Hello, and welcome to BJ's Restaurants, Inc Q1 2023 earnings release and conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there'll be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Greg Levin, Chief Executive Officer and President. Please go ahead. Thank you, operator. Good afternoon, everyone, and welcome to BJ's Restaurants' fiscal 2023 first quarter investor conference call and webcast. I am Greg Levin, BJ's Chief Executive Officer and President. Joining me on the call today is Tom Houdek, our Chief Financial Officer. We also have Greg Lynds, our Chief Development Officer, on hand for Q&A. After the market closed today, we released our financial results for the first quarter of 2023, and you can view the full text of our earnings release on our website at www.bjsrestaurants.com. Our agenda today will start with Rana Schirmer, our Director of SEC Reporting, providing our standard cautionary disclosure with respect to forward-looking statements. I will then provide an update on our business and current initiatives. Then Tom Houdek will provide some commentary on the quarter and the current operating environment. After that, we will open it up to questions. Rana, please go ahead. Thanks, Greg. Our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. Our forward-looking statements speak only as of today's date, April 27th, 2023. We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission. Greg? Thank you, Rana. BJ's delivered record first quarter revenue, growing more than 14% compared to a year ago. Our Q1 results demonstrate the affinity guests have for the BJ's concept. We are unmatched in the industry given our polished casual positioning, broad varied menu with AUVs of more than $6 million and growing, and our focus on delivering gold standard operational service and gracious hospitality to our guests each and every day. Given these factors and our unwavering commitment to taking care of our guests, our first quarter comparable restaurant sales and guest traffic continued to beat the industry as measured by Black Box. Our first quarter comparable restaurant sales increased 9%, with our average weekly sales for the quarter rising above $121,000. We also made meaningful progress on our restaurant-level margins, reaching 12.6% compared to 9.8% last year, despite continued inflationary pressures. Our ability to grow our top line and leverage the incremental sales is a testament to our restaurant management teams who are executing well against our sales driving and productivity initiatives while delivering gold standard service to our guests. The best way for us to continue improving our margins is by driving top line sales. Every additional sales dollar earned leverages the fixed elements of our restaurant's cost structure and flows through to profit at a higher rate. To that end, we continue to focus on a variety of initiatives aimed at increasing top line sales. All of these sales initiatives must begin with a focus on the guest and how we can improve the guest dining experience at BJ's. We know from our consumer research that guests come to BJ's for an experiential dining experience that is rooted in our brewhouse theater environment with a best-in-class bar statement, familiar foods made brewhouse fabulous, served by our talented team members whose mission is to deliver gold standard service and hospitality every day. To that point, we continue to execute against our remodel plan so that we maintain our competitive differentiation around our high energy, polished, casual positioning and brewhouse theater environment. As you may recall, our remodel program includes a variety of potential improvements, including additional seating capacity, an updated bar statement, new lighting, artwork, booths and tables to name just a few items. The new bar statement is amazing and includes a much lighter, more contemporary bar featuring a new 130-inch television that screams brewhouse theater to all guests. As we noted last quarter, we plan to remodel at least 30 restaurants this year, or approximately 15% of our base. To date, we have completed nearly half of the 2023 planned remodels in addition to the nine we completed last year, which all are driving incremental comp sales for these restaurants. Our culinary and menu strategy is rooted in the familiar items made brewhouse fabulous based on our guest research. Last year, we began testing a smaller yet broad menu focused on these core familiar made brewhouse fabulous items. Based on the success of this test, we plan on introducing this new menu in July. This new menu will have approximately 10% fewer items, allowing us to improve daily execution while reducing inventory and prep hours in our kitchen. It will also allow us to introduce future menu innovation while keeping our overall menu tight. Additionally, later this year, we are planning another test with removal of additional items while continuing to provide the guest variety BJ's is known for. From a menu pricing strategy, our goal is to maintain a good, better, best pricing strategy that allows for guests to receive excellent value across all price points and have the option to indulge with more premium items if they so choose. To that point, we have maintained our Daily Brewhouse Specials, lunch menu, and happy hour prices to provide value options for all guests, while maintaining a higher price strategy with our craveable and differentiated proteins, including slow roast items like our Double Bone-In Pork Chop and Prime Rib, and our Fresh Atlantic Salmon for guests looking for a more premium experience. The execution of our sales-driving initiatives is not possible without the commitment and passion of our talented team members. Over the last couple of years, we have added a lot of new faces to the BJ's family. Beginning next month, we are implementing a series of sales-driving and optimization initiatives to enhance our dining room and kitchen execution, including updated gracious hospitality procedures and improved kitchen systems and prep procedures. These initiatives will uplift our already strong Net Promoter Scores, drive sales, and optimize our efficiencies in our restaurants so that we can better leverage our increasing sales and continue taking care of our guests. In addition to our sales-driving initiatives, we continue to execute against our cost savings programs to drive margin expansion. As we previously discussed, last year, we launched a cross-functional initiative to identify at least $25 million of four wall cost savings opportunities that will benefit our restaurant operating margins while maintaining our quality standards. Given the progress to date and the number of opportunities still being explored, we are confident that we will achieve our $25 million goal. Importantly, we won't stop there as we continue to vet additional opportunities to ensure we maximize savings across our business, while of course, still providing great quality and value to our guests. While driving top-line sales and improving margins are top of our priority list