BJ’s Restaurant & Brewhouse sales rose steadily during the second quarter, buoyed by reopened dining rooms and continued strong off-premise business, but have hit a setback in July as dining rooms reclosed in California, its biggest market.
Same-store sales for the casual-dining chain were negative 57.2% for the quarter year over year, executives said on a second quarter earnings call late Thursday. Sales rose each month, down 74% in April, 63% in May and 40% in June.
By June, BJ’s was starting to look more like itself again. About 95% of the chain’s 208 restaurants had opened their dining rooms with capacity limits, with glass dividers installed in most units to help maximize seating. Popular entrees such as slow-roast tri tip and Atlantic salmon were back on the menu.
Dine-in was bringing in about half of its normal sales, while off-premise continued to be a key driver, rolling along at double its pre-pandemic sales clip. Weekly unit volumes rose to the mid-$70,000 range.
Notably, restaurant-level operating margins reached 13% in June, helped by Father’s Day and graduations as well as off-premise business that allowed the chain to leverage hourly labor, which was 300 basis points better than the same time last year, said President and CFO Greg Levin.
“As we're continuing to do a lot of business off-premise, you just have less what I would call daily controllable costs within the four walls of the restaurant,” Levin said. “So that gives you the biggest benefit there.”
But on July 13, California ordered restaurants to reclose dining rooms to help stem a surge of COVID-19 cases, encompassing about 62 BJ’s locations. As of Thursday, about 70% of BJ’s restaurants had dining rooms open, executives said.
Through the first three weeks of July, same-store sales were down about 40% year over year, with weekly sales per unit of approximately $62,000.
Recognizing that many guests seemed to feel safer dining outdoors, the chain had already begun adding or expanding patios at about 90 restaurants when the reclosures struck, which has helped soften the blow, executives said. The chain now has 150 restaurants with outdoor seating, contributing about $26,000 in weekly incremental sales in those locations, CEO Greg Trojan said on the call.
“People are taking advantage of outdoor dining,” Trojan said. “Going back into spending their lives inside in their homes is not what people have on their mind, and we will see the end of that.”
After months of ups and downs, executives said consistency will be key in stabilizing its business.
“As we go start of July here and all of a sudden had to go back to an off-premise business, that's a challenge for us,” Levin said. “It almost becomes a little bit like early or late March and early April, where we've set our teams back up to take care of people within the dining rooms.
“So, when I think about our business, if we stay in the steady state, I think we can optimize our margins.”
Also in the quarter, BJ’s rolled out digital menus, ordering and payment using QR codes. A majority of dine-in customers are now using their phones to browse the menu, and about a quarter are using the mobile payment option, Trojan said. The chain also added an online reservation system and upgraded its off-premise order status and texting capabilities.
“The acceleration of adoption rates around technology, which will … benefit the fundamental experience of our guests and our team members, we view as a real positive,” Trojan said.
BJ’s took a noncash impairment charge of $10.9 million during the quarter; $9.7 million was related to three restaurants and $1.2 million to beer spoilage.
BJ’s finished the quarter with $86.7 million on its balance sheet and $50 million available on its line of credit. The company also raised $70 million in the quarter through a common equity offering and extending its credit line to November 2022. Capital expenditures were expected to be about $5.5 million, which includes adding glass dividers and construction of a new restaurant in Orange Village, Ohio.