BJ’s Restaurants Inc. is working to drive sales and profit by reducing the size of its menu and beefing up value offerings, the company said Thursday.

The Huntington Beach, Calif.-based casual-dining operator saw same-store sales drop 2.2 percent for the third quarter ended Oct. 1, the first negative quarter since the end of 2009, and traffic decline 4 percent. The results followed negative sales patterns seen across the casual-dining segment.

The chain is working to drive sales by creating “quality capacity” in restaurants and making tweaks to both the front of the house and the kitchen, BJ’s president and chief executive Greg Trojan said in a call with analysts.


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“We need to be able to serve more guests more quickly and add an even better quality level than we are today,” Trojan said.

In recent years, the chain has expanded the number of menu items it offers, but that has hampered kitchen production, he said. Now it is looking to decrease the complexity of the menu and upgrade quality overall.

Streamlined menu to emphasize quality, value

The menu to roll out in November will have 24 fewer items, and will include more than 50 changes designed to speed throughput and improve quality, Trojan said.

Menu development efforts are focused on adding more “middle-of-the-menu” items under $10, with smaller portions and fewer calories but bolder, on-trend flavors. For example, a new BJ’s Brewhouse Burger line will debut, though details were not revealed. The company is also reworking its turkey burger, which has 1,700 calories.

“We think somebody ordering a turkey burger is not expecting a 1,700-calorie experience,” Trojan said.

The chain will debut more menu changes in February, included a redesign of the menu format.

Other tweaks will be minor. Onions will be cut fewer times in kitchen prep, and the chain will return to serving deep-dish pizzas in the pan, because placing the item on a plate slowed service. The company will also begin testing mobile ordering this month to speed service.

Speed was not necessarily a problem at BJ’s, said Trojan, but casual-dining is losing market share to the fast-casual segment in part because guests are pressed for time, particularly at lunch.

BJ’s, which ended the quarter with 143 restaurants, expects to open 17 to 19 new units in 2014, most of which will be small-format restaurants with more efficient kitchens.

Guest satisfaction metrics have risen for the third quarter and for the year. The company is managing food costs well and labor productivity has remained flat, despite negative traffic trends, “something that’s very difficult to do,” he said.

The concept itself is not at fault, said Trojan, pointing to surveys that indicate BJ’s sales per square foot are No. 2 among established casual-dining chains.

Analysts mixed on future performance

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BJ’s chief financial officer, principal accounting officer and executive vice president and secretary Greg Levin said the chain’s same-store sales decline was the result of a roughly 2-percent benefit from menu pricing that was offset by a decrease in guest traffic.

Cannibalization from some new BJ’s restaurants also impacted same-store sales, particularly in the core market of California, he said. New restaurants are opening strong, but sales tend to flatten in time, which is typical.

August was the softest month of the quarter, but Levin said same-store sales trends showed signs of improvement in recent weeks.

For the first three weeks of October, same-store sales decreased a modest 0.5 percent or so, with less menu pricing, said Levin. Traffic during those weeks has also improved by about 2 percent over the third quarter.

Levin said the casual-dining segment in general is expected to remain challenged through at least the end of the year, and likely into 2014.

Sales for the casual-dining segment have dropped 7 percent over the past five years, according to Knapp-Track data, but BJ’s same-store sales have grown 15 percent during that time, Trojan said. BJ’s has also grown average unit volumes from $5.2 million to $5.8 million.

BJ’s for years has stood out in the casual-dining sector as a brand that ran contrary to industry trends until late in fiscal 2012, when company officials began to warn of choppiness and consumer pull-back on dining out. Former chief executive Jerry Deitchle retired in February, and incoming CEO Greg Trojan inherited a brand that needed to refine its positioning to drive traffic.

“While we are disappointed that our comparable restaurant sales are softer than we would like, I am confident that we are not only working on the right things to restore momentum, we have made good progress on the building blocks it will take to set in motion another sustained period of larger sales premiums to the industry,” said Trojan. “We will continue to play offense, and, at the end of the day, we’re not revolutionizing anything here in this concept, but improving on the basic formula that has worked so well.”

In a report Friday, Wall Street analysts had a mixed view of improvement plans.

Christopher O’Cull of KeyBanc Capital Markets Inc. advised investors to remain cautious about BJ’s, saying, “We are not confident the issues causing BJ’s declining guest counts are well understood or that the company’s sales-building plans (e.g. television advertising) will result in sustainable improvements.”

Anton Brenner of Roth Capital Partners had a different view, saying company-specific issues, in addition to macro factors, were contributing to sluggish results, though he lowered expectations for the fourth quarter.

“We expect that strategies now being implemented will help drive sales and improve profitability, while double-digit store expansion is sustained,” Brenner wrote.

Contact Lisa Jennings at lisa.jennings@penton.com.
Follow her on Twitter: @livetodineout