, we will remain at the forefront of technologies that enhance the experiences. This long time down 17 numbers.
It's clear that concept I can navigate today's cost pressure, while maintaining their value proposition.
Relevance will be the ones, which prevail and emerge stronger in the quarters in years to calm.
As we noted previously our concepts menu variety combined with the physical design of our restaurants drives a wonderful diversity in gas and occasion utilization.
This affords us the opportunity that balance and check growth and traffic driving value initiatives to maintain our crazy.
Value positioning.
Finding incremental revenue opportunities, where we can be aggressive on pricing and value is fundamental to this strategy.
Whether its offering 10 dollar take home bottles of wine our newspapers dollar take home entrees.
Our our recently expanded family seized another accommodation catering packages, we're focused on initiatives that grow sales have been providing noticeable value for our yes.
This past November we started selling our prepared she'll take home entrees and this new revenue stream has grown steadily to it into next level comparable to our best selling in restaurant items.
Given these sales are nearly 100% incremental it gives us a chance to providing incredible value to argue as.
While driving margins and profitability.
No not another opportunity to do just sat is our work to watch BJ superior subscription CLO.
Our award winning grow Masters are hard at work, creating unique years, they will only be available to guess that become members of the BJ severe club.
Our goal is to drive incremental subscription revenue, but just as importantly, more traffic into our restaurants.
We're on track to begin testing this program, which we believe will offer VJ is another clear point of differentiation in the casual dining studies in late Q2 as this year.
[noise], while investing in his new revenue streams is core to both our sales building in value strategies, we continue to innovate around our in restaurant value in traffic opportunities as well.
In January we launched a great success, our new enlighten powerful lineup, which includes a variety of healthy delicious meal options, such as probably flowery human powerful with salmon and other protein options.
We believe on trend menu items like these are both keep our brand incurring and drives additional visits from our guess ultimately leading to an improved email performance.
You'd have to same time, we continue to expand on to check building tower are part of our centers the plane entre business.
Our try to menu items continue to I'd impressive growth in our slow rose business. In fact, these items, which were introduced last year and then even more incremental to this category than we expected as we have seen prime report jobs.
While maintaining solid popular.
Probably popularity.
We're also focused on driving greater traffic during our lunch day part endpoints Morgan.
Generational trends in competitive intensity of challenge launch more profoundly than other areas would be industries dine in business and as such were seeking to improve gross value in speed from our lunch yes.
He recently began testing a new 810 $12 lunch value menu, which also includes newly licensed healthier options along with our traditional lunch favorites.
We know from our research that convenience fees and value our most critical for lunch guests and we believe these new options will improve our competitiveness and all of these areas.
In addition to continued growth of our route how special [laughter], our loyalty program provide important everyday value pillars for I guess.
The organic growth at these two programs you didnt without the benefit of any incremental marketing spends that again speaks to their importance in the value equation of our concept.
Oh delivery, we continue to grow it enhances incremental and profitable part of our business in Q4.
First we implemented targeted promotions that profitably drove both new trial of B-j's delivery as well as repeat orders.
We also streamline execution and improve service fees.
Equity integrating all third party delivery ordering into our point of sale system [laughter].
[laughter] excuse me.
Removing that need for team members to reenter orders received on third party tablets.
[laughter] excuse me.
Lastly.
New delivery partner, which is proof incremental.
As we have also seen the continued expansion of our delivery sales with our legacy partners.
Looking at unit growth.
Success of our new restaurants, the vast majority of which are in markets outside our core footprint.
Gives us great confidence in our ability to double the number of being days in the U.S.
We plan to open eight to 10 restaurants, this year with an eye towards increasing that number into the low double digits next year.
We continue to emphasize quality of openings over quantity, but we believe our restaurant manager pool and site selection pipeline enables us to gradually increase our opening pace to a level, where they're generating consistent revenue growth of 5% or marinaro pipeline.
We believe this new restaurant growth comparable restaurant sales on the 2% to 3% range, our ongoing Foodies manager management of our restaurant level margins.
Benefit of leveraging these fixed costs in our business will enable these days to achieve high single to low double digit earnings growth [noise].
