Greetings. Welcome to BJ's Restaurants Incorporated Q2 2023 Earnings Release and Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Rana Schirmer, Director of SEC Reporting. Thank you. You may begin. Thank you, operator. Good afternoon, everyone. Welcome to our fiscal 2023 Q2 investor conference call and webcast. After the market closed today, we released our financial results for our fiscal 2023 Q2. You can view the full text of our earnings release on our website at www.bjsrestaurants.com. I will begin by reminding you that our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. These statements are based on management's current business and market expectations. Our actual results could differ materially from those projections in the forward-looking statements. 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. We will start today's call with prepared remarks from Greg Levin, our Chief Executive Officer and President, and Tom Houdek, our Chief Financial Officer, after which we will take your questions. Greg Lynde, our Chief Development Officer, is also on hand for Q&A session. With that, I will turn the call over to Greg Levin. Greg? Thank you, Rana. BJ's delivered another solid quarter, growing top-line sales and expanding margins year-over-year. Our total revenues increased by more than 6%, led by strong comparable restaurant sales of 4.7%. We are proud that these results once again beat the industry as measured by Black Box, both in terms of sales and traffic for the quarter. Consumer demand trends were generally stable and consistent throughout the Q2, and these same trends have continued into the first three weeks of the Q3. Importantly, our margin improvement initiatives are also delivering results as we made meaningful progress on this front, with restaurant-level margins reaching 14.5%, which was 260 basis points higher than last year and our highest margin level since the pandemic. We still have wood to chop to get back to the high teens pre-pandemic margin levels, the progress we have made to date confirms the effectiveness of the strategy that we have laid out last year. Our teams are laser-focused on methodically executing against this strategy, which drives our confidence and optimism that we can continue to build margins in the near term and over longer horizons. Our sales and margin growth strategy is based on our in-depth consumer research and focuses on building the BJ's brand over the long term, quarter by quarter and year by year. We know that our guests escape to BJ's for a dining experience rooted in gold standard service and gracious hospitality delivered by our restaurant team. Our guests want familiar food items made Brewhouse fabulous, all in an ambiance that is of higher quality, differentiated, and full of energy compared to mass-market casual dining concepts. To deliver gracious hospitality and gold standard service, we methodically rebuilt our restaurant teams to make sure we are always delivering memorable experiences for our guests. Our Q2 restaurant manager retention exceeded the same quarter in 2019, and we continue to see improvements in our hourly team member retention as we narrow the gap to pre-COVID levels. As a result of more tenured team members at both manager and hourly ranks, our labor productivity metrics in the second quarter were better than a year ago and better than 2019, highlighting that we can not only drive record sales but drive those sales very efficiently. We were also able to drive those efficiencies while maintaining our strong net promoter scores. In regard to our culinary strategy, we rolled out our new menu in July that has 15% fewer items and is focused on familiar items made Brewhouse fabulous based on our guest research. Having less items, but the right items for our guests, will allow us to improve our daily execution by increasing repetition of guest favorites while reducing prep hours in our kitchen, both of which can, over time, contribute to our sales and margin growth goals. At the same time, we introduced some new items that squarely fit with this culinary strategy, including our new Big Twist pretzel appetizer, served with beer cheese made with BJ's Brewhouse Blonde beer, Hickory Brisket Nachos, and we upgraded some of our signature cocktails. Demand for these new items is strong, demonstrating our product innovation is connecting with the preferences specific to BJ's guests. Because we know that our ambiance, coupled with our team members' gracious hospitality and higher quality food profile, is key to serving memorable Brewhouse experiences for our guests, we continue to invest in our remodel initiative. 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. The new bar statement is amazing and includes a much lighter, more contemporary bar, featuring a new 130-inch television that screams Brewhouse Theatre to all guests. We now expect to remodel 35-40 restaurants this year. That's up from our original plan of approximately 30 remodels due to the encouraging results and financial return profile these restaurant remodels have delivered to date, as measured by incremental guest traffic and restaurant profit. When including the 9 remodels we completed last year, we now expect to have remodeled at least 20% of our restaurants by year-end. While the best way for us to continue our margin growth is by driving top-line sales, since every additional sales dollar earned leverages the fixed elements of our restaurant's cost structure, we also laid out a plan last year to identify at least $25 million of four-wall cost savings opportunities