this year, we continue to complement these initiatives with new restaurant openings. As we've said many times, we believe there's an opportunity to double the number of BJ's locations in the U.S. However, we will continue to execute our expansion strategy at a rate that provides high-quality sites and execution over growth for growth's sake. Our new restaurants continue to provide solid results as the BJ's restaurant concept remains in strong demand by guests across many regions throughout the U.S. To date, we have opened two new restaurants and expect to open three more restaurants this year for a total of five new restaurants in fiscal 2023. Our first new restaurant this year opened in Orland Park, Illinois, which is our first restaurant in Illinois after building many successful restaurants in the Midwest, including Ohio, Indiana, and Michigan. We are very pleased with the strong sales performance of our new restaurant openings. In fact, our restaurant class from 2022 and 2023 to date has maintained average weekly sales approximately 20% higher than our other restaurants, and our two new restaurants opened this year are averaging approximately $150,000 in weekly sales. In summary, we are focused on a comprehensive set of initiatives aimed at significantly increasing our average weekly sales, growing our restaurant margins, and continuing our national expansion, driving towards a goal of growing BJ's sales to $2 billion and beyond while delivering meaningful earnings growth and shareholder returns. In the meantime, we are incredibly and increasingly confident that guest affinity for our brand and concept, coupled with the trajectory of our business and our current growth and margin-enhancing initiatives, will enable us to achieve attractive near and midterm overall growth and margin objectives. Let me turn it over to Tom to provide a more detailed update from the quarter and current trends. Tom? Thanks, Greg, and good afternoon, everyone. I will provide details of the quarter and some forward-looking views. Please remember, this commentary is subject to the risks and uncertainties associated with forward-looking statements as discussed in our filings with the SEC. In the first quarter, total sales grew 14% to $341.3 million. Because of the 53rd week in 2022, our Q1 period ends on April 4th this year as compared to March 29th last year. On a comparable restaurant basis, sales increased by 9% over the same weeks as last year, calculated by shifting the 2022 period by one week to end on April 5th. Without this shift, and using our fiscal Q1 2022 weeks as the comparable restaurant base, our first quarter comparable restaurant sales rose 10.7%. The comparable sales improvement, in conjunction with improving operating efficiencies and further progress on our cost savings initiatives, contributed to BJ's first quarter margin improvement. Our restaurant-level cash flow margins were 12.6%, an improvement of 280 basis points compared to the prior year. Adjusted EBITDA was $25 million and 7.3% of sales in the first quarter, which beat the prior year by $11.9 million, with a margin that was 290 basis points higher. We reported net income of $3.5 million and diluted net income per share of $0.15 on a GAAP basis for the quarter, each of which were more than double year ago levels. Our net income includes a $1.8 million income tax benefit, which includes the usual FICA tip credit and applying our estimated annual effective tax rate as compared to a $10.2 million income tax benefit from the same quarter a year ago. From a weekly sales perspective, we averaged more than 121,000 per week per restaurant in the first quarter, or more than 12,000 higher than Q1 of 2022. We maintained our off-premise weekly sales average in the low 20,000s while generating dine-in sales of more than 100,000. California was our strongest market with comparable sales of 12% in the quarter, it was encouraging to see similar strength across all markets in California, including the Bay Area. Notably, we also drove outsized growth in our late night and lunch day parts, demonstrating that guests are returning to more normal consumption patterns. Moving to expenses. Our cost of sales was 26.6% in the quarter, which was 70 basis points favorable compared to Q1 of 2022 and 50 basis points favorable to Q4 of 2022 after removing the gift card breakage benefit to Q4 revenue as described in our fourth quarter earnings release. Inflation in the low to mid -single digits on a year-over-year and quarter-over-quarter basis was in line and even modestly favorable to our expectations. The inflation figure would have been approximately 2 percentage points higher if not for the cost savings benefits from the changes we implemented to date across our food basket as part of the cost savings initiatives. Taking into account our January pricing round, we carried pricing in the mid 7% area in Q1. To date, we have seen no guest pushback to our menu pricing rounds. Labor and benefits expenses were 37.6% of sales in the first quarter, which was 130 basis points favorable compared to the first quarter of last year. We made further strides improving our labor efficiency in the quarter, which was driven in part by increasing labor retention in our restaurants, which was at its best level in more than two years. Our overtime and training hours improved as well, which as a percentage of sales were 20 basis points better than Q1 of 2022 and within 30 basis points from pre-pandemic levels in Q1 of 2019. Occupancy and operating expenses were 23.2% of sales in the quarter, which was 80 basis points favorable compared to the first quarter of last year as we leveraged higher sales. We continue to identify O&O savings opportunities as part of our cost savings initiatives, which, with savings beginning to materialize in areas such as new leftover packaging containers and renegotiating and optimizing certain maintenance programs. Additionally, in the quarter, we made the decision to invest in reinstituting third-party janitorial services as opposed to using our own team members. This move helps ensure guests consistently experience our restaurants in a like-new, first-class condition. G&A was $19.7 million in the first quarter, which was slightly less than our original estimates. Turning to the balance sheet, we ended the quarter with a debt balance of $60 million and net debt of about $31 million. We are very pleased with the strength of our balance sheet and will remain consistent in our approach of prioritizing growth-driving investments by return profile, including building new restaurants, improving our existing restaurants, and funding sales-driving initiatives. Looking to the second quarter of 2023, the industry has experienced some choppiness in comparable sales as the timing of Easter and spring breaks shifted. However, we are entering what is typically our strongest sales quarter, propelled by Mother's Day, Father's Day, and graduation celebrations. We tend to see our average weekly sales per restaurant grow modestly from the first quarter into