In addition, our disciplined approach to our capital structure provides us the ability to expand while deploying cash flow from operations to buy back shares and grow our dividend further enhancing shareholder returns.
In closing before turning the call over to Greg.
Oh, Thank our 23000 team members for all day due to make BJ is a great place to work.
In an increasingly more attractive destination for our guests.
We appreciate their engagement and support just as we do the support of our shareholders and other stakeholders as we continue on our journey to make IGI is the best casual dining concept ever.
With that I'll ask Greg could take us through the detailed financial performance of the quarter and year end Greg.
[laughter].
[laughter] excuse me thanks, Craig.
Before we get to the quarterly details.
Let me remind everyone that beginning with Q1 fiscal 2019, we adopted the accounting standards update 2016 cash show to the topic Apthirty two for leases and as you know that requires us to put the present value about lease payments on our balance sheet as a REIT cheese asset with a corresponding lease liability.
This new lease accounting standard Asa requires us to make a onetime noncash adjustment to retain earnings of approximately 29 million. Its sale lease back is that we're amortizing in operating in occupancy costs over the term of existing leases.
Prior to this accounting update.
Overall, the new accounting standard increased our restaurant level expenses and again. This is primarily an operating occupancy cost by about 2.3 million annually. So specifically for the fourth quarter, the new accounting standard impacted our restaurant level margins by approximately 600000 or 20 basis points and reduced earnings per share.
Three cents for the fourth quarter.
Additionally, during the fourth quarter, we completed two sale leaseback transactions. So restaurants that opened in 2019 under the new lease accounting sick walls began on these transactions are now recorded in the period in which the gain occurred rather than amortized over their new lease terms that starts during the first quarter.
We recognized a pre tax gain of 4.7 million for the sale leaseback of these two recently opened DJ restaurants.
This game benefited our operating margin by 160 basis points and earnings per share by approximately 24 cents for the quarter.
A reconciliation of the impact of the new lease accounting standards for both the quarter and full year as included in today's press release.
In regard to our fourth quarter, our total revenues increased 3.8% to 291.1 million driven by a 3% increase in operating weeks and 8.4% increase in average weekly sales are comparable restaurant sales were also up 0.4% this season.
In line with our average weekly sales.
California comparable restaurant sales, which began to soften last July showed improvement in Q4, but still lags behind our total comps for the quarter.
Looking below the top line our cost of sales was 25.2%, which was 20 basis points lower compared to last year's fourth quarter, driven primarily by menu pricing and probably these costs. This was offset by higher meat and dairy costs.
[noise] labor of 36.4% for the fourth quarter was 100 basis points from a year ago due to higher Lee higher hourly average wages and an increase in the state unemployment taxes and this was partially offset by improved labor productivity.
Hourly wage growth in Q4 continued in the mid single digits, which is consistent with what we've experienced throughout 2019.
Operating in occupancy cost increased 50 basis points to 22.5% from last year's fourth quarter.
20 basis points to be in presuppose related sort of new lease accounting better reviewed earlier.
And the balance was primarily related to higher facilities costs.
Included in operating in occupancy cost is 7.6 native marketing, Stan and that equates to about 2.6% of sales is pretty consistent with last year's fourth quarter.
Our general and administrative expenses at 15.4 million.
Occasions, as we reduced our restaurant support center incentive compensation.
Our tax rate in the fourth quarter was approximately 6%, which was higher than expected and driven by the income from our sale leaseback transactions.
In terms of capital allocation, we continue to use our strong cash flow from operations to execute our expansion plan and invest in our business, well opportunistically repurchasing shares and paying dividends.
We generated nearly 130 million in adjusted EBITDA in fiscal 2019.
We use the solid cash flow to continue our national expansion with the opening of seven successful restaurants and to invest in our existing restaurants, and opportunistically repurchase 2.1 million shares of our common stock for a total of 82.8 million.
We also returned 10.2 million square shareholders for our quarterly cash dividend between increased by 8% in October 2019.
We ended this last fiscal year with 22.4 million of cash and 143 million funded debt on our 250 million line of credit.
