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Financing

BJ's Restaurants starts thinking longer term

While still focused on the near-term complications posed by the pandemic, management is experimenting longer-term initiatives such as a beer subscription program.
Photograph: Shutterstock

With weekly sales hitting $80,000 per restaurant at the end of September, executives of BJ’s Restaurants are looking beyond the near-term complications of the pandemic to try a few longer-range strategic moves, including the addition of a beer subscription program.

But exploiting any expansion opportunities from independent restaurants’ high mortality rate is not one of the starred items on the list, or at least not at the moment, the officials said.

The leadership team indicated during the company’s third-quarter call with financial analysts that their top priorities still include expanding seating capacities while dine-in service is capped in many of the 29 states where the 210-unit chain operates. CFO Greg Levin noted that BJ’s is installing glass partitions in its indoor service areas to squeeze in another 12 to 14 tables, a 10% boost in capacity while aiming to extend outdoor dining through a systematic addition of heaters and tent walls.  

About half the system has been winterized in that fashion, with the tally expected to hit 170 units by mid-November, CEO Greg Trojan noted.

He added that BJ’s is also addressing the unique complications of the pandemic through such initiatives as capturing unit-level staff members on video while they work, a move that promises to facilitate contract tracing if a guest or one of the employees tests positive for COVID-19.

In addition, Trojan mentioned such accommodations to the new realities as giving the chain’s catering menu a twist as the brand strives to recapture big-batch off-premise sales. BJ’s recently rolled out what he described as pre-portioned group meals. “In just a matter of weeks, they are accounting for over 20% of our catering sales,” Trojan said.

That initiative is part of a larger effort to hold onto the off-premise business that BJ’s built while dining rooms were closed. That effort, said Trojan, is proving successful to date, with weekly takeout and delivery sales continuing to hover between $23,000 and $25,000 per unit, or nearly 2.5 times the pre-pandemic volume.

“We see a future where we at least gain back our previous in-restaurant dining volumes while augmenting these sales with an increased off-premise business, positioning BJ's as an even more powerful force in the casual dining restaurant industry,” Trojan said.

He pointed out that BJ’s has eased up on its menu-trimming efforts, with 110 items now available, compared to 85 before June.

Trojan mentioned that BJ’s has started testing its beer subscription service in a group of restaurants in northern California, but did not disclose sales figures or details on how the program works. “We've learned a lot in a few short weeks since launch, with the most encouraging data point being the high level of engagement of members once they sign up,” he commented.

BJ’s had mentioned before the pandemic that it intended to try a beer subscription program but apparently put the initiative on hold because of the COVID crisis. Management’s few comments indicate that subscribers are entitled to try new beers as they’re added to BJ’s tap, but the financial model wasn’t explained.

Levin was asked about widespread contentions that the high failure rate of independent operations is flooding casual chains with prime expansion opportunities. “Deal flow is picking up—I see more opportunities out there,” Levin said. “But, frankly, the quality of the sites that we're seeing right now are not that great. ‘The other thing that we're seeing right now as well is, as companies across many different industries start zooming construction, there's a backlog of construction and labor costs, lumber, steel and some of those things haven't quite come down yet. So we're taking a little bit maybe of a prudent approach here.”

BJ’s indicated that sales at units opened for at least a year had climbed back to 79.6% of the pre-pandemic level during Q3. Revenues rose 28.6%, to $198.9 million, but the company was left with a loss for the quarter of $6.6 million, compared with a year-earlier profit of $3.7 million.

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