Q1 2021 BJ's Restaurants Inc Earnings Call
[music].
Good day and welcome to the Bj's restaurants incorporated first quarter of 2021 earnings release and conference call. Today's conference is call is being recorded at this time I would like to turn the conference over to Greg Trojan Chief Executive Officer. Please go ahead Sir.
Thank you very much operator, and good afternoon, everyone and welcome to Bj's restaurants fiscal 2021 first quarter Investor Conference call and webcast.
I'm, Greg Trojan Bj's, Chief Executive Officer, and joining me on the call today is Greg Levin, our President and Chief Financial Officer. We also have Greg Lynds, Our Chief Development Officer, and Kevin Mayer, our Chief marketing officer on hand for Q&A.
After the market closed today, we released our financial results for the first quarter of fiscal 2021, which ended Tuesday March 30, you can view the full text of our earnings release on our website at Www Bj's restaurants Dot com.
Our agenda today will start with Rana Schirmer, our director of SEC reporting providing our standard cautionary disclosure with respect of forward looking statements. I will then provide an update on our business and current initiatives and then Greg Levin will provide some commentary on the quarter and the current environment.
After that we'll open it up to questions. So Ron of go ahead. Please thanks, Greg our comments on the conference call today will contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, we're looking statements involve known and unknown risks uncertainties and other factors that cause the actual results performance or achievements of the.
A company to be materially different from any future results performance or achievements achievements expressed or implied by forward looking statements.
You 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 April 22021, and 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 of referred to for discussion of risks and uncertainties <expletive>ociated with forward looking statements contained in the company's filings with the Securities and Exchange Commission Greg.
Thanks Rhonda.
I'm very pleased to report the positive momentum in our business continued and accelerated throughout the first quarter of 2021.
Propelled by both improving dining room seating capacity in key markets and guests eager to return to our restaurants, our sales are continuing their steady recovery.
The quarter began with weekly sales per restaurant and averaging $66000 in January as strict indoor dining restrictions remain in place and a number of states, including California, where we operate 62 of our 209 restaurants.
We're all on premise dining was banned including outdoor patios.
In February our weekly sales average rose to 76000 as certain states loosen restrictions and we have the benefit of sales from outdoor patios in California that were allowed to open in late January.
In March the pace of our sales growth sales growth accelerated even further with our weekly sales average increasing to 97000, a 27% increase from February as California began allowing guests to dining doors, albeit with limited seating capacity.
Our sales increased by 50% in the span of the quarter.
Highlighting guests' appreciation of the Bj's concept.
And I couldnt be prouder of our teams that continue to deliver our gold standard service in this rapidly evolving environment.
We continue to see positive momentum in April with our weekly sales per restaurant now averaging more than 100000 of week.
Additionally, on a comparable restaurant basis. Our April sales are now within 7% of 2019 sales levels.
In fact more than one third of our restaurants now have higher sales than in the same weeks in 2019, which.
Which is quite encouraging when you take into account that we're operating with still only approximately 70% of our seating capacity given ongoing restrictions.
And that our late night business, while improving still lags 2019 levels as bar centric late night traffic remains challenged.
Offsetting these sales hurdles has been our team's ability to drive outdoor dining and off premise sales.
Regarding outdoor dining we've installed temporary patio spaces in more than a third of our restaurants, which are currently adding approximately 10% to our effective seating capacity.
Even as our dining rooms are allowed to open at higher seating capacity some guests still prefer outdoor dining, especially as the weather continues to improve.
We are even seeing guests both of these outdoor spaces for special events, such as birthday parties and other celebrations.
And we're entering a busy time for our restaurants with mother's day father's day and graduation season in the coming months and anticipate these additional seats, we will continue to serve us well throughout the quarter.
Now the XR takeout and delivery sales of held up extremely well even as on premise dining has begun to recover.
Our off premise weekly sales average per restaurant was more than 26000 in the first quarter and has maintained a more than 25000 to date in April.
Our delivery and takeout sales remained more than doubled pre COVID-19 levels as our guests continue to take advantage of the convenience of enjoying bj's in their homes, while also returning to our dining rooms.
We're encouraged that the off premise innovation, we introduced during the pandemic, including expanded family meals and our connected curbside service remain very popular with our guests.
We continue to believe that the habits such as these foreign during the pandemic, which increased consumer convenience will remain strong going forward.
All told we're very pleased to see both our in restaurant sales and off premise sales now higher than the levels in the fourth quarter of 2020, demonstrating strong momentum across all of our channels.
As we welcome back more guests into our restaurants, nothing is more critical than delivering our gold standard level of service on each and every visit.
Last year, we took a balanced approach to streamlining parts of our menu, which benefited our execution, while maintaining bj's tremendous variety, which is one of our key competitive advantages.
And we continue to see the results in our NPS net metrics in fact, our dine in NPS recommend score reached another all time high in Q1, beating our previous Mark set in Q4.
Yes.
The key to continuing to deliver our gold standard service as our sales volumes recover is hiring and retaining talented of restaurant managers and hourly team members.
We estimate that the return to pre Covid sales levels on a sustainable basis, we need to recruit and train more than 5000 additional kitchen in front of house team members and another 125 plus restaurant managers.
These restaurant leaders are critical to both strong execution today and to fuel our future growth as we ramp up our new restaurant openings.
Much like our long standing philosophy on opening new restaurants, where we always have prioritized the quality of openings over quantity, we will not compromise our hiring criteria as we seek only the best hospitality focused team members.
We've also made notable continued progress on several key initiatives that we believe will be key sales drivers in the coming quarters and years, including our beer club and our virtual brand called slow roast.