The trailing 12 month adjusted EBITDA of 120 up 229 million.
On the net leverage remains modest at approximately 0.9 times.
[music].
Now before we open the call up to questions. Let me spend a couple of minutes, providing some commentary for fiscal Twentytwenty.
All of his commentary, it's subject to risks and uncertainties associated with forward looking statements as discussed in our filings with the FCC.
Our comparable restaurant sales of seven weeks into fiscal 2020 are up 1.7%.
California remains a little softer, though as I noted a moment ago trends in California continue to improve from Q3 2019.
With regard to restaurant operating weeks I've expect approximately 2708 weeks in Q1.
[laughter].
Second fiscal 2020 cost of sales to be in the low to mid 25% range. We've walked in about 60% of our commodities for this current year. However, certain items such as produce at most of our needs are on must be contracts. So well have updates on those trends as the year progressive.
Typically for Q1, I'd expect cost to sales to be in the low 25% range.
[laughter].
With regard to labor, we absorbed another increase.
To the California minimum wage as well as a minimum wage pressures from other states.
Aside from the state minimum wages, we also expect wage pressures across the restaurant business, both hourly positions and managers based on the latest trends and anticipating another year of upward pressure on hourly and management wages in the 5% range.
For the quarter and based on where sales are today I expect labor to be in the upper 36% to 37% range. Please remember that adds in the past we see some of our highest labor cost as a percent of sales in the first quarter each year, primarily due to higher payroll taxes and benefits that occur at the beginning at each year and which last.
Until we reach many of the state caps or limits later in the year.
Of course labor as a percent of sales is highly correlated to weekly sales averages and comparable restaurant sales go up so labor as a percent of sales will be impacted by these factors.
We are targeting total 2020 occupancy and operating cost to be in the mid to upper 21% till now 22%.
Additionally included in total occupancy in operating cost will be approximately 2% to cure and a half percent of marketing spend and that is pretty consistent with the level of marketing spend for fiscal 2019.
For Q1, I would expect operating occupancy costs to be in the mid 21% range and like labor operating occupancy cost as a percent of sales is highly correlated to weekly sales averages and comparable restaurant sales growth.
We expect total G.N. a to be around 70 million in 2020. This assumes 100% support center or as we would call corporate incentive compensation.
In 2019, our support center incentive compensation was approximately 2 million compared to a budget at 100% support center incentive compensation of around 6 million.
Therefore, excluding support center its doesn't compensation, our controllable GSK will increase to approximately 64 million or 6.7% compared to approximately 60 million last year again that is taking on incentive compensation for both 2020 2019 to give an apples to apples.
Those comparisons.
As we've said many times our goal is to leverage our controllable gionee that is that is the gene excluding incentive compensation as we continue our national expansion.
For this coming year, we'll be slightly behind that goal for two main reasons first beginning with this fiscal year, we have to adopt a our accounting standards update 2018, gosh, 15, which deals with accounting for implementation cost incurred in cloud computing arrangement.
Good morning, everyone with the details the accounting standards update require us to amortize implementation costs of our new human capital management system in DNA instead of in depreciation and amortization.
So this will be a new cost this year in DNA.
Second we will incur costs related to our beer subscription plan, including personnel and other costs.
For the first quarter I'd expect DNA to be in the mid to upper 16 million range.
First quarter Preopening costs should be in a 1 million range based on two restaurant openings at the end of Q1 and expenses for up to three more restaurant openings in the first half of this year.
We expect our tax rate to be in the 6% range for fiscal 2020, excluding any significant discreet items. This compares with our 2019 rate of around 2.2%.
I anticipate our diluted shares outstanding will be in a 19 million range.
Capex for 2020 should be in the range of 85 million to 90 million and that's sort of development of eight to 10, new restaurants maintenance capital expenditures at their sales and productivity initiatives and the new human capital management system support our growth and this is before any tenant improvement allowances or sale leaseback proceeds we gave us.
Keith.
We anticipate funding our 2020 capital expenditure plan.
She had cash cash flow from operations, our line of credit and the landlord allowances and sale leaseback proceeds.
