Thomas Houdek: Sure. Yeah, the O&O line, you’re right, in terms of our — especially our productivity initiative, this is one where we’ve identified ways to save, but they’ve taken some more time to implement. So we’re starting to see some of those come through in Q1. We called out the changes that we had in our R&M planning for the year, and that’s both on OpEx as well as CapEx. We’ve also made some changes that some outside services that we’re now completing internally that we can do it for cheaper and it’s a higher quality. But even coming into later in the year, we’ve got a new disposable distributor that is going to give us product at a lower cost that will be a nice savings than in the second half. So we’re continuing to find ways to just be more efficient in the core O&O line.
And some of this has been stickier that has been sitting higher. But yeah, this is — when I think of where we’re going to find some good cost savings this year, I want to find even more savings on this line. Going into Q2, we do have some extra marketing spend happening then. So our 1.7% that we just mentioned is going to be closer to 2%. So we will see a little uptick in the total O&O line because of a little extra marketing spend. We are seeing a little extra inflation as well on commodities for some cost of sales. So there’s a few things that are also baked into the forecast for where margins are going to be, but yeah, there’s some nice tailwinds as well.
Nick Setyan: Fair enough. The other question I want to ask is, not so much the value equation, because it does seem like you guys are still a relative value to your peer set because of where your average check is. But what can you do to highlight that sort of favorable value gap a little bit more?
Greg Levin: Yeah. Nick, that’s something that we continue to work on, and that gets down to really driving the awareness around that price point affordability. So as we lean into that, we’ve lean more into our Daily Brewhouse Specials. As I mentioned earlier, talking about whether it’s the loaded burger Wednesdays, it’s the slow roast Thursdays that come about, the half off pizza, those have been big areas for us. We continue to also — as we can work through our new menu and create new menu items that have a little bit better price points, let’s call it starting price points, but allow our guests to trade up if they want, that comes in and it’s going — it’s a part of really the media side of it. The other is as we rolled out our newer menu, we, this year, went back to what we used to do pre-COVID, but have that spiral menu.
It allows us to actually change our pages. So we are a little bit more flexible and able to push some of the value there. And in a couple markets, while they’re in tests, I won’t go into specifics, we do have a more value menu in certain specific markets that we continue to analyze the test. And depending on how it comes through for us, we may see us expand that.
Nick Setyan: Okay. And then just a modeling question in Q2, what is pricing going to be — menu pricing in Q2 all-in?
Thomas Houdek: Pricing will be in the 3% area.
Nick Setyan: Got it. Thank you.
Operator: Our next question is from Sharon Zackfia with William Blair.
Sharon Zackfia: Hi, good afternoon. I was hoping you could quantify more where traffic has improved to in the month of April.
Greg Levin: Negative low single digits, right?
Thomas Houdek: That’s right. Yeah, so far — yeah, so we’re through April now. So it’s in the down about 3% area.
Sharon Zackfia: Perfect. And then, Greg, I apologize if I missed this, my cell phone cut out, but it sounds like you’re making some incremental investments in hospitality. It sounded like maybe those are in specific regions. Can you talk about what you’re seeing that’s causing you to make those investments? And has there been any kind of waffling, I guess, and guest satisfaction that’s leading you to think about investing more there?
Greg Levin: Yeah. By the way, I just want to think about your first part of the question. Our dine-in traffic is actually less than the negative 3%. It’s kind of in the 2%, just from a negative standpoint. So we’re getting a little bit of drag from the off-premise. And we did talk about we’re spending money wisely in off-premise and looking at other ways to drive off-premise overall. But when we look at the health of the business overall, we want to drive that dining room traffic. That dining room traffic delivers an affinity for the brand and that then drives off-premise. So just wanted to get back to that aspect of it. In regards to your other question from a labor standpoint, one of the things that we’ve been really looking at in our business is pace and the throughput in our restaurants and how we can be faster.
BJ’s has never been a fast restaurant. People like to come and spend their time there and enjoy their time at BJ’s. That’s why we’re more experiential from a dining perspective. We’re not necessarily something that’s complimentary to something else, meaning we go to BJ’s and a movie. We are the event of the evening. But at the same time, we’re looking at areas that we control, whether it’s how quickly we get somebody seated, how quickly we get an order into the guest, how quickly we cook, how quickly it gets run out, and so forth. And as we looked at that, Chris Pinsak, our Chief Restaurant Operations Officer, and his team really started looking at some of the pinch points in regards to how quickly do we get to a table to get that order into the kitchen.
Because if it’s into the kitchen quicker, it cooks quicker. And we started looking at that ratio at times between servers and food runners, as well as how do we want to think about an expediter in regards to what we call a quality fast position. And we’re making some tweaks to that. The net-net of that is it should not add any real labor dollars to our business. It’s more of a shift from servers, from food runners, and then to more of an expediter type role that we didn’t have that we used to have maybe 15 years ago. And we’re doing that in more of the high-volume restaurants first to see how that works for us and how that drives improved pace and throughput. And then as we work through that, we’ll look at that and determine the right cadence for the rest of the restaurants.
