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As BJ’s wrestles with inflation, its guests remain unfazed

Customers haven’t reacted to higher prices yet, but more hikes are coming at the casual-dining chain.
casual dining restaurant chain prices
BJ's Restaurants have been raising prices to cope with inflation, but customers appear to be OK with it./Photograph: Shutterstock.

As inflation continued to rise in the U.S. this spring, BJ’s Restaurants and Brewhouse decided to take a closer look at how its customers were responding.

Along with measuring sales and traffic, it studied how often guests were visiting and what they were ordering. After all, it had raised prices by 4.6% since November, and overall inflation broke 9% in June. Its customers didn’t flinch.

“To date through July, we have not yet found any measurable changes in our guest behavior,” said CEO Greg Levin during the chain’s second quarter earnings call Thursday.

BJ’s traffic was typical for the season, he said, and guests were ordering the usual amount of appetizers, drinks and desserts. Value offerings like happy hour didn’t draw in more patrons than normal.

At the same time, the chain hit its stride on hiring, adding more than 6,000 new workers in the quarter. That brought it close to 2019 staffing levels and allowed its restaurants to serve more guests.

The result was a strong top line performance by the Huntington Beach, Calif.-based chain in the period ended June 28. Same-store sales rose 11.7% year over year and 4.8% compared to 2019. Total revenues were $329.7 million, a new quarterly record.

And while its guests may be unfazed by inflation, 214-unit BJ’s is certainly feeling it. The chain’s food costs were higher than it was expecting in Q2, up 10% year over year and 2% vs. the previous quarter.
Its labor costs were also higher than last year as it hired and trained thousands of new people in the period.

As a result, its restaurant-level operating margin fell to 11.9%, from 14.8% a year ago.

BJ’s will respond by raising prices 2% in August. That follows a 1.4% hike in June. 

It’s also looking at smaller tweaks that could help margins, such as ordering larger pack sizes that are delivered less often, buying different cuts and sizes of products like chicken, salmon and avocados, and slow-roasting its own chicken wings, Levin said.

"We have a very proprietary wing that costs us money the way it's currently done," he said. "Slow roasting is some pretty significant savings that we can do at BJ's and actually make it a more unique and even differentiated product."

Its labor should become more efficient as well as new employees get better at their jobs, he added.

And if guests do start to shy away from higher prices, it could actually help the bottom line.

“Any broad decline in demand would be accompanied by a relief in input costs, which could benefit margins,” Levin said.

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