In closing you James remains a proven cotton broke concept that generates strong free cash flow and maintains a solid in flexible balance sheet.
Well, yes to continue executing on our robust long term new restaurant growth opportunity.
As we've discussed on the call, we're consistently outperforming our peers that and taking market share and our strategic position within the industry to continue to take share.
As we start 2020, we remain confident in our initiatives to drive sales productivity and efficiency combined with our balanced approach to new restaurant growth and disciplined management of our capital structure continues to be a proven formula so extraordinary levels of guest satisfaction sustained long term.
To answer growth can be appreciation of shareholder value.
That concludes our formal remarks, operator, please open the call up for questions.
Thank you, ladies and gentlemen, if he would like to ask a question. Please signal by pressing star one on your telephone keypad using a speaker phone. Please make sure function is turned off color you're signaling to reach our equipment again. Please press star one and we'll pause for just a moment to everyone opportunity to signal for questions.
Well take our first question from Mary Hodge.
With Baird. Please go ahead.
Good afternoon. Thank for taking the questions I just had a couple of questions on the comps outlook I think first I think you mentioned last quarter that it would take roughly a 3% come to hold the margin structure flatten 2020. So I guess first of all had that relationship change and then second what would be your degree of confidence and getting to that level based on your planned average check and.
Initiatives that you have in the pipeline.
Yes, Marriott Sacroc lab, and I don't think anything has changed that much I'd, probably say the kind of whole margins, it's probably more in the 2.5% range maybe versus the three for side I think it's I think the algorithms somewhat straight forward a in the business and that is if we can manage our commodity.
Yes, and kind of the one to one of the half percent range.
Eight as I mentioned I still expect hourly labor to be in the 5% range and then I think we have the ability to continue to manage the operating occupancy costs, especially this year, because they're not going to be gone over the new accounting update. So you start to look at that it means we can leverage cost to sales probably getting back on later I mean, you're gonna be able to manage operating occupancy.
Cost to get the margins are somewhat flattish, we think there around that 2.5% or so I think we've got a really good set of initiatives. After you Jay buoys line of things that allow us to contribute to grow comp sales and I think as Greg mentioned on the comment on that.
So to speak friend right here, but I do think me items like our $6 to go entrees the value lunch items are testing well. So I think were lined up well to to go after that two and half percent comp sales.
Hi, Thank you and then just as a quick follow up what level of average check are you planning for the business for 2020.
Well I think as we look at our business and we think about things like these $6 to go items. We look at work catering is in continuing to grow some of the slow those items as well what the power bowls are doing for US we would like to see average check frankly or not.
Two and a half a greater level of things like the $6 to go entrees those are incremental to grow net average check in our business.
Yeah, and same thing the catering, which we're seeing great success at so I think ideally we'd like to be above that number but again I can do it by mixing properly and our business, making sure we maintain that that value quotient around things like the launch the 810 12, and our daily greenhouse specialists as well.
That's great. Thanks for taking the questions.
Well take our next question from Jeffrey Bernstein with Barclays. Please go ahead.
Hey, guys is actually dropped pretty strong Bernstein.
I'm just somebody unit growth.
Sure.
Any additional color.
So one of them on the fourth quarter and then as we look forward.
Double digits human growth number.
No.
The distinction between new markets in existing markets.
So in terms of the footprint over the internet, whether you're going to try to smaller.
These markets.
[laughter].
I can.
Taking seven or so so first of all we're not planning any I mean closures in the in the years are closer.
Last year as one of our small original we call or between college restaurants on most elbow coming so.
Lease expired, there, but and we've been very fortunate.
As a concept not to experience.
Let me closures that at all so Ah. So that's the answer to a two that in terms of where the growth.
We'll be it.
We will be generated from him from a market perspective. It will continue to open the lion's share outside of our traditional core larger markets.
Of California, Texas, and Florida, as we've said before there are.
Few opportunities and we will open restaurants and in those markets, but the lion's share will be leveraging the base.
We will be adults in the Midwest cord or in a in the northeast where we are you know been opening with the with great great success.