the second quarter. Factoring in recent and historical trends, we expect to grow our average weekly restaurant sales in the second quarter by 4%-5% over the $118,900 per week we generated in the same quarter last year. Factoring in our sales expectations and cost trends, I expect restaurant-level cash flow margins to be in the low to mid 13% area in Q2 as we grow sales through strategic initiatives, make additional progress on our cost savings initiatives, and benefit from menu pricing. Including in the margin expectations is our plan to increase our marketing spend as a percentage of sales by 70 basis points from 1.4% in Q1 to 2.1% in Q2 due to an awareness-driving marketing media campaign in certain key markets in the second quarter. We expect marketing spend as a percentage of sales to return to the high 1% in the third and fourth quarters, which is more consistent with 2022 levels. We continue to target restaurant-level margins in the low to mid-teens on a run rate basis as we exit the year. We expect a tax benefit in the second quarter similar to the first quarter, which will again include the usual FICA tip credit and applying our estimated annual effective tax rate. We continue to expect CapEx spend in the $90 million-$95 million range this year, which includes the five restaurants we intend to open in 2023 and more than 30 restaurant remodels. Two of our new restaurants are now open and the remaining three are under construction with expected opening dates in the second half, one of which will be a relocation. As previously discussed, we made the decision to close two underperforming restaurants, one of which was a small format legacy restaurant, with one closing in Q1 and the other closing early in Q2. We also continue to push ahead with various remodels depending on the specific restaurant, which ranges from $150,000- $750,000 per restaurant. We expect to spend approximately $450,000 per location on average this year. We have now completed 14 remodels to date and remain very encouraged by the extra traffic we have been able to generate with the remodels and the resulting return on investment. On average, restaurants are adding more than $1,500 per week in sales following the lower cost remodels, where we add three extra booths and enhance the lighting, artwork and other upgrades, and adding multiple thousands of weekly sales after more costly remodels with broader scopes, including updating the bar statement along with many other upgrades. In summary, we know the best way to grow margins and profit is to grow sales. Recent sales trends have been encouraging and we remain committed to being sales drivers first and foremost. We intend to continue building sales into 2023, with demand for experiential dining remaining strong, especially at BJ's. At the same time, we have elevated productivity and cost savings through our margin improvement initiative, with momentum continuing to build. We have a clear path to sales and margin growth and our long-term strategy remains intact. Thank you for your time today and we'll now open the call to your questions. Operator? Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then Two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Alex Slagle with Jefferies. Please go ahead. Hey, thanks. Congrats on the quarter. You know, it looks like you've been seeing some really strong non-comp sales trends in the recent couple quarters, I guess with the new stores performing really well and trying to think about if we should expect those trends to continue that positive gap. You know, as you talk about the 4%-5% average weekly sales growth in 2Q, you know, should we be thinking about like a 2%-3% same store sales metric underlying that? Alex, I think it's the 4%-5% is probably the reasonable comp sales in there. This is a little bit of a reversal of Q1 in a way, because it's an interesting question where in Q2 we actually end fiscal Q2 ends the week of July 4th, and that's a low weekly sales average for us. In a way again much like Q1 and then it evens out from there, more or less. We end up replacing a fairly high weekly sales into Q1 and put a low weekly sales into Q2. It's one of the reasons that we try to give a little bit more color around what last year's comp sales was of 118,900. A way to think about building your model would be 4%-5% off of that number. Okay, that makes sense. The average weekly sales growth beyond that probably shouldn't be too significant beyond the comp for the balance of the year. That's right, Alex. In the second quarter, the weekly sales average growth will be right around the comp growth. We have seen about, it could be 100 basis points extra that we're getting from the extra weekly sales from our non-comp restaurants. Because of the shift that Greg mentioned, it gets it about in line for Q2. It's, you know, that 4%-5% should be both weekly sales growth as well as comp growth in Q2. Great. The expectations for the holidays and events coming up, Mother's Day and graduations, I recall them being pretty strong last year. Was there anything different in terms of staffing or other year-over-year differences to consider as we roll over those? No, I think we're obviously well staffed and I believe based on everything we're seeing in our business that we'll be more efficient and more effective taking care of our guests this year than last year because of the maturity in our team members and being staffed up. I think at the same time, from a macro standpoint, there was a certain amount of excitement for guests to get back out and celebrate after, you know, two years of challenges around COVID. I think in, I think from what we can control and execute, I think we'll do better. We continue to want to monitor the, what I would call the macro side of it. Okay. I'm not sure if you mentioned any changes in guest habits or anything with mix or appetizers, drinks, things like that you noticed over the last couple of months. Maybe just remind us if there were any changes you noted. I think in Tom's comment, he mentioned that we're seeing some really strong sales coming in late night at lunch. I think some of that has to do with obviously the BJ's concept. We've got great lunch specials. We updated our lunch specials this year in the first quarter, introduced some new items that are becoming best sellers for us. We have seen, I think, in general, party size start to normalize a little bit, still a little bit better than where it was versus 2019, let's call it. Our incidents are up versus kind of the 2019 timeframe. As we look versus 2022 last year, we have seen a little bit of a slowdown in alcohol incidents. I think we mentioned that on the Q4 call. That's one area that we continue to watch, but generally, everything else seems very consistent in our business. I don't know if Tom has anything else to add. Yeah. I think Greg covered it. Just to be clear, on the outperformance we've seen in lunch and late night, those day parts do have slightly lower check. That's, you know, we think of the incidence levels that Greg