In March we launched our beer club to the majority of our California restaurants as a reminder, our beer club as a subscription program where members pay $30 every two months for to unique and exclusive beers from our brewery team as.
As well as perks that include a free appetizer of free pursue key large pizza and $5 Growler refills to go.
While we're still in the early days of the broader California launch we continue to be encouraged by the guests interest in an engagement with the program as it is driving both incremental visits and profit.
Looking beyond California, we are encouraged to see the progress of updates to the liquor laws in certain states that could enable us to offer our beer club and other large markets, such as Texas and Florida.
Earlier this month, we expanded the test of our virtual of brand slow rose to approximately 30 restaurants in California and Texas.
Our survey results show top tier satisfaction scores and a high level of guest Incrementals, <unk>, which supports our research and optimism that this brand can flourish alongside bj's.
We use learnings from our earlier testing to make adjustments to the menu and we're now testing various price points to determine the best pricing structure to optimize sales and profits.
We expect to be in a position to establish a broader rollout planned in the coming few months.
And no discussion of our growth prospects would be complete without mentioning our new restaurant openings.
We remain on track to open our two 2021 openings in the second quarter located in <unk>, Indiana in Lansing, Michigan, which were already under construction at the outset of the pandemic.
Our <unk> restaurant will open this Monday April 26, and we also intend to reopen our Richmond, Virginia location in the third quarter, our pipeline for 2022 and beyond continues to build and we remain incredibly optimistic about the opportunity for many more new future locations as we continue on our path to.
At least 425 domestic restaurants.
Reflecting.
<unk> on an unprecedented 12 months of operating during a pandemic I remain amazed at the dexterity and engineered <unk> of our teams in our restaurants and at our restaurant support Center.
Bj's has a long standing tradition of rigorous testing with an ability to move quickly to implement changes across our system.
These efforts were supercharged during the pandemic as we evaluated and executed on many opportunities to optimize our business in such a rapidly changing environment.
We are using the learnings of our most recent innovative work to build an even stronger innovation capability with the cross functional team from key areas and our restaurant support center and select test restaurants. So we can learn even faster through testing and iterating on how to best approach our next opportunities.
Also in the past year, we have expanded our guest research capabilities.
We're still in the early innings, but I believe our enhanced ability to identify top priority of consumer needs and quickly filter in refining solutions, which are bolstered with our bolstered innovation process will be of powerful driver of outsized performance going forward.
Finally, I'd like to take a moment to share my immense gratitude to our restaurant team members are results wouldn't of impossible without the hard work and dedication of so many of our team members going above and beyond to welcome guests back to our restaurants with our world cl<expletive> Gold standard of execution, which sets us apart.
We can see through consumer surveys that guests are enjoying their dining experience at bj's more than ever which is only possible with the best teams in the business.
So now let me turn it over to Greg to provide more.
More detail update from the quarter and current trends Greg.
Thanks, Greg.
As Greg just outlined our sales continued to be largely dictated by capacity restrictions there.
Therefore, my commentary on Q1 in Q2 to date reflects where we are with the ever changing national state and local restrictions and regulations regarding dining room limitations.
Please remember this commentary is subject to the risks and uncertainties <expletive>ociated with forward looking statements as discussed in our filings with the Securities and Exchange Commission.
As restrictions ease throughout the quarter, especially in California, where we started with off premise only in January and then add the outdoor patios in February followed by indoor dining in March Bj's weekly sales increased impressively as we finished the last two weeks of March with average weekly sales greater than the 100000.
The per restaurant are.
Our comparable restaurant sales compared to fiscal 2019 improved sequentially as well from negative 36% in January to net.
<unk> of 31% in February and finally negative 17% this past March.
Total revenues for Q1 for $223 3 million and we reported a net loss of $3 1 million and diluted net loss per share of 14.
On a GAAP basis.
The easing of dining room restrictions during the quarter allowed us to productively leveraged certain variable and fixed costs in our business, resulting in restaurant level operating margin of 11, 5% and positive adjusted EBITDA of $12 7 million for the quarter.
Specifically cost of sales came in at 25, 1% for the quarter, which was in line with last year's first quarter sequentially cost of sales came down 70 basis points from Q4 and that was driven primarily by decreases in cheese costs and our overall sales mix in the quarter.
Labor came in at 36, 6%, which was 420 basis points lower than the prior year adjustments.
Adjustments, we made at the beginning of COVID-19, including reducing our menu and continuing to drive off premise sales allowed us to leverage our kitchen and dining room labor compared to a year ago. When COVID-19 restrictions were just beginning.
While it is difficult to compare 2021 labor to last year.
Our 36, 6% labor is only 40 basis points higher than Q1 of 2019, when our weekly sales average was 26% higher at 111000 compared to 81000 this past quarter.
Our labor productivity is really a result at the adjustments I just mentioned regarding a slightly smaller yet still very broad menu changes in management staffing levels based on weekly sales results.
The continuing strength of our off premise sales and the leverage we are getting from the continued increase in weekly sales as capacity restrictions ease.
Right now our sales are ahead of our ability to hire the talented people needed to operate our restaurants at the level of expected.
As Greg Trojan mentioned, the key to continuing to deliver our gold standard service as our sales volumes recover as hiring and retaining talented restaurant managers and hourly team members great people delivering our gold standard food service and hospitality is how we grow our sales volume beyond our prior.
Levels, which enables us to manage labor as a percentage of sales at levels that productively contribute to bottom line growth.
Operating occupancy costs were 26, 8% for the quarter inclusive of about one percentage of sales for marketing.
Operating and occupancy cost averaged about 22000 per restaurant operating week for Q1, representing a decrease of two 6% compared to last year.