Right and then just on delivery you guys mentioned previously.
Activity and economics of the promotional delivery offers.
Okay.
Environments some of your rough jump here as I mentioned that.
Every market, maybe it's not something a little bit I was just wondering if you've seen anything in terms of.
Flow down and the growth.
Well environment there. Thanks.
Yeah. Thank you for asking about the.
We pointed out it's still growing and we're still you know picked up there we had a lot of opportunity or both delivery and take out but the rate of growth has slowed considerably and you know we be caught consciously.
Dial back on our level of promotions in that in that space I'm in that in the depth of promotions.
As we've seen the level of competition and number of players in third parties deliveries you just see incrementality of spending goes out there if it goes promotional dollars. They baseless I assume they did they did before so look we still think it's a a robust growth area you know as.
Said offering consumers are voting and continuing to sue to purchase from.
But that distribution channel for sure we still think it's highly incremental.
But I think it's fair to what you said it is you go back brokers is a plateauing for for all those reasons.
<unk>.
Well take our next question from Matt Difrisco with Guggenheim Securities.
Thank you [noise] just a couple bookkeeping questions here first did you guys disclose how much off premise sales work or delivery with enough.
We do not it's still a two day, it's Phil it's about 10% that it's up year over year pretty evenly split between takeout and ER and deliberate.
We didn't mention I know you mentioned, specifically here that we've added a couple.
More delivery companies onboard now that we can seamlessly, bringing trade our point of sale system.
Which is allowing us to continue to grow that channel was one of the readings are going that channel.
To your inferring like 5% Liberty, 5% pick up.
That's correct.
Okay. Thank you for that and then also I guess, if you weren't you.
Look at the growth in the new markets and sort of your approach to advertising I know you said it sort of in that two 2.5% as far as overall marketing, but it's there or you get into a tipping point and any markets, perhaps maybe some markets in Texas are some markets in Florida.
You could maybe use some more traditional advertising, but maybe could drive a little bit more brand awareness.
Yeah actually if I take it.
Yeah.
Okay sorry.
Yeah.
It's more a function around.
The the mode of advertising and media flexibility.
In the world of cord cutting that you know where this your go to continue so I'm.
Kevin Kevin can talk a little bit more about it without getting into two less competitive detail here, but we do think there's an opportunity to to advertising in certain markets at a more affordable targeted way.
But it wasn't available you know, even a year or two ago and you know our testing control around those programs and then and promising so the short answer is yes, that's so much the because we.
<unk> increased scale in many markets I'm too.
Significant degree, but combination of having enough restaurants, and being able to target a metric it for just a real opportunity to get to some of these mergers sooner than the traditional model of.
Cable national cable buys et cetera.
Yes. Thank you and then I just wonder.
Follow up on the comp.
Sounds like California is getting stronger when its lagging the overall national averages that more so the national.
And seeing a lift from just from weather benefit them less or more mild winter in the mid west in the northeast work rather than sort of the delta is not being experienced as much maybe in California, and then Greg a woman I just want also better understand the anatomy Oh the quarter to date comp trend versus what you did for the full quarter. So if my math is right.
Like you have a harder compare coming up in the back half from one Q first where you've already left in the first seven weeks. Thanks.
Yeah first off or not.
Your math is correct [laughter] and that would be to eat the comps start to move up a little bit from that standpoint over the quarter.
Versus a year ago and to your first call. It I do believe there's there's some truth to that when we look at it on absolute basis, though California's delta is improving year over year, but there's definitely right BJ, specifically being a more California section centric company.
We don't get quite the benefit of rolling over the polar vortex and somebody other things from a year ago.
The I would add.
Yeah. So that you know it is a general trend that we've talked about the last couple of quarters here from last year.
California, which is typically you know more about health and not it's been lagging a bit markets weather. Aside you know he had the range of last year in California stones.
It would seem to be benefiting you know quite as much as the weather elsewhere, but in general you taking away into the weeks of of whether.
Happy to see you, improving but California still lagging pretty consistent you know positive outperformance and all the other markets.
Understood. Thank you so much.