mentioned, that's, you know, a cause of it. We do have these day parts and, you know, that's one great thing about BJ's. We drive sales in our restaurants starting at lunch all the way through late night. These areas that have been down more from pre-COVID levels are recovering. When that traffic comes back, it's a little headwind on the check side. That's the dynamics at play there. Got it. Thank you. Thanks, Alex. The next question comes from Jeffrey Bernstein with Barclays. Please go ahead. Great. Thank you very much. Two questions. One, just on the menu pricing. I think you said for the first quarter in its entirety, you were running in the mid 7% range, and I believe you mentioned there was no resistance. I'm wondering if you could just walk us through maybe what was taken in the first quarter and maybe what your current outlook is for what you would take for the rest of the year or what the pricing would be if you didn't take anything for the rest of the year. There does seem to be some concern that, you know, new pricing is gonna be harder to pass through with, you know, what seems like food at home now falling below food away from home after a nice 18-month period where restaurants had some perhaps protection. Just trying to get your sense on the pricing outlook and your confidence in what you plan on taking as we look to the rest of the year. Thank you. I had one follow-up. Yeah, Jeff, we're looking at somewhere in that 7%-8% for, you know, the rest of this year, where we sit right now. We don't plan at this current time any additional menu pricing with our June, I guess it'd be our June 29th menu. We'll determine after that. There's usually an October menu, and probably in the October menu, we'll take pricing as we start to think about that pricing, trying to cover inflationary costs going into 2024. At the same time, we continue to try and be, I guess, you know, as I mentioned in the call, strategic in the way we're trying to look at our pricing, items that are more unique and differentiated, where consumers that are coming out and looking at things like a prime rib that maybe you can't make at home, that provide much more of an experiential dining. We feel that there could be room for pricing on those areas. At the same time, we wanna continue to balance it with that barbell approach, which is around the lunch specials, our Daily Brewhouse Specials and so forth, to make sure that again, there's kind of a good, better, best pricing. Where we sit right now, kind of in the, you know, 7%, I think we're a little bit higher than that right now, that's kinda how we're gonna roll through this year, even as some pricing will roll off in June, probably bring us down into the kinda low 7s at that time or so. Jeff, one piece to add on this too. When we take our pricing, there's the post audit that we do looking through both incidence rates to see if we see any shifts down or looking at trading relationships. We've seen very consistent ordering before and after the pricing rounds. As we made the comments in the prepared remarks that we haven't seen any impact from the pricing rounds, they've been accepted. That's really what's driving it. It's really, you know, no incident shift after pricing rounds as well as no trade downs, no, you know, not trading from, you know, something that's higher cost into lower cost. We're seeing very consistent ordering patterns before and after. That's very encouraging. My other question was just on the dollars you're spending. I know in 2023, you seem to be focused more on the remodels with 30 or more units, whereas the new units, Greg, I know you often talk about quality over quantity, and that's very understandable with the seemingly five units this year. You know, presumably you'd like to do more, but you wanna find quality. The couple you already opened this year with $150,000 average weekly sales, I mean, that's very impressive. I'm just wondering what are the greatest issues you're finding in terms of finding sites more so than the five? I think investors would love to see a re-acceleration in the unit growth, which you guys used to deliver. I'm just wondering what maybe are the challenges you're finding to find more than 5 sites in a particular year, whether it's real estate or the investment cost or anything along those lines will be helpful. Thank you. Yeah, great question, Jeff. It's actually what you ended there with. One is the site cost to build. As much as we're at a one-to-one right now with the new restaurants doing, you know, $150,000 times obviously 50 weeks gets you about $7.5 million, and we mentioned this on another call. The, you know, myself, our board of directors, our executive team really don't wanna be spending $7.5 million to build a restaurant. We continue to look for ways to bring that down, but still maintain the elements of the brewhouse theater, which are so important to differentiate our concept. Greg Lynds, who is here, is working with his team to work on ways to bring that down and work through a couple different prototypes. That's number one. Number two is as the people get better, we wanna make sure as we continue to build restaurants, we have the right quality of individuals to run these restaurants that are doing $7 million, as we just talked about. Those are the two governors to growth. I don't think this puts any change in our, in our view of where we can go, ultimately we wanna get back to growing our new restaurants at a 5% plus clip, which would get you 10+ new restaurants. We're continuing to line up the new restaurant growth for next year and what that pipeline's gonna look like. I don't think we're gonna get to the 5% next year, meaning 10+. Some of it's again, building out the infrastructure and doing the right way for quality over quantity. That is our target, and I fully believe we'll get back to that target here shortly. Thank you. You're welcome. Thank you. The next question comes from David Tarantino with Baird. Please go ahead. Hi, good afternoon. The first question is, just, I was wondering if you could help to break down the composition of the comp a bit better for Q1. Can you talk, I know you gave us a pricing mid 7%, but, you know, was there a mix impact or is traffic essentially the plug there? Sure, David. When we said that the lunch and late night increased, that did weigh on check a little bit. Think of traffic was low single-digit positive, then check was up in that 6%- 7% range. Got it. Then what does your guidance for the second quarter assume on those metrics? It sounds like you might be running a bit higher pricing, I wanted to understand kinda what the underlying traffic assumption is for the second quarter. Yeah. It's, it's more in the kind of flattish to negative low -single digits based on where the average check is trending. Okay. I maybe you could clarify what the pricing is? I thought you said, it was a little bit higher. If we said I think the way to think about it, David, if we talked about the fact that we're gonna try and grow average weekly sales in the 4%-5% range and pricing