Included in operating occupancy costs was the overhead was over $1 3 million of operating expenses for temporary patios, which generated over $16 million in revenue for the quarter.
G&A for the quarter was $15 3 million, we are still targeting G&A of approximately $67 million for 2021, which includes more than $6 million for incentive compensation compared to less than 500000 booked in 2020 due to COVID-19 and its impact on the business last year.
Our G&A budget also includes $8 million related to equity compensation compared to only $7 million in 2020.
As always depending on our results the $6 million of incentive compensation may vary.
Now turning to the balance sheet as we previously reported in January we raised an additional $30 million of equity capital and that combined with our improving sales and productivity resulted in us, finishing the quarter with approximately $97 million of cash on our balance sheet and funded debt of 116.
$8 million.
At current sales levels, we are now generating more than $2 million of cash per week with sales continuing to recover subsequent to quarter end, we paid down an additional $15 million on our credit line and plan to further reduce our debt balance in Q2 by another 10 million to $20 million depending on the sales.
<unk>.
But the bottom line is we are of very strong balance sheet cash flow and the capital necessary to opportunistically and aggressively pursuing new restaurant expansion of <unk>.
Further investing in our sales driving initiatives.
Shifting to today as I said at the beginning of my prepared remarks, our sales continue to be governed by the varying capacity limitations imposed by local and state regulators.
While many state and local jurisdictions continue to ease their capacity.
We have seen some states rollback of the easing of dining room restrictions for example of certain counties of both Washington, and Oregon have reduced allowed guided capacity from 50% to 25% recently for.
Furthermore, despite some eliminating all restrictions we continue to operate our restaurants with the safety of our team members and guests first and therefore continue to follow CDC guidelines of maintaining six feet of social distancing in our restaurants the.
The safety first practice will cap, our total capacity to around 70% to 75% in the near term.
However, with the strength of our off premise sales and the continued use of temporary outdoor patios. We believe we have the opportunity to continue growing our sales sequentially each quarter until all restrictions are eliminated.
As we noted in our press release today on the comparable restaurants sales basis, comparing current sales to 2019 were down around 7% for the first three weeks of April.
This equates to a weekly a weekly sales average of approximately of $102500 per restaurants, so far in April.
I am encouraged by both the recovery of our dining room sales, which was led by California in late March when dining room restrictions for east as well as our ability to maintain off premise sales and more than double our pre COVID-19 levels.
Going forward, we expect some modest sales benefit in the coming months, which are seasonally stronger historically with guests celebrating mother's day father's day, and graduations with us, but the leaf sales will be range bound until dining room capacity has returned to the 90 plus percent level, which generally will not happen until we can.
Safely eliminate the six feet of social distancing.
We are all hopeful this will be sometime in the second half of the year as the growing number of vaccinated Americans will for will further reduce the spread of COVID-19.
With regard to the middle of the P&L right now, we anticipate commodity inflation between one 5% and 2%.
With cost of sales in the mid 25% range for the second quarter. This is slightly up versus Q1, as we are seeing more freight cost increases and the other supply chain challenges as manufacturers and distressed.
Distributors ramp backup for increased restaurant sales.
At the current time, we of about 55% of our food commodities locked for the rest of this year.
While the labor as a percentage of sales is trending back to more historical levels as Greg Trojan noted, we estimate that in order of returned to pre COVID-19 sales levels on a sustaining basis, we will need to recruit and train more than 5000 kitchen in front of house team members and another one.
125, plus restaurant managers.
While this is an investment in our business for the long term it will put some upward pressure on our labor as a percentage of sales compared to Q1, we are in the high touch business and which our precise execution of every aspect of our business, including food service and hospitality drive long term sales.
And therefore profitability.
I am anticipating G&A to be in the range of about $17 million, which will.
Which will include about $2 1 million in equity compensation compared to $1 6 million for Q1 and increased investment spend as we ramp up of our hiring of new managers and people to continue driving sales.
Additionally, I'm expecting our diluted shares outstanding to be in the $24 $6 million range for the second quarter.
And finally, the positive and growing sales trends discussed today clearly highlight the work of our exceptional team members combined with the strength of the attractiveness of the Bj's concept and the quality and level of hospitality, our guests know and love.
Bj's is positioned to not only excel today, but also to emerge from the pandemic with strong opportunity to gross sales volumes and profitability exceeding pre COVID-19 levels are.
Our solid balance sheet enables us to Opportunistically Reaccelerate, new restaurant growth beginning next year as we enter a new normal operating environment and to continue investing in additional sales driving initiatives like our beer club and guest research.
We continue to believe that the Bj's concept can grow to at least 425 restaurants domestically and that the combination of our sales momentum higher cash flows and strong balance sheet can readily support an acceleration in our restaurant expansion program.
Thank you for your time today, and we'll now open up the call to your questions operator.
Thank you thank you for.
Like to ask the question. Please signal by pressing star one on your telephone keypad and if you're on speakerphone make sure. Your mute function is turned off to allow your signal to reach our equipment.
Of the Star one to ask the question.
And we will go to our first question from Brian Bittner Oppenheimer.
Thank you good afternoon congratulations.
<unk> on the recovery of Youre seeing thus far in your business.
Greg You said in your prepared remarks that one third of your stores are currently trending at higher sales volumes and experienced in April of 19 can you just maybe break out the commonalities in this cohort of stores I'm sure they have higher seating capacity than the other stuff.
<unk>.
Still have very high off Prem, but any more specific color you can give related to this group that is now outperforming the 2019 levels would be helpful is there of late night business coming back.
Quick more quickly at the check average is a lot higher or anything else you can give would be helpful on that.
