After a challenging third quarter, BJ’s Restaurants is striving to recover its momentum through a batch of new initiatives, including a beer subscription program and technology that enables customers to order and pay via smartphone from their seats without downloading an app.
The casual chain also intends to offer a two-for-one deal whereby dine-in customers can take home a second entree at a bargain price, and to develop additions to its value-oriented Brewhouse menu specifically for weekends and lunch, the brand’s most challenging meal occasions, according to CEO Greg Trojan.
BJ’s will continue to push its new catering service, which has been growing at a 25% rate since being introduced earlier this year, Trojan said. But he was measured in his assessment of delivery’s potential, noting that heightened competition has tempered growth.
The moves were aired to financial analysts after the company posted a 0.3% decline in same-store sales and a 56.5% freefall in net income, to $3.7 million, for the quarter ending Oct. 1. Revenues rose 3.1% to $278.7 million.
Management attributed the decreases to weak conditions across all of casual dining and the impact of Hurricane Dorian. Trojan said the downturn was particularly pronounced in some markets of California, where 10% of BJ’s 207 restaurants are located.
Margins, he said, were squeezed by rising wage levels and higher food costs, particularly for avocados and the chain’s new tri-tip sirloin entree. The average guest check rose 2.7% for the quarter.
BJ’s intends to address escalating labor costs in part by looking at how restaurants can operate more efficiently, but it does not intend to cut staffing or otherwise cut back on service levels, CFO Greg Levin said during the conference call with analysts. “We've seen too many other companies that get on these calls, they talk about the fact that we're eliminating X, Y and Z positions, and all of a sudden they've got a big line at the front door because there's nobody taking care of the guests as they walk in,” Levin said.
Rather, the chain will focus on dynamics such as how far servers have to travel, given the cavernous size of some units.
Trojan suggested that the focus will be on building BJ’s top line. Toward that end, he announced that the chain will start testing a paid beer subscription plan next year in California, but he declined to provide details. He indicated that it would be a true subscription service, where patrons pay ahead of time for access to products, rather than a beer club that rewards patrons for a certain volume of orders.
The chain is already testing a system that enables customers to order food or drink, from their tables or the lobby waiting area, and pay for it by downloading an app first. “While we continue to believe that downloading our app delivers a lot of value to our most frequent guests and builds our customer loyalty database, we know that it is a barrier to greater adoption rates for some less frequent guests,” he said.
The buy one, take one entree deal will be rolled out next month, Trojan said. “Part of our thinking was also that they'll help trial for our takeout and delivery business,” he told the analysts. “There’s a select number of entrees, namely five, that carry really well and reheat really well.”
Trojan was measured in his comments about delivery. BJ’s sales through that channel are continuing to grow at a double-digit rate, but heightened competition has cooled things down, he explained.
“You just look at the pure numbers of folks playing in these third-party marketplaces, and the promotions they're in,” Trojan said. “It's just a lot more crowded.”