being in that kind of upper single digits, we've talked about trying to be somewhere between 7%-8% for the entire year. It starts to, depending on where you look at it and how you piece it together, it looks like kind of low -single digits, negative traffic. Generally, the difference there would be we're not getting the full 7% or 8% on our menu pricing. It's down, 'cause Tom just mentioned, somewheres in the 100-200 basis point. That's why the difference is gonna be traffic of, you know, 0 to - 2-ish, let's call it, - 3-ish. Got it. Okay. Is that... I guess, is that how you're running right now? You mentioned some choppiness at the start of the quarter and optimism about what's to come. Is the message here that the traffic needs to improve or is that kind of how you're running right now or it's quarter -to -date? It's been all over the place. I would say more recent trends as we get away from Easter, have been closer to the kind of mid-single digit comps, I would say. Got it. Okay, great. The last question I had is, you know, just to, you know, in general, I know you've given us a lot of detail on the price increases not affecting, you know, kinda mix, you know, mix impacts or what consumers are buying. I'm wondering, if you could maybe opine on whether you think there's any traffic degradation related to the price increases, either for you or the industry. I know you're not alone in having to take pricing, but I wonder, you know, just as you lean in on pricing to protect margins, are you seeing any sort of information in your traffic data that would suggest there's a pullback? Yeah. You know, it's interesting, David, because when we look at last year, so I'm using last year and kinda going to this year, there was really no change in our traffic as we took different pricing last year. Last year I think we ended up more in the mid-6s or so for the full year. Don't necessarily think 6 and 7 on top, because it's how it blends at different times. We didn't really see much change in there. This year it was harder to tell because of the January going over against Omicron and then seeing how things have kind of like settled in right now. What I would tell you, which when we play, which kind of plays into our numbers overall, is we're continuing to see better growth in the dining room, which makes sense even here in, into the April timeframe. We're seeing more of this flattening out of the delivery. I should say delivery and takeout, meaning total off-premise. That number's kind of flattening, even though there's pricing there, and that becomes, for lack of a better term, maybe a little bit negative on the traffic where you're seeing better in the dining room. It's a little bit to be expected as our dining rooms get better and more efficient. That's where we're seeing consumers to go. I don't know how much of that, though, is really pricing or when we've taken pricing, seeing a real change in our business. Got it. Great. Thank you. I'll add on that. I'll add on that as well. The, you know, one metric we also watch after the pricing rounds is just how we're trending versus Black Box. We get weekly both sales and traffic data from Black Box. You know, through last year, through this year, we've been beating the industry, and that margin hasn't changed. We track it, you know, right after we take pricing, and usually it's not that visit that'll impact, it'll impact the next visit. We watch it in the coming weeks and months, and it's been very consistent with the, you know, our trends versus the industry and how much we're ahead. It's, you know, at least it's not impacting us any more than the industry. It seems like it's, you know, being accepted. My last comment on this one, and I know this always becomes a little bit more challenging 'cause it's a little bit more qualitative than quantitative. It's the reason that on our Drive and Optimize conferences coming up, we're spending time on really making sure we're taking care of our guests within our restaurants. At the end of the day, we have to deliver that gold standard execution. We have to deliver gracious hospitality, so our guests know that if they are spending more, they are getting a better dining experience at BJ's and are willing to pay for it. That's key for us going forward. It's one of the things that we will always invest back into our people and make sure that they're taking care of our guests every day. Great. Very helpful. Thank you. You're welcome. The next question comes from Nick Setyan with Wedbush Securities. Please go ahead. Thank you. I do wanna focus on margins a little bit more here. You know, COGS, you know, in Q1 obviously in the sort of 26.6% range. You know, we took a little bit more pricing here in early Q2. You know, it sounds like inflation's running a little bit better than what we thought even a couple of months ago. I mean, how are we thinking about the cadence of COGS, you know, this year, and could we exit, you know, Q4 under 26%? Sure, Nick. Yes, very, very possible there. You know, going into the year, we did have some inflation. We're not modeling in deflation right now. The percentage of increases has been, you know, modestly under what we were expecting even a short time ago. The back half of the year, it really depends on what happens with beef. That's, you know, a big input into our business. We have some inflation baked in there, and that was part of the full year forecast. You know, that's really the determinant if it's, you know, if it's a little higher or a little lower. Yeah, we certainly expect it to, you know, given some pricing and how that flows through, you know, it could certainly be in the 25s. Is there anything in terms of mix shifts or anything else that we should think about that might derail sort of the sequential downtick in COGS, you know, from Q1 to Q2 to Q3 to Q4? Nick, I think, as Tom said, it's really gonna be around beef. One of the things that we've seen in our business, really coming out of COVID, but I'd almost argue maybe a little bit into COVID, is consumers like their kind of indulgent comfort foods. At times they are things that are a little bit more unique than what they can, you know, make at their home easily. We've seen over the years, especially coming out of COVID, just things like Rib-Eye and our Tri-Tip, really start to come up our chain of commodities versus maybe people thinking of BJ's from, you know, 15, 20 years ago, where it was kind of a pizza and beer joint. That very menu has really moved that mix around a lot on us. Because we use a fresh product in regards to Rib-Eye and Prime Rib, as well as our Tri-Tip, it's not locked in for the full year. We continue to watch that. We've got some, you know, initiatives against that in regards to how we can be more efficient and continue to manage that. I think it's a real wild card out there, as Tom said. Just relative to sort of that $25 million, you know, cost takeout number, where are we now relative to that $25 million? We're probably in the middle innings of it. We put through some things like we've