Sharon Zackfia: Thanks for that. And just one last question. It sounds like you’re seeing a little bit of commodity inflation kick up. Do you still expect flat to low single digit for the full year or has there been a change to that?
Thomas Houdek: No, that’s still in line with our expectations. It’s looking like the low single digits, but yeah, still a lot of year in front of us. But we had a really good Q1 in terms of where we were expecting commodities to come in. But some of the produce recently is higher, some of the meat. So it’s more or less in line with the plan as it started. We had a little bit better Q1. Now we’re seeing some of it pick back up a little bit. So yeah, we’re still right in line with the original guidance.
Operator: Our next question is from Todd Brooks with The Benchmark Company.
Todd Brook: Hey, thanks for squeezing me in. Just wondering, Tom, within the guidance for slightly negative same-store sales in the second quarter, what are the assumptions that you guys are building in for the strength of celebration season here, Mother’s Day, graduation, Father’s Day? Thoughts on how those should perform year over year given the macro background?
Greg Levin: Yeah. Everything — when we look back to the recent celebrations, the Valentine’s days, when we were expecting people to come out, they have come out. So I am expecting — and the focus internally is how do we make sure, yes, gracious hospitality is is a focus, but also pace so we can get these tables set and people fed and when they want to leave, they can leave. And so we were ready to see the next group. So yeah, we’re expecting these to be big weekends for us. And we’re putting all of the operational pieces in place to make sure everything we can control is being controlled and driving as much sales as possible.
Todd Brook: Are those weekends that you can actually grow year over year or it’s more hold the hill because they were such high-volume weekends last year?
Greg Levin: Our goal is always to grow and have more consumers come into our restaurants. As I mentioned earlier, Chris Pinsak, our Chief Restaurant Operations Officer, got through with the rest of his ops team and looked at ways to make sure we have the most flexible floor plans in place, how we increase reservations for those big weekends and reach out not only for Mother’s Day and Father’s Day, but also all the graduations that happened at that time during that season there. And we believe that by adjusting our floor plan and some of the changes we’re making in the labor staffing that we’re going to do in some of our bigger restaurants, that we have the ability to get them into our restaurants, sat faster, food into their tables faster, and that provides additional capacity.
One of the things that we’ve seen in this business coming really out of COVID is just restaurants seem to be busier at the front desk. And then as you look in the restaurants, they’re just not operating as fast as they are. So I wouldn’t necessarily call it entirely false weight per se, it’s more about how are we more efficient when people come into the front doors of our restaurants and we get them sat sooner. And that’s one of our big initiatives this year. And that initiative will really prove itself out, come Father’s Day, Mother’s Day, and these graduation timeframes.
Todd Brook: That’s great. And then, Greg, you talked about without the impact of January, we probably really would have been even more surprised by the restaurant-level margins than where we are now. And I know if we have a normal celebration season, typically, that’s a big sequential lift that we tend to see in restaurant-level margins Q2 versus Q1. So, Tom, I think you talked about less pricing, a little bit more commodity inflation, but just trying to get a sense of is there a how high is up type of way that we should think beyond the guidance if things do fall as expected in Q2.
Thomas Houdek: Todd, it’s interesting. Being in this business as long as I have been, people used to talk about this business around Q2 and Q4. If you go back historically and look at this business, it’s switched to a Q1 and Q2 business. It just that first part of January, longer spring school breaks. You go into spring break in March, which is still in Q1. As I mentioned, Valentine’s Day, President’s Day, other long weekends. And when you go back and you can look at BJ’s margins over the time, the difference between Q1 margins and Q2 margins, they do bump up from time to time, but they’re not like a 100 or 200 basis points or 300 basis points more. You’ll see anywheres from 30 to 100 play in there. So I think as we think about where we’ve looked at our business, where we’re trending, I think the mid-15s is a solid improvement in where we are today and continues to move us forward.
If sales come in significantly better, as I said earlier, the ability to leverage in this business, I think, is very strong.
Todd Brook: Okay. And if I could squeeze one more in, exciting to hear that you got the build cost down to $6 million in the new prototype. Just wondering, what changed to get the build cost down that much? Is it front-of-house changes, back-of-house changes? I know it was a little bit more maybe, quote-unquote, simple construction, 90-degree angles versus curves and angles and things like that. But that’s a big drop from where you guys were running with the recent set of builds. I’m just wondering how you got there. Thanks.
Thomas Houdek: Yeah. A big portion of that, Todd — you were with us at our Investor Day and you saw our Framingham restaurant and some of our newer restaurants. They have that island bar. That island bar takes up more square footage versus our more traditional restaurants that have, what we call the classic bar statement against the wall, where we could put that 130-inch TV in. And that helped achieve a big amount of savings there. It then allows us to run that much more efficiently because you got the kitchen right behind the bar. So it’s easier for key members to serve the people in the bar area. They’re not driving as many steps. And then losing that island bar, you don’t have to staff it with two to three bartenders at different times because you have people on different sides of the bar.
So that’s where you get some of that operating efficiency. So that’s a significant portion of it. There’s also other things that we looked at within how we set up the kitchen, the different, as you just saw, undulations or right angles versus curved angles.
Operator: This concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today’s presentation. You may now disconnect.