Welcome.
Well take our next question from Chris Ocull with Stifel.
Hi, Good afternoon, guys I'm, just a follow up on that last Atlanta questions.
Can you tell how your system is performing relative to the peers in your footprint I know you guys have stress the importance of outperformance in terms of comps and are you seeing that relative performance in the footprint set your where you operate.
Chris This is Jack loving Ah.
Yeah, we break down our our restaurants, obviously by state and geography, it can compare it.
It's black box by state and geography and in general we're outperforming in just about every other market out there or except for California. When we look at California. We said this before it's specific to a couple areas primarily the bay area, we tend to have.
Big restaurants up there and when they're down a little bit they they can wait heavier on other restaurants within California, and they tend to be maybe a little bit more mall centric and that northern California area. As you know, we don't have a lot of inline restaurants.
In total we probably about 20 inline restaurants.
We just happened to have a majority of that 20.
More in the California, marking and make it a little bit more in the Bay area.
Okay. That's helpful and then.
Great how many stores with the company be testing the new your subscription program and what metrics are you evaluating during that test.
[noise] [noise] in.
In 2020, where Ah were.
We're talking about California, as the a test market for a number of probably obvious obvious reasons brewing capacity brand et cetera, hi.
Hi, among them, Chris and and I look it's it's.
Really what we're looking for the program to do is is hey, you know the metric of success. So we want people to be engaged and sign up obviously, but really the end goal here is to activate them in a way that generates more traffic in the restaurant I mean, we are.
I think theres, a great opportunity to have you know a subscription revenue stream here, but we are we're thinking of this is you know a ability to access I'm very unique award winning caliber beers as being a part of the club, but there will all.
So be in restaurant benefits that that drive folks not just to pick up to be or when its available, but also drive traffic in between release dates with.
That makes sense do.
No. That's that's good and he just lastly, it looks like the new unit volumes had been improving the past few quarters and if that's the case what are you guys doing differently do you think two calls the improvement.
I don't know we.
After completing answer for you from that standpoint, I mean, we take a lot of time diligently to make sure that we slots that we consider to be thereby spots for BJ. We've said a couple of times in the past couple of years that we really like going into some of these more secondary markets.
I am probably is I think about the Christian we talk about it it is a little bit up in filling in those markets. So you start to build a little bit about planned awareness.
So as we you know at our second and third and fourth restaurants in the Michigan, we start to build up that brand awareness same thing with the Ohio as much as North Attleboro Phoenix makes I first wanted to Massachusetts, where slowly starting to build.
That brand recognition into the northeast with our restaurants in Connecticut.
Hi, This is only 20 minutes from work so.
Chris I think one of the common denominator denominators is we're opening.
Many of these cases in trade areas, where the overall competitive intensity isn't quite the same is what it is in the core of you know the traditional Texas or California, or some other markets I'm, even though they bring high population density you see or the northeast is a good it a good example.
Just the difficulty of development and in the northeast just getting using that as an example.
You don't see the same level of seat density.
And in our price point, but that you see elsewhere in some other trade areas and I think that's that's one of the biggest things of that we're benefiting from.
Okay, great. Thanks, guys.
We'll take our next question from Joshua Long Pepperidge Sandler. Please go ahead.
Great. Thanks for taking the question wanted to see we might be able to dive into the average check price mix mixing put into the quarter and then is we think about trends both during the quarter and then are here to date in the first part of your budget geographic commentary was helpful. Curious, what you've been seeing them either we did weaken.
And or.
Alternatively by day part as well, noting that you get some initiatives around the lunch day part.
I think we've seen any major changes from a day part perspective, I mean, you talked about I mean, we talk to them into remarks about.
Lunch being generally more challenge for the industry and that's true for us as well and why you know were we're focused around because there's value speed and and and a healthier alternatives that at lunch. So I don't think there's you know.
We haven't seen any shift or or new news from from the general Daypart.
Now says if you if you will.
You know we are we are seeing some some nice check growth as a result of and I'd say you know where.
In the past couple of years, we've seen average check below where we're pricing right now, we're seeing I'm a bit more mix benefit.
