BJ’s Restaurants was a bit too generous with its Pizookie Pass.
The $4.99 monthly subscription, which entitled customers to a free serving of BJ’s signature giant cookie dessert every day from late June through October, helped drive traffic at the 218-unit casual-dining chain in the third quarter.
But the deal also hurt sales and profits. Customers who came in just for free Pizookies drove down check averages and added complexity for employees, which hurt the chain’s bottom line.
The chain began selling a limited number of the passes on June 27. They sold out quickly, as they have in past years.
“I would characterize this program as effective, but not efficient,” said Lyle Tick, BJ’s newly hired president and chief concept officer, during an earnings call Thursday. “Going forward, this program will need structural re-evaluation if it will continue, and all of our programs will go through a similar filter.”
Overall, BJ’s same-store sales rose 1.7% on a 1.3% traffic increase—its best traffic performance since 2018, excluding the pandemic recovery period. But restaurant-level margins fell 20 basis points to 11.7%, below the chain’s guidance of mid-12% for the quarter.
The situation shows the risks of offering low-priced deals to boost traffic at a time when customers are especially price-sensitive. Red Lobster infamously lost $11 million in a single quarter last year with its $19.99 all-you-can-eat shrimp promotion, illustrating the importance of balancing value and profitability with special offers.
As the Pizookie Pass expires, BJ’s has shifted its promotional focus to a Pizookie Meal Deal, which features an entree, fries and Pizookie for $13 on weekdays only. The deal has a better cost profile and has helped deliver same-store sales growth of 4% through the first four weeks of the fourth quarter, said CFO Thomas Houdek.
Huntington Beach, California-based BJ’s is in a period of transition. It ousted CEO Greg Levin in August and replaced him with board member Brad Richmond on an interim basis. Tick was hired a week later.
They’ve been charged with helping BJ’s reach more customers and improve value for shareholders. The chain has struggled recently with sales and traffic declines.
Richmond and Tick said they are currently in the “discovery” stage at BJ’s, taking stock of the brand’s advantages and determining where it could do better.
On the positive side, they said BJ’s is a unique concept with broad appeal. Its large menu and brewhouse atmosphere make it a destination for a variety of occasions, including celebrations, family dinners, happy hour or a night out with friends, Tick said. But that differentiation may need some clarifying.
“We are uniquely the only national brewhouse and have an opportunity to reinforce our uniqueness and what truly makes us special and not allow ourselves to be de-positioned as a generalist, casual dining brand,” he said.
BJ’s menu could be simplified, both in terms of what’s offered and how it’s prepared, Tick said. It was a realization he had while working some shifts in the restaurants since joining the chain.
“You may or may not know it, but we have three different ways to scoop ice cream onto a Pizookie,” he said. “We might be better off with one way doing that.”
The menu will also likely be cut down, though Tick said he does not know yet by how much. The chain trimmed its menu by about 10% last year to lower costs.
Promotional activity could also be cut back. "My initial observation when looking at our overall discounting and promotional footprint is that we have an opportunity to rationalize our programs," Tick said.
The new regime is also taking a more disciplined approach to capital allocation. New openings have not always performed as well as expected, and the chain plans to slow down development while it reevaluates its strategy, Richmond said. But unit growth is still part of its long-term plans.
“We need the new unit growth,” Richmond said. “And each one of those is a pretty significant bet, if you will. And so, we really need to be sure that we're comfortable that we have all the elements right.”
He noted that the change in the pace of new openings likely won’t be felt until 2026 or 2027 given the long lead times on openings. BJ’s has opened three new restaurants this year.
BJ’s stock was down more than 5% early Friday afternoon.
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