Yes, Brian.
Great question and I.
Obviously, the yes, it's nice to have a third of our restaurants comping positive three weeks into April.
Generally I think what we see is those are in areas that have either pretty loose restrictions. So thats given us obviously the ability to have greater capacity than other areas and in some of those locations like we have for a few here in California that are comping on the positive side as well and those generally have pretty large exterior.
Our external lot patios right now that are temporary patios and then there has been a little bit to your point of.
Some late night, that's come back in there and then these are restaurants that have really done some nice job.
On the off premise so the holding onto that off premise sales they've got the patio and the late night, it's a combination of that.
And honestly, it's very mixed as well like I said Theres some California in there there is Texas in there of those Arizona, it's very broad geographic.
Ryan the other thing I'd add is.
Even though there are some states the.
Virtually eliminated all restrictions, we're still operating and Greg mentioned this we're still operating with six feet of social distancing, because we think frankly of just the right thing to do.
So, even even where you might be envisioning restaurants, with very loose capacity restrictions, where we're we're adhering to social distancing, which in general it varies by restaurant layout still caps our capacity at about 75%. So.
So just just give you give you that information of his background.
<unk> two two of those kind of positive comps.
No. Thank you for that.
And just as my follow up Greg you have given some color in past earnings calls about where margins could go as your sales restore you've talked about the path to getting back to 2018 levels or even better now that you are sitting here operating against these value.
<unk> that are clearly improving.
Closer to 2019 levels can you update us on how youre thinking about margins in the 100% sales recapture scenario I mean, it's clearly looking like that scenario is now imminent, but you did also talk a lot about the need to hire and train all of these employees. So any update on where you think margins go in the 100% recap.
True scenario.
Yes, I think.
I think it's a little bit of a two part question here, Brian I think in the first part as sales start to recover we're going to need to bring those team members in and get the training and theres going to be that investment costs in our business and I think in the shorter term that makes it a little bit more challenging per se, if youre at that 100% level.
I actually look at it.
Secondly, and I think more importantly than that is I think the real opportunity for us and we've talked about the slot internally as we look at our business.
And that is it's not so much of a 100% sales volume we wanted to be 100, 510% sales volume of where we were before.
And ultimately by holding on to the off premise the initiatives that Greg Trojan touched on on beer club I think Kevin and his team of our leading of some of the things around our most valuable guest I think it gives us really this opportunity to take sales above the 110000 weekly sales average that was kind of.
Kind of our historic trend trend line and when we start to bring that above there were ultimately going to bring down more dollars down to the bottom line in dollars of what we take to the bank. So I think there is that opportunity for more dollars per restaurant week coming to us as we grow our sales volume, we do need to get through some of the I think short term challenges here around the <unk>.
Irene I am hearing that across the industry from that perspective, but I like the the road we have in front of us.
Thank you thanks for the update.
Thank you.
And we'll go next to Jeffrey Bernstein of Barclays.
Okay.
Great. Thank you very much.
Two questions as well first just on the.
As you're reopening the dining rooms.
Seems like you are encouraged by the off premise I think you mentioned.
In April.
125000 or.
100000 average weekly sales.
Just looking to clarify I think you had said of 25% of the 100000 and average weekly sales were still in off premise.
That's true I'm, just trying to figure out how you measure the increments how do you want for restaurants reopen their dining rooms, whether you have some examples of markets that are back to a 100% in restaurant dining and how incremental those to go sales have been that would be helpful. And then one follow up.
We don't know.
From a micro basis, Jeffrey I mean, what we know is.
You are correct first of all in that we're holding onto the level of about $25000 of weak and that is occurring in the face of very significant ramp up in dine in sales so which.
I've maintained for quite some time that delivery and takeout or separate occasions, theres going to be some pressure on them as dining rooms come back when theres no alternative, but they are filling of different need right.
And that's what we're seeing so we're seeing it's not like we're seeing a disproportionate.
Differential in restaurants that of open dining rooms more than less it's been very consistent that we're holding onto the sales volumes.
When the dining rooms were constrained.
More generally geographically.
If that makes any sense so.
So again, we're encouraged that we're holding on to the sales and it's our intention.
Going forward is to is to grow our off premise business we think.
Guests are certainly reacting to the product changes that we've made we think we have a lot of advantages with the variety of our menu.
We've done a lot of product development at what we think are screaming values out there. So we think theres room to grow off of that 25.
5000 of week.
Got you right. So it's 25% of your sales of currently to go and those are really holding up even in markets, where total sales of reverting back to historical levels.
Correct.
Gotcha.
Okay, and then just my follow up in terms of labor because I know you guys of emphasized it in your prepared remarks first of all of the fact that it was down 400, some odd basis points for the quarter.
Very impressive and I think you said its actually quite close to the labor you saw as a percentage of sales two years ago.
The average weekly sales are significantly lower so I'm just wondering how much do you think is permanent or sustainable savings.
Versus whats coming back I don't know, whether you can share of forecast for labor and <unk> for 2021, with all of that rehiring and training, but just trying to.
Separate out what has to come back and maybe what is permanent savings or what youre expecting the labor to be in the near term. Thank you.
Yes, Jeff I don't know if we have the the.
The answer to that just because the amount of training that we're expecting to come back in.
It's going to be much more substantial than what we've seen over the last year.
In that regards and the other side of it as you think about the dining rooms open you're attaching of server to that additional sale of versus the leverage that comes from off premise.
So I think those two things generally will move our labor percentage.
Sure.
Maybe a little bit versus what we saw in the Q1 timeframe.
And in my prepared remarks.
I tried to basically say frankly sales right now are running ahead of labor there.