And overall check benefit from a few the initiatives. We then we've been working on and you know slow roasted and tried to me Entre popularity is is probably an obvious one.
You know, we're very pleased even though it's still early on but its having you know a material impact is our six dollar entre take on meals or you know up or very incremental to to check and and helping us the build builds check through degree value, we're offering on and those.
To go items. So that was off premise is all well combining to should provide some some good check growth as we as we head into into the new year.
Great. Thank you for that and then thinking about the each 10 units. This year and then looking to extend that up a bit as in the out years can you talk a bit about your manager pipeline you alluded to that in some of your prepared comments, but curious on what you what you're doing what you've done about strengthening that and really preparing the brand for.
Disciplined growth that you talked about focusing on quality not just wondering.
Yeah. That's a great question, Matt we've we've often said in the past the biggest determinant of how fast we couldn't can go is that is that bench strength and you know I just without using our own corn I'm too. Much here is you know we've proven through the years to know how to open restaurants, Welling still operate solid rest.
Fraud, and we've we've opened as many as 17 restaurants and done that pretty pretty successfully in the in the past. So we haven't you know I'm very very disciplined.
Training and Anoro team and approach and Morse. Most importantly, a lot of experience within the B-j's concept that I've been doing it for a long long time so.
So if you know we we just feel good about the <unk>. The training we've been at a slower growth mode for a couple of years now so that gives us an ability to restock that training pipeline and feel a feel a feel good about the b bench.
Thank goodness that will enable us opening successful restaurants have you decided that Josh if as we went through our goal standard kitchen systems. This last year, which focused on as it is as the main sounds are says on the kitchen side of things that also take into account aren't you can't our executive kitchen managers and kitchen man's or do you need to make things a little bit.
And your for them to allow us to continue to bring and not only the talent, but to get them acclimated to D.J.D. The way that allows us to grow so we feel good about our manager pipeline, we spend a lot of time on it.
Okay, we have a call on every week going through that pipeline and making sure that its primed and ready to guys. We continue our national expansion.
Great. Thank you.
Well take our next question from Sharon Zackfia with William Blair. Please go ahead.
Hi, Good afternoon, I may have missed but did you give traffic and ticket for the quarter.
Hi, I'm going to forget or not.
So we look after the quarter. It's it's we were down about 4% and traffic.
And our ticket was up or whatever that differences.
Hey into it the 5% range or so when we look at the numbers to the quarter. It then we mentioned just on the ended that Q3 call, we slipped to our $3 because they keep on Friday October last year in 2018 to September in 2019, so as we look through the quarter we.
At a pretty big average checking Pete can actually went up against treat all up if they keep on 2018 and then our traffic came down in both but I would call November and December where traffic is a negative 3% range and then it's been a pretty to hear it either in Q1 or so.
So as you think about it all lined out that basically traffic down into the 4% range or so ticket trad ticket up in the 5% range, but it really got skewed a lot more by October.
Okay. That's helpful. And then I haven't heard you guys talk about awards for Awhile and I don't know kind of where you stand on that and in the program or how to pick up and then there and also if there's any opportunity or if you're thinking about tying then.
Warrants with Citi. Your club that would be interesting that didn't get any insight into and I guess.
Lastly on your labor outlook. After this year I mean is there any line of sight towards any kind of moderation and that hourly labor inflation.
Okay.
I'll take the the loyalty part of the question churn and and Yeah, I briefly touched on it as calling it one of our value pillars, along with through how special so thanks for asking the question because it really has continued since the relaunch which is over two years ago. Now you know, we've just seen nice momentum around.
The.
Growth in sales from and both members, but more importantly, no growth in transactions, even you know proposed proportionately from or from our loyalty program. So so we're very very pleased with that is that it really is a big part of us balancing this whole check growth.
And maintaining value equation are really important part of that so.
So we're happy to happy to see that momentum continue.
And we will use the infrastructure, you know sign up and points tracking et cetera communication infrastructure of our loyalty program to include man.
To implement the beer subscription program and will also make it easy for beer subscription members to track where they are in in the elements of beer subscription through one DAP and you know a seamless experience between.