talked about before, such as the wings. A couple ways that we've changed our cutting of our fresh salmon that have come through on the commodities. Right now, it's, I think a big effort's going after the operating occupancy line. That's an area that just has shifted on us as well as the rest of the casual dining industry. Some of it's to off-premise. Some of it was those challenges with off-premise in regards to takeout packages and other costs that now we can competitively bid and get those in. As Tom mentioned, we've got takeout packaging coming in later this year. That'll give us some savings there. We're looking at some also, I think actually leftover packaging is coming in this year. We're looking at some changes in takeout packaging that's actually higher quality to go after. We've got to offset that with some changes in janitorial. We're starting to see a good momentum on there in regards to labor. We'll see another round here as we go through it with the new menu coming in in June or basically July, with less menu items. That allows us to readjust our staffing labor lines, as well as adjusting our prep, as well as other efficiencies in there. There's really another level that's gonna start to come here in Q3. Unfortunately, Q3 is a little bit lower weekly sales average, so some of it will get masked by that. I think going into Q4, we'll start to see that real benefit coming from the efficiencies driven from the little bit smaller menu, and then on top of that, the other efficiencies around the cost savings. Great. Thank you very much. You're welcome. The next question is from Andrew Wolf with C.L. King. Please go ahead. Just wanted to focus on labor with regards to wage rate inflation, which I think you said was about running, I think last quarter, you said it was 7%. Have you seen any changes in that rate? Or is it kinda too soon in the economic slowdown for there to be any relief on the labor side? Hi, Andrew. Sure. The year-over-year number did decelerate a little bit more. It's more in the mid 5% range now for Q1. If you look sequentially more the quarter-over-quarter, it was more in the mid 1% range. Yeah, it continues to. You know, it's still inflation. It's still we're paying more per hour, but it's nothing like the increases we were seeing a year or two ago. Andrew, I think the other comment on that as well is Q1 is generally gonna be some of our highest inflation periods because the minimum wage increases start to hit in January 1st. To Tom's point, we're not necessarily seeing what we've seen 1 year ago, and we'll see how that continues through the year. The other side, Tom mentioned this in his formal remarks, is our retention levels are the best they've been in two years, and that really helps us. They're not as good as they were back in 2019, and that's where we need to get back to. That's really important for us to make sure that we're bringing on the right people at BJ's, we're onboarding them correctly and basically reducing turnover. That drives efficiencies within our restaurant. It helps manage the overtime, helps manage the training costs, and ultimately, that is a buttress against inflation, and that's a big initiative of ours. Okay. Excellent color. I was actually gonna ask about the metrics as it, getting back to, I think the last question, a follow-on on the $25 million cost savings goal. You know, it looks like the run rate in COGS is around $8 million, just based on the color you gave in your earlier. Is it fair to think that, you know, and based on the commentary you just gave as well, that more of that is gonna be skewed to labor and, you know, packaging and some of the other costs in the P&L to get from-? I, You know, whatever you're running at now back up to the full realized amount. We'll be looking still across the board. If I think of everything that's being vetted right now, there's still plenty in the food cost line as well. It really still is a full court press against if you wanna put it into three buckets: the labor, the food cost, and the O&O, the operating expenses. You know, it's great that we've found as you know, some of these great wins on the food cost side. There's other items being tested right now that still have some decent impact. Yeah, there's certainly I mean, we did highlight a number of things that will be helping on the labor front as well. Yeah, it won't be you know I wouldn't say it's more skewed in one area versus another. Andrew, the best thing that's happening, I don't know if it's the best thing, but the thing that's happening really well is we are getting back to what I would call kind of just normal operating cadence. What that means as well, and I think it's a little bit to Tom's point on the commodity side, we have the luxury now or the ability now to go out and bid certain products that you just couldn't do last year. you know, some of it worked out better for us. For example, as we talked about it, wings. We couldn't go out and bid our wings last year, so we had to figure out something better, and that really helped us. Now that we can bid certain things, maybe we don't need to look at it differently. We could just get better pricing that we couldn't get a year ago as suppliers are coming back online. I think to the point is we look for our $25 million, and the reason we're pretty bullish that we'll get above that is there's areas that we couldn't go after last year. Some of them, by the way, are takeout packaging that we talked about or to-go packaging. You're also seeing it in the commodities line and other things which I think will continue to help benefit us as well as the rest of the industry. Okay. Thanks for that color. I'll leave it there. Thank you. The next question is from Joshua Long with Stephens Inc, please go ahead. Great. Thank you for taking my question. Wanted to see if we could circle back to the commodity conversation. How much of your basket is locked right now? I appreciate the comments around beef and how, you know, that can kind of shape up or drive the trend for what happens in the second half of the year. What kind of visibility do you have on the remainder of your basket here over the next quarter or two? Sure, Josh. About a third is locked on annual contracts right now. It's a little less than we would have been, kind of in the pre-COVID way that we would approach the, you know, across the board here. There, there's areas of our business, like wings, for example, where it was kind of a processed product before and we would lock it in for the year. We could have locked wing prices in for the raw product for the whole year, but it was very favorable to not do that, to float to market. There's other areas of our business that just strategically or we think of the premium that was being charged to lock, it just made more sense, and the direction of, you know, where the commodity markets were headed, it just made more sense to float. A little bit less than usual, but not by any wide margin. Great. That's helpful. Then on your comments around ticking marketing back up, especially