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BJ’s laser-focused on labor as sales slip

Understaffed restaurants had to limit their menus and hours, putting a lid on sales.
BJ's exterior
About half of BJ's restaurants are nearing pre-COVID staffing levels. / Photograph: Shutterstock

The success of BJ’s Restaurants, like much of the industry, hinges on staffing. 

To be sure, there were several factors that caused the casual-dining chain’s same-store sales to fall 0.5% in the third quarter compared to two years ago. The surging delta variant of COVID-19 kept customers away over the summer, for instance, and the company was already facing tough comparisons to a 2019 quarter that featured lots of promotions.

But it was a lack of workers that really held the chain back, executives said on the chain’s third-quarter earnings call Thursday. Short-handed restaurants were forced to limit their menus and hours, which put a lid on sales. Meanwhile, stores that were more fully staffed saw positive comps.

“Staffing remains our No. 1 opportunity to drive near-term sales growth,” said CEO Greg Levin, according to a transcript from financial services site Sentieo. “We continue to see a direct benefit to our comps at restaurants with higher staffing levels.”

Chainwide, BJ’s restaurants are staffed at about 90% of pre-COVID levels. About half of its 212 restaurants are close to fully staffed, and those generated same-store sales increases of more than 5% compared to 2019. Meanwhile, stores that were missing workers saw sales declines in the high single digits. 

“Excluding those restaurants,” which make up about a quarter of the chain, “our comparable restaurant sales for the quarter would be positive low single digits,” Levin said.

Staffing levels tend to vary by market, Levin said. In Texas and California, BJ’s has more restaurants and more brand recognition. Not only does that make hiring easier, but it also allows one location to borrow employees from a neighbor. Restaurants in newer markets can’t do that. But overall, he said, hiring is trending positive.

“What we're seeing differently is we're seeing people show up for interviews and then show up for their jobs for the first day,” Levin said. “We didn't really see that at the very beginning as the economy opened up.”

Levin highlighted initiatives both high-tech and old-fashioned for driving hiring and retention going forward. He touted the benefits of predictive scheduling in the same breath as culture, team-building and employee appreciation. He also noted that BJ’s has changed its training materials to make things easier for new employees. 

“I'm not sure anybody has come up with the magic pill yet,” he said.

In other news from the quarter ended Sept. 28:

  • BJ’s is raising prices again to keep up with food costs. It will institute a 1.4% hike in the coming weeks, which comes on top of a 2.5% increase in July. The chain’s reliance on high-quality meats makes it particularly susceptible to recent inflation: Its food cost inflation for the quarter was 10%, executives said, driven mainly by higher prices for ribs, prime rib, ribeye, tri-tip and salmon.
  • Food and labor costs and lower sales contributed to a drop in restaurant operating margins. They were 11.2% for the quarter, down 230 basis points from 2019. “The No. 1 way for BJ's to protect and leverage margins is to improve our staffing levels,” CFO Thomas Houdek told investors.
  • BJ’s plans to open at least eight restaurants in 2022. Levin noted that the cost of building them has risen over the past few years, to $5.6 million or $5.8 million from about $5 million. 
  • In preparation for the new restaurants, BJ’s added the role of senior vice president of operations to head up day-to-day restaurant operations, freeing up the EVP of operations to focus on long-term strategy. BJ’s also hired someone to lead its Beer Club subscription program.

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