They are not where we'd like them to be in regards to our traditional staffing models as much of our NPS scores are up and everything seems to be going in the right direction the ability to hold onto those.
And from a long term perspective, our sustainability as we said really come down to making sure. We've got the right team members on there. They are working the correct amount of hours.
On the right shifts so that they bike and level of working at Bj's from that standpoint, So I think the the labor number gets a little bit up and down from that standpoint over this year.
We have said in the past and I forget the exact number here, but we with the change in the menu and the things that we've addressed this year, we've pulled out labor hours.
Both of the kitchen.
And the profit in the morning of the kitchen hours and other things from that standpoint, and that will definitely stay out.
The hard part about your question, Jeff is really where inflation kind of moves into some of those those positions within really the back of house for and what we call. The kitchen area of our restaurants, we know us as well as the rest of the industry are all fighting to get good people back into the <unk>.
And of the restaurants and that will put some inflationary pressure on there. So it's hard to kind of quantify labor hour savings versus what the dollar rates maybe.
And then also is interesting.
Okay.
I would just say.
As Greg was saying earlier overall sales volumes will leverage our fixed labor and off premise.
We think it's going to settle in at a much higher level than it was pre COVID-19. So given the lower labor content of their those are the offsets against what we are continuing to see as wage wage pressure and inflation.
But it's fair to say I think you've mentioned that you think labor as a percentage of sales would be higher than the $36 six from the first quarter in the near term as you invest so heavily.
That's correct yes.
Exactly I think of that but I do think is going on with Greg said because he does.
I think of really.
I think it breaks out in a really effective way and that is.
We talked about the for hourly labor is down significantly year over year.
Because of the changes we've made the ability to get off premise and that number is going to go there. When we look at labor versus two years ago, It's really because of that management labor is deleveraging on the lower weekly sales average so as that we can sales average can get back to more normal lever layer of levels that manage the labor should come down a little debt.
While the hourly labor goes up those two can offset I think the ability to run more historical labor is out there from that perspective I just think in the short term as we work through the pushes and pulls it can be a little more difficult.
Understood. Thank you.
We'll go to our next question from Alex Slagle from Jefferies.
Hey, thanks.
And the follow up on that conversation and just kind of what else you think you need to do.
You get the best people.
<unk> in 90 day do you think you need to raise wages more broadly for or what else you might need to do to make sure youre able to execute like you want to whether you.
Net of capping capacity at certain locations or something like that that maybe we haven't thought of.
Analysis of good.
Good question.
What we have always had some advantages as a concept, particularly with our high volumes of bringing our total.
Tractive place to work financially, particularly front of house, but also we've worked hard on our culture is a good place to be et cetera.
And even though theres a lot of pressure out there I think we've hired about 750 people in the last three weeks right. So and we have we have not had to curtail hours of operation or take out of season dining rooms to this point.
Our team is is handling the pressure well.
We are seeing success in hiring people.
So.
That's the core of of operations is key.
Creating the right place to work in the rate the.
Conditions, if you if you will and so far.
We're still optimistic we remain optimistic we will be able to negotiate through it all but it's just kind of it's tougher.
It's tougher right now.
Okay.
And then.
Question on.
The bar room activity.
You have a sense for what traffic looks like more recently in the later hours in the shoulder periods and how you expect the borrowing activity to pick up the restrictions loosen a little bit more and people get more comfortable.
Yes.
Remind us for the historical mix of our sales volume of that hardware.
Hard hit the.
Period.
Yes so.
Alex generally that late night business the semis in the 12 to $13000.
Range 70, so I think about 100000 of $110 a week of sales youre getting.
10, 12% coming from that later night period, we have seen it slowly improve I think as stimulus checks came through in March you had the <unk> tournament.
I gave a reason for people to start to venturing add a little bit more and I think again vaccinations are playing into that will keep our feeling more comfortable but it's still down when I look at that business compared to the.
The other times of the day.
It's got our largest.
The decrease on a percentage basis year over year.
We now have to think about it.
It's going to play out based on how people think about the pandemic itself and how different areas.
To continue to ease restrictions so our view.
<unk>, probably through Q2 is it still going to be on the softer side, there and then hopefully as we get to the second half we'll start to see not only our capacity increase within the rest of the restaurant, but the ability to get a little bit more of that late night.
That's why I think Q2, our weekly sales average as much as we like where they are right. Now I think there are little bit range bound until the next level of improvement and improvement meaning more of vaccines in the.
The.
The Covid cases.
Come down.
Now just as a reminder.
We have curtailed the operating hours in our closing of our restaurants earlier than normal in most markets. We have started to see enough volume in some markets, where we're not going all the way to usual hours, but we are extending our closing hours by a bit and it's.
It's usually a value of about an hour or so.
And so.
So we are we're seeing some of the that business come back, but thats a big part of it. Obviously is we have to be open to drive the sales.
We want to make sure of the demand is there.
Alright, okay. Thank you.
Welcome.
And we'll go to our next question from David Tarantino of Baird.
Hi, good afternoon.
I was wondering if you could comment.
On on your views on how much of the stimulus check might.
It might be impacting the sales trends.
In the late March and April to date period, and I know that's a tricky.
The thing to isolate but perhaps you can talk about.
What's happening in the restaurants that arent seeing capacity changes during that period.
As an illustration.
Yes, Steve.
The arent any of those so.
Yes, what I would tend to say.
Is the sales volumes that we're seeing right now just taking out the capacity changes. So we're looking at more of maybe like a Texas and Florida that have been.
Of that have had looser restrictions.
Versus California and to see the business.
Is the sales trends are very similar to sales trends in 2019 and that is you're kind of into the March timeframe in that spring break.