as we go through the back half of the year, can you talk about what channels have been working particularly well for you and just how you're thinking about that messaging as we get into a more normalized environment? I mean, there's obviously conversations around potentially a softening macro. Just remind us, is it gonna be awareness, brand building? Is it gonna be a little bit of more, you know, targeted price points? What's working in the current environment from a messaging and awareness perspective for the BJ's brand? Great question, Josh. Right now, it's a little bit more brand building. The reason it's a little bit higher, this quarter, has really more to do with the fact that we did new creative, and so we've got to expense that creative, and it's gonna get expensed in Q2. To some degree, the amount of, let's see, what you would call it, media spend or being, you know, on TV or doing digital TV, linear versus connected, et cetera, is somewhat similar with last year, but it's really the more creative that's coming through from the expense side of things. As we look at our business, we wanna build the brand. Even though with our brand, building, we do have usually some tagline. It might not necessarily be price specific, but it might be more of limited time offerings. Like right now, our tagline is around our Confetti Pizookie. Our Pizookie is, you know, one of those drivers for us that is unique and differentiated. We'll continue to use that both from a connected and linear TV as well as social and digital. Great. Thank you. You're welcome. The next question is from Sharon Zackfia with William Blair. Please go ahead. Hi, good afternoon. I was hoping to talk some more about the menu rationalization. Can you talk about whether, I believe it's been in test, whether you've seen any kind of lost sales or consumer pushback and kind of the order of magnitude of margin benefit that that provides? Second question, just the loss on disposal of assets running $2 million a quarter the last few quarters. Is that related to the remodels, and is that something we should kind of expect, you know, for the foreseeable future? Tim, you wanna handle that? Yeah, let me-- I'll handle the second question first. So this quarter, um, the majority of that expense was related to these, um, glass dividers that we put up in our restaurants during the COVID era. Um, just, um, you know, the-- it was a high-quality glass that we put up to as dividers to really give, um, folks the ability to come to the restaurants, where we can expand capacity at the time. But, um, you know, with where we are today, and it does break down the sight lines to our TVs and, um, so we-we're, we're going through and removing those dividers. So there's some write-down associated with, um, with those. But, um, but yeah, otherwise for the remodels, we did write off, um... We did have a plan coming into the year, so you saw an increased amount that was of the expense in Q4. The majority of the remodels should have been captured in that, you know, in the Q4 window. Sharon. On the menu rationalization? Yeah, thanks. Yeah. First of all, great question on the menu rationalization, because it is something we've been testing for a while. You're right in the sense that it's very difficult to rationalize a menu and grow sales. It takes a little bit of time, and it's probably one of the reasons we've been testing this for a while and have gone through different iterations to get it to where we believe we've got it right. I will tell you, as we work through this, and I'm gonna, you know, get you into a little bit of the sausage making, I guess, for lack of a better term, certain things didn't work for us in this. We took off some certain appetizers, and we saw our, what I would call our add-on sales go down. We've had to add those back, and continue to work through some of that where we feel that the changes should be more or less net neutral within our business. It is, you know, we try to look at reach and frequency. There are a couple just interesting ones we took off. This one was our internal debate. You're gonna laugh. We took off the side wedge salad. Guess what? People that want a wedge salad will not switch to a house salad or to a side Caesar salad. All of a sudden, we lost side salads. We went ahead as we go through and do this testing, and therefore, when it rolls out in the July timeframe, it'll still have a side wedge salad. Bottom line is we've gone through and we've worked this a lot, and tried to make sure that we know it the best we can. That being said, every restaurant is a little bit different, but we feel comfortable in the fact that we've taken the right amount of testing, that we, for lack of a better term, measure twice and will be cutting once, in regards to this menu. Hopefully there's another round that we can take off some other items as we continue to create new, more, craveable items for BJ's. Greg, I know you mentioned you're taking off 10% of the menu items. I mean, what% of ingredients or things that come in the back door are going away? I wanna say it's, yeah, I wanna say it's like 21 SKUs. I don't have an... Sorry, I think I mentioned on one of the other calls. It's a decent amount in SKUs. It's a decent amount of changes in the way we're doing some prep, to your point there, on some of the single source items that weren't high sellers that'll come through, that'll have us adjust our prep hours in the on that going forward. It is, there are more SKUs that are disappearing than there are menu items, I believe. Okay. Thank you. You're welcome. The next question is from Todd Brooks with The Benchmark Company. Please go ahead. Hey, thanks for taking my questions here. Just wondering if we could, and I don't know which way is easier to snapshot the difference of where you are from a staffing standpoint year-over-year going into your seasonally strongest quarter, Greg, but can we either dimensionalize maybe what we think we lost in Q2 last year from having, I think 25% of the workforce at that point had been hired in the last three months and we were coming off of limited menus and getting back to full menus and some restricted hours. Do you have a sense of maybe what it cost you last year? If you wanna talk about from the prospective standpoint, how excited are you to be going into this seasonally strong period with staffing where you want it, retention improving, so you're getting bodies that have stayed in the role longer and gotten more efficient? Yeah. I think it's easier to talk prospectively. We are, as an organization, excited, I think, going into this year's graduation, Mother's Day, and Father's Day seasons, not only fully staffed from a body standpoint, but it's really about the staff getting their sea legs under them and getting used to doing the volumes we've done at BJ's. I think we learned a lot, obviously, last year. We learned a lot. Believe it or not, it's gonna sound again, a little husk, a little different, and that is even like around Veterans Day weekend, some of the Veterans Day