Between the two programs even from a rewards perspective, so yes. It think of it more as a you know a super add on to two loyalty in terms of guest experience.
And then a question on labor inflation after we get through the next round in California.
HM.
We we said this before and I still believe that when we look at the gate and analyze the data minimum wage is only 50% or the wage inflation that we're seeing out there.
Most of our kitchen is above I should say not well I guess most of our kitchen is a above minimum wage from that perspective, yet they're still saying the same kept the pressures that we see in the dining round. So when I look at it I played a little bit to the unemployment rate being sub 4%.
And as a result, I still think we've got at least another year.
Wage increases I do think it will moderate over time, but I I still kind of see 2021 being another year.
Outside of 2020 that we'll probably see labor inflation.
Okay. Thank you.
You're welcome.
Ladies and gentlemen, we have time to take one more color or last question will be from Todd Brooks C.L. King and associates. Please go ahead.
Hi, Thanks for taking my question.
Couple of funds one we just went through a holiday period in Q4.
Talk to any sort of metrics our success around.
Hi, there recently relaunched catering efforts and what you saw across all their parents.
Yeah.
All things here in Big picture, I'm, frankly, losing the one each in Ah between Thanksgiving and and Christmas I didn't get impact that business. We saw I think as he looked at December we saw it kind of ticking a little bit later in regard to the holiday parties.
We were up big on our gift cards I want to say into teams year over year, which did really well first I think it's kinda, helping a little bit with the comp sales in Q1, because most of those gift cards and related rewards for them or are there if that doesn't get regain usually in the first 60 days or so the next quarter our catering.
Actually has been doing really well I don't have the numbers in front of me, but I'm I'm actually not only a impressed with what we didn't catering in Q4, but in Q1 indicator number continues to do really well for asking to some just great catering increases in sales frankly, just about every day I fell on new packages.
I think at Cod, we talk about this a lot at being Jays, because we don't have the marketing might that you might seem someone's a larger cap restaurant companies a lot of our initiatives take time to grow we didn't seem to fixed dollar entrees that started in November there are actually probably at an all time I should say probably I know they are at an all time.
Hi, good sitting here in the January and into the February timeframe, and our catering actually as I. Just mentioned continues to grow into PD, one or January and February at numbers above a year ago. So I like where we often does initiatives.
I would also saying I've mentioned this before that the new years day slept Yeah, you know flip flop did kind of impact comp sales in Q4, probably by about 20 basis points, it's probably helping Q1 by about 20 basis points. Because January 1st is a big day and getting that in Q1 kind of helps us a little bit in Q1 hurts us a little.
In Q4.
Okay, and then just two quick follow ups, one when you talked about.
5% ticket and.
In Q4, he's catering is there enough activity the a chunk of that lift ticket was catering weren't they didn't.
Can that be measured and then.
Other follow up is just around the openings as we're a little further into the year now he's a cadence for for kinds of scheduled openings through a 20. Thanks.
Yeah, let me take on the person not on catering it's still a small numbers I didn't have much of an impact on average check our average check as I mentioned it was really packet and in October that the flip side of the $3 picking a lot.
Because I moved out after that the average check I kinda came back down into kind of the up 3% range or so.
Maybe a little bit higher and I think that's as we mentioned kind of $6 entre from that standpoint, and frankly, even though we did mention it in detail on this call the slot of us at the Tri temp has been really beneficial for us it's tease out mixing out positively in our business. So that's really I think in the fourth quarter not so much on it.
Catering just because it's such a smaller amount of our sales.
In regards to the cadence a new restaurant openings right now it looks like a we've got to add one restaurant opening in Q1, which will be in northern Alberta out there in Massachusetts.
It's looking like three restaurants will open in Q2.
And then separately neighborhood, probably two to three in Q3, probably two in Q3 and so that's the kind of in Q4.
Okay, great. Thank you.
You're welcome.
Ladies and gentlemen, this does conclude today's question and answer and conference call. We appreciate your participation you may now disconnect.
Thank you everyone. Thank you everyone.
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