And in spring break, it's a little bit higher of a seasonality standpoint. So we see sales increase from that standpoint, and a lot of those existing markets. I think you put that with the vaccinations and you put that with the stimulus checks and I do think there is kind of of a couple of weeks there more on the kind of late March where the numbers bumped up.
GAAP.
And then they probably come down a little bit which tend to look at frankly, how our sales trends were in prior years, taking obviously 2020 out of it.
I definitely think that there was some benefit to it but it doesn't feel like two weeks later or three weeks later of the stimulus is gone and sales of decline some significant amount from that standpoint in fact, I'd probably say the generally.
With the state stayed positive from our stakeholders stayed up in regards to their sales levels.
And just Greg for any of the context for the.
It sounds like a lot of those markets are close to being even to the 2019. When did you start to see that happen was that.
Yes, pretty stimulus checks kind of early March for where they also kind of approaching 2019 levels or did you see that step up late March and into April.
I think we saw more of a step up into kind of late March on those on those markets revenue.
I would tend to tell you that the sales trends were similar to prior year sales trends, meaning March generally has a higher weekly sales average trend for our weekly sales average for us.
In February and January ads.
Because of spring break because of that Easter might might be and then we saw the same type of pattern from that standpoint.
But I do think that as the stimulus checks came in that kind of late March mid to late March that's when we saw that step up and I think consumers after that felt good about going out and they've kind of held on to that kind of dining trend that we've seen David of another thing that might help.
Answer to your question again indirectly, but as we are seeing some really solid check growth in our in our business and the biggest driver of the check growth.
As part of your size as people are going out and they're calling friends and family and driving.
The average.
Number of people in it.
King of check or of party.
<unk>.
A big growth factor there are also ordering more.
Per capita even in the alcohol and like people are just like so glad to be out and theyre spending more when they are.
Are out and we haven't seen that that wasn't like I've got a stimulus checklists like.
Go out and have a party.
That has been very consistent so I find that per.
The interesting as it relates to the stimulus. There is no question that it helped but we're seeing I think it's more fundamental human behavior of like.
To be out and be with friends and family that's going to be with us for some time.
Very helpful. Thank you.
Okay.
And we'll go to our next question from Nicole Miller of Piper Sandler.
Thank you good afternoon, I wanted to ask the first about labor and the hiring and.
Kind of the filings of the overwhelming as you can imagine so.
Is there from perspective, our context, how many.
D J and points you have in the field today to kind of right size that and then I know this is the super challenging question, but.
How many of the hires are familiar of worked with you in the past.
<unk>.
While the first in the restaurant industry space.
How many do you have for like really teach steady job.
Yes.
The client trying to.
Through all of the different.
<unk>.
Question is that we're in that one question so to speak.
So we pre pandemic, we had about 23000 kind of hourly team members.
We're somewhere in the neighborhood of 17 to $18000 today, which is gets us back for about 5000 of Greg Trojan kind of mentioned on this call from our perspective.
And then in regards to those hourly team members coming back.
It's across the board of from that standpoint.
We obviously want people that have high integrity, you have high hospitality can handle the the high volumes of Bj's from there.
GAAP perspective, and generally we tend to look for people that have restaurant experience when they want it.
To join Us.
The thing that we've got to see here is I believe its in early September when the federal unemployment starts to run out or does run out.
And there might be a little bit more of an issue.
Influx of people that come at that timeframe.
Yes.
Unemployment insurance has been given through the pandemic and frankly.
Not going to debate, where the right wrong or indifferent from that standpoint, but it was given at a rate really <unk>.
<unk>, our bring people and lower and lower page jog, our in service type jobs to make them whole. So there's less of the incentives sometimes for people to get back into some of these positions that are in the 15 to 20 dollar hourly wage rate.
Right now and I think that might change in the September timeframe as the unemployment insurance of expires from the from the federal level.
So I don't know if that answers all of your questions. Your entire question, it's hard to tell exactly how many.
We have been in the restaurants space before vs havent from that standpoint.
But we've got a good reputation as Greg Trojan, saying out there we've been actually hiring of these non people over the last couple of weeks our retention levels right now are lower than they were I believe in 2019.
So people enjoy working for us from that perspective, it's just the we're not only competing with our peer companies out there and I know everybody's challenges of that we're also right now kind of competing with the federal government and somewhat of the unemployment subsidies.
That really does help it makes sense I know, let's say it separately.
The <unk> situation the law.
Last question from me, you've always help us think about leading indicators of the same store sales and how we typically think value for the industry and for yourselves and then maybe it was the idea of our notion of safety and I'm. Just wondering now for it isn't like fun and entertainment. So.
Does your guess does your guest steady lead you in any direction of what the leading indicator of sales might be.
I'll, let them answer that but thanks for everything you just mentioned is bj's value funding of entertainment and safety. Those are all from things that we do very well you must have been in some of our focus groups Nicole but.
But very much so.
We know that.
Bj's as of social gathering place.
And for all for all of those reasons, but really is at the core of the dining experience of our of our brand and that is kind of serve us.
Has served us well, but particularly given the dynamic of coming out of the pandemic I think is a really great strength.
To have for sure of sort of of that high energy comfortable gathering place and we like structurally have the ability to serve large parties better than most most.
Concepts out there I mean, we are set up to accommodate large parties without a reservation of et cetera, and we've been doing that well for a long long period of time.
Thanks for the update Tonight appreciate it.
Youre welcome.
And the women's next to a question from John Gl<expletive> of Morgan Stanley.
Thanks, very much I wanted to ask about the two new emerging sales layers, you've talked about the slow roast virtual brand and the beer club and any early sense of how we should think about the size of that opportunity.