specials, it's a lot of volume that comes into our restaurants, and our team members did a great job handling it. We're excited to be fully staffed. I think we can give better execution to our guests so they can have even a better dining experience at BJ's. I think overall, it should be a, you know, a strong period for us. At the same time, though, as we did talk, and I guess I'm tempered a little bit with, there was a lot of buildup of people wanting to come out last year, and it's one of the reasons I think we see it in maybe alcohol incidents kind of slowing down a little bit. I temper it a little bit with that, but I think we're excited to be fully staffed. We're excited to be executing at the level that we're executing at. Therefore, we're excited to be able to take care of even more guests that wanna come to BJ's. If you look at something like Valentine's Day in the, in Q1, though, do you see evidence that the demand was tempered on that occasion? Because that'd probably be the most recent read, right? No. We had a really good Valentine's Day. It was executed well by our teams. They did a tremendous Valentine's Day, and they did a great overall Valentine's Day weekend. I think you can feel it in our restaurants. I give my hats off to Chris Pinsak and our Vice President of Operations team that are really doing a great job making sure our teams are delivering on the gold standard and gracious hospitality. You just see it today versus a year ago. We see our restaurant managers out on the floor. We see our team members, you know, taking care of our guests. I hadn't really thought about Valentine's Day, I guess maybe because we're so much into April. I think your point's a good one in the sense that we really had a strong Valentine's Day, and we executed well against it in regards to our operational cadence. Okay, great. Then just two quick ones to wrap up. One, when you were talking about capital allocation, the one piece that you didn't mention was share repurchase. Obviously, the stock and the group have been weak here. Based on kind of the reality of the results that you put up, I think you could almost argue that highest and best use of some capital may be share repurchase at these levels. Where does that fit into the overall plan, given the other claims on CapEx that you have? I think as we continue to grow our business, share repurchase and other capital allocations to benefit shareholders is an important part of the BJ's story. I think even if we were saying we were growing our business at, you know, 5+% in regards to new restaurants, we would have extra cash in our business, assuming we move our margins the right way, which, you know, we fully expect to be able to use that cash to buy back shares. As we continue to look and execute against our plan, I think share repurchases will be part of our business going forward. Okay. The final one. You guys talked on the last call about an AI scheduling tool. I think it was being tested in 20 restaurants. Is there any update you can give us on maybe labor efficiencies that the tool is providing kind of in that control group of restaurants? Is it something where you know you wanna proceed through the rest of the chain and maybe what the cost save opportunity might be? Thanks. Hi, Todd. Sure. The, we're still very encouraged by what we're seeing. We're testing still in those 20 restaurants. I would say on average weeks, there, it's a good tool to get the, you know, the sales forecast right so we can schedule more accurately as well as prep more accurately. You know, some of these weeks, if you go into like the Easters and, you know, it still needs some training there, but we're encouraged. We're still, you know, testing. Yeah, you know, this is something that I think is, you know, something we're certainly excited about and thinking about how it could benefit us. Okay, great. Thanks to you both. Thank you. Today's last question comes from Jon Tower with Citigroup. Please go ahead. Great. Hey, most of my questions have been answered, so, I guess two quick ones. Any impact of weather in the quarter or quarter -to -date that you wanna call out? Because I know California obviously had some fairly big swings. The rest of the country got some benefits to start the first quarter. Anything noteworthy to call out? Yeah, Jon, we did see some impact in California, especially earlier in the quarter, especially, you know, when you think of the rain that came through. You know, it was a headwind certainly for some of those days and weeks. But like I said, California was our best performing market. Nothing that held us back, but it was a modest headwind. Okay. Then just real quick flip into the menu reduction that you're talking about. It sounds like there's gonna be some labor savings and prep improvement. You didn't mention anything about table turns, and I'm assuming that's part of the equation here, but just wanna verify that that's the case. It's part of the work here is getting faster table turns. Jon, it should be a by-product if we're able to be more effective in our kitchen and get menu items out sooner and quicker to our guests, essentially, our tables would turn faster. We have other opportunities there. We have Mobile Pay in our restaurants. In fact, people that use Mobile Pay end up with, I wanna say about a seven-minute to 10-minute quicker table turn than people that, you know, traditionally pay the way they currently are. We're continuing to work through some of those other aspects to be faster. We're making some changes to our server handheld tablets, where they can actually take the payment there to speed up the process. The interesting thing about this, and I'm gonna go a little bit longer, is we've done a lot of testing with our innovation team in regards to how we can be faster in our restaurants. We've even set up in a test in a restaurant to kinda do a quick service for our guests, where they can order right when they walk in and then get seated. Guests come to BJ's, as I said, for that kind of experiential dining experience. Even the ones that kinda ordered at the counter during our test, they end up ordering another beer, they end up ordering a Pizookie dessert at the end, and they still spent basically about an hour at BJ's. We know the reason that a consumer comes to BJ's, they made their decision based at their house, not necessarily driving down the street going, "Is it QSR or is it BJ's?" That being said, we wanna be as efficient as we can with our table turns and give the guest that wants to be faster, you know, the ability to be faster. We'll continue to work that, but at the same time, we understand that we are there for an experiential dining for our guests. Therefore, we wanna make sure that we're doing everything we can to make sure that they have a great experience. Got it. Thanks for the for taking the questions. Have a good day. My pleasure. Thank you. Ladies and gentlemen, this concludes our question and answer session. The call has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you, everyone. Thanks.