Relative to whatever else you want to think about maybe the overall off premise business.
And specifically on the beer club you mentioned is obviously regulatory issues in certain states. How many of the restaurants could you actually put that into now just given the current regulations.
Yes on the beer club I wanted to say its somewhere in the neighborhood of of 70% or so.
And hopefully as Greg Trojan said on the call that that number can expand.
Into Texas and in the Florida in fact, I think Florida may have they may have changed some of their laws just recently, but taking those two states out of I believe at the majority of the other states, we can get into which gives us pretty close to 70%. So.
Sort of thinking about that it's the 150 range of selling the 210 restaurants.
And then John real quick we have not quantified where we think both of those can go for us.
One of the things we've talked about in the beer club is and Greg mentioned net with all of the different parks. Our idea of the beer club is for to drive people into our restaurants to spend more in our restaurants and at least in the.
And kind of the test of Sacramento and in the all of California, We are seeing incremental visits from those guests.
One of these will have to see is as capacity opens in California will that incrementally the EBIT increase even more in that regard, but right now the <unk>.
Beer club is showing incremental guests coming our incremental visits.
And they tend to use the parks and spend up and it's in that case driving incremental revenue.
Slow roast is doing the same thing for us it doesn't have as much.
<unk>.
What's the word of any of our cannibalization against our own products and the analysis that we've done but we've kind of held back on giving specifics is we wanted to see how these things continue to to grow over time and the test period I don't know range I'm part of the reason for that is first of all of it we haven't been out of it that long.
But when you think about the timeframe of when we consciously did us we might have been a little crazy.
We rolled it out in the in Sacramento in the midst of the pandemic and so it's the operated under a few different conditions of dining room availability right. So that interesting.
The one because.
Throughout even when our dining rooms were of close folks were taking advantage of the off premise offers in the ground. The refill for example is a really popular.
So thats been gratifying to see but we really need of more extended period of time with some sustainable dining rooms open to understand where it's really going to kind of settle out. So we're obviously very encouraged because of the micro.
<unk>.
Metrics and the dynamics of the program look like guests are really responding well as for the most important thing, but how big it can be and how this growth we just need a little more time.
To.
The C. It mature a little bit before we have a better idea.
Thanks.
Maybe just the more detailed question just on the first coordinate in store margins.
What were the discrete COVID-19 related costs and you talked about in maybe the go both ways, maybe you had better of insurance experience because.
And the restaurant experience with less.
You may have had more cost <expletive>ociated with it.
Pay related what were those.
Puts and takes in the on the Covid basis in the first quarter that might may not persist in the future.
John if I had to think about those costs.
Yes.
I think they're around the patio I'm just trying to think of the things that we've changed in our business.
And then kind of at least one of them up on the call was the the $1 3 million that we spent on patios and we didn't have before.
There's obviously, some PP&E and stuff like that that's probably in.
In the Q3 hundred thousand range in there it's honestly from the direct costs probably in the neighborhood of.
$2 million or so that just think off top my head, it's hard to discuss the insurance side of it because the insurance markets for just crazy last year.
And they unfortunately have no relationship to the.
The underlying business in regards to how you are managing claims and other things of the insurance market shifts.
Or really what I would call of very hard market that again is something we haven't seen in 10 plus years.
Which.
Again, it doesn't doesn't really reflect the having less people in the dining room, there for your slip and falls might be down or general liability insurance should be down. The fact of the matter of the insurance market was higher and we self insure on that so if I think peer direct cost is somewhere in the area about $2 million.
The only other thing that I don't have the number of front of me here is the labor we spent a lot of money on over time.
And as Greg touched upon it really comes down to hiring of the other key members to bring him onboard that can reduce over time, which can help us manage the labor cost for the better but also getting better quality of life for everybody in our restaurants.
That's great. Thank you.
And we'll move to our next question from James Rutherford of Stephens incorporated.
Yes, thanks for all the details so far most of mine have been asked so just a couple of book keeping thing for pets alright.
First within that 25000 of off premise premise weekly sales could you share the split between curbside and delivery and within that delivery bucket. What's the split of first party of third party. Please.
I'm just kind of looking at how the sales kind of played out here.
It's probably.
It's.
It's pretty close to 50 50 looking.
Looking at the number it might be.
55 delivery of 45 takeout, but it's it's I.
I would probably think James it's 50 50.
And then on delivery.
Out of that again, 85% of its kind of be actually probably closer to two.
90% of its going to be third party delivery.
Frankly, all of this can be of third party delivery, except about 10% of its of what we call our white label, where they kind of go through our website versus going through a third party aggregator site.
Got it okay. Thank you for that and then one more within your one year comp what is price running today and do you foresee pushing a little bit harder on price given demand seems to be outstripping supply and given the ongoing wage inflation picture.
Actually.
Thank you for asking that because I think it's sort of.
Important element of.
Where the businesses right now.
And I mentioned earlier that we're really happy to see guests numbers in incidents driving some healthy check growth.
And we're taking that as an opportunity to price less not more.
I think.
As one of the things that.
Drives bj's.
<unk>.
Volumes and traffic is the fundamental value of our concepts. So we view this.
As an opportunity to invest in value, while we have some of these other dynamics working working in our favor so.
We're I would say we've been pricing and the.
<unk>.
The two.
The low to mid twos.
The last few few years were a good 100 basis points or so below the.
Okay. Thanks, very much and congrats on the results here.
Thank you. Thank you.
And well go to our next question from Brian Mullan of Deutsche Bank.
Okay. Thank you I was just hoping you could talk about current development expectations for 2022, maybe some color context around.
Current thinking on how many units might be realistic next year.
What are some of the key factors that will determine where that winds up in the yen and then.
The intention right now to accelerate that number in 2023, just given the lead time the development pipelines in the.
So Brian.
The so we think about.
The business the question overall.
Ultimately I think where we want to get too is getting ourselves back to a restaurant growth at <unk>.
Minimum 5% of year.
From that standpoint, so you start thinking about 200 restaurants, 5% per year somewhere in the neighborhood of 10.
<unk> going from two of let's call. It three this year, because we're going to reopen our Richmond, which is going to act like a new restaurant opening for us in regards to hiring training et cetera moving.
<unk> from that kind of three to next year is probably we said it's for in the eight to 10 range or so going into 2022, I think going into 2023, we would get above that again and start to move that into the to the low teens.
We did we've done as many as the beginner to Greg Lynds 17, restaurants 18, other getting here on the 18 restaurants in the year. So we know we can get ourselves back that we're going to deal with quality.
We're not going to race to quantity from that standpoint, but we wanted to make sure. We always have great quality sites in our building that pipeline and really we've said this before and I think there is a good opportunity for us to exceed this but that would be somewhere in that 567% unit growth. So I'm thinking about 2% to 3% comp sales.
Get yourself to around 10% revenue growth and then our ability to leverage in the middle of the P&L P&L allows us to drive EBITDA or earnings growth into the.
The low end to the low double digits.
Okay. Thank you that's great and then just a follow up just a quick one on capital allocation and.
In the past you've carried a bit of of.
Modest leverage.
Pay the dividend I mean, do you view of the dividend is necessarily any more coming out of this and then what might you need to see to begin to feel comfortable doing share repurchase I know, we just went through development, which of the use of capex, but even with that it seems like kind of normalize here of the free cash flow is pretty attractive. So I'm just wondering your latest thoughts if anything's changed relative to.
How you used to do things.
Yes.
I think.
This is something that we would obviously get get together with our board of directors as we go through and put together the details of our plans as we come out of the Covid from that perspective, but if we're in a position where we have significant amount of excess cash can be out of our business.
We would look to to determine what is the best use of that excess cash, which would mean you start thinking about a share repurchase or dividend program at that time, I think where we are right now.
Still a little bit early to start to put that on the table from that perspective, I think we wanted to see the sustainability really start to see ourselves moving back to capacity restrictions being eased. So we can get to a 100% capacity are 90 plus percent capacity.
And when we start to see that I think that's when we start to think about how we wanted to use our free cash flow. In addition to our what's the extra after we continue to build new restaurants for the only thing I'd add to that is one thing.
With a lot of confidence that we will not change is our conservative approach to the balance sheet.
We don't need another year like we just had to remind us of the advantage of running our business that way so.
That's one thing.
I don't think.
We have any intention.
Unchanging.
The other is the first priority is going to be the best use of capital is finding productive ways to grow our sales and grow our business either through new restaurant openings or improving the restaurants that we have and then we'd look to dip.
The dividend.
And share share repurchases from from there in that order.
Thank you.
Okay.
And our last question comes from transact sales of William Blair.
Hi, good afternoon.
Sorry, if I missed this but in terms of the labor and kind of getting back to the staffing you'd like both hourly and managerial how long do you think that would take I mean is that something you expect to the made whole on here in 2021, and how do you kind.
Kind of juxtapose that challenge with labor with the development of accelerating into 2022.
So that's a good good question.
Look we don't have a crystal ball on this it's our intention to.
The two certainly catch up to our sales volumes now we're still not doing quite the sales levels yet.
You do have capacity restrictions. So we don't have to get all of these folks hired tomorrow right.
But if if and as we would hope and expect we continue to see progress on the sales front.
We'd like to see I actually think greg's point on unemployment pulling back we've even seen some states that are.
Going to be joining the federal unemployment programs as well that's going to be of help and our hope would be by the holiday season, we'd be in a much more normalized place in terms of staffing where sales in our staffing of reach to a more normal equilibrium.
Yeah.
And because we do need to hire managers, obviously and establish that pipeline, but the numbers, we're talking about our share of our we have a high degree of confidence that we don't put new managers of new restaurants, obviously, they all count as a manager.
But we think that we can manage through and the kind of numbers, we're talking about growing into.
Our eminently manageable from a manager perspective, and because of their new trade areas that aren't really impacted by the levels of where we are in hourly workers right. So.
I think.
You are asking of really good question on the balance of of how those all work together, but that's that's how I'm thinking about it.
And I think you ask a follow up is the.
Is the labor dynamic more strength one of <unk>.
Alison and I ask that because I'm trying to figure out with low risk the virtual concept of.
The higher protecting the kitchen, if there is some shortage impacting the kitchen capacity actually that's of great question.
Typically in the last few years kitchen has been the most stressed we haven't buyout by a fairly wide margin is like finding front of house folks not debt.
Anything as easy in the labor markets over the last couple of years, but we've been much more stressed in terms of filling kitchen kitchen jobs.
And interestingly I would say.
Part because we were still fairly staffed in our kitchens.
Have a fixed amount of hours you need to run our kitchens.
The.
Youre not going from the same low levels when dining rooms arent opened we don't have many front of house people. So we're going from zero, but.
<unk>.
The good cadre of folks doing on the takeout in the off premise side of the business, but not nearly the number of front of house you need to run of dining room right. So theres much theres more stress to the system on the front of house, which is different than it's been.
As.
In recent history.
Okay. Thank you.
Youre welcome.
And that concludes today's question and answer session and today's call we'd like to thank you for your participation you may now disconnect.
Thank you everybody. Thank you.
Yes.
Yes.
Yes.