that will benefit our restaurant operating margins while maintaining our quality standards. I am pleased to announce that during the Q2, we surpassed the $25 million goal on an annualized basis, which helped reduce food, labor, and operating and occupancy costs. While we are proud to have achieved this milestone, the team has identified significant additional savings opportunities, which we expect to realize later this year as we continue to execute against our cost savings initiative. As we continue to build top-line sales and expand margins, we also continue to open new restaurants in a balanced manner. To date, in 2023, we opened two new restaurants and expect to open three more restaurants this year, for a total of five new restaurants in fiscal 2023, including one of which will be a relocation in Chandler, Arizona. As many of you know, overall new restaurant construction costs, including furniture, fixtures, and equipment, as well as the related supply chain costs, have increased by over 35% since 2019, bringing some of our new restaurant builds to the mid $7 million range on a gross basis before any tenant allowance funding. As a result, our development department has been busy designing a new prototype that takes the best features of our current restaurant, but reduces the cost to build by about $1 million. Because of the significant savings, we are submitting new plans for most of our 2024 new restaurants. Our development team is working closely with planning commissions in each city to get the new plans approved as quickly as possible. However, to be conservative, we expect the timing of approvals of these new prototypes will result in some 2024 new restaurant openings moving later into the year and possibly into 2025. As such, I expect 2024 new restaurant openings to be similar in number to this past year, and then we will see an increase in new restaurant openings in 2025. As we have said many times, our goal is to re-accelerate our new restaurant expansion and grow restaurant weeks by 5%+ annually. However, we are going to do it with the right quality and at the right investment cost to continue to drive strong new restaurant investment returns. With 5%+ new restaurant growth, consistent comp sales in the low to mid-single digit range, and expanding restaurant margins, we should achieve very strong EBITDA and earnings growth for our shareholders. In summary, we laid out a plan last year to methodically drive top-line sales, grow our restaurant margins, and continue our national expansion. Over the last several quarters, we have been consistently executing against this plan and building momentum in our business. I am extremely proud of our restaurant team members, who day in and day out, get to provide memorable experiences for our guests, thus enabling us to drive towards our goal of growing BJ's to $2 billion in sales and beyond. With the positive reactions from our guests to all that we are doing, we are 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 expansion. Finally, I'm excited to announce that we will be hosting an Analyst and Investor Day later this year, when we will share greater detail around our near-term opportunities and our longer-term growth strategy. Stay tuned for further information in the coming weeks. Now, let me turn it over to Tom to provide a more detailed update for 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 Q2, total sales grew 6.1% to $350 million. On a comparable restaurant basis, sales increased by 4.7% over the prior year. Our restaurant-level cash flow margin was 14.5% in theQ2, an improvement of 260 basis points compared to the prior year. Comparable sales growth, in conjunction with improving operating efficiencies and further progress on our cost savings initiatives, contributed to our margin improvement. Adjusted EBITDA was $31.8 million and 9.1% of sales in the Q2, which beat the prior year by $8.4 million, with a margin that was 200 basis points higher. We reported net income of $11.9 million and diluted net income per share of $0.50 on a GAAP basis for the quarter, both of which were materially higher than year-ago levels. Our net income included a $2.2 million income tax benefit, which includes the usual FICA tip credit and applying our estimated annual effective tax rate as compared to a $2.2 million income tax expense from the same quarter a year ago. From a weekly sales perspective, we average more than 124,000 per restaurant in the Q2. The Q2 tends to be our strongest sales quarter seasonally, with outside sales during the celebration weekends of Mother's Day and Father's Day, as well as throughout graduation season. In fact, during the week that included Mother's Day, we set a new all-time high weekly restaurant sales average of $140,000, which beat our previous weekly record by nearly $10,000. Our California strength continued as it was again, our strongest market, with Q2 comparable sales of 8%, with similar outperformance across all regions of the state. Moving to expenses. Our cost of sales was 25.9% in the quarter, which was 170 basis points favorable compared to Q2 of 2022, and 70 basis points favorable to Q1 of 2023. Food costs were about flat quarter-over-quarter and slightly deflationary year-over-year, which was moderately favorable to our expectations. The inflation figure would have been approximately 2 percentage points higher, if not for the benefits from the changes we implemented to date across our food basket as part of the cost savings initiative. Labor and benefits expense was 36.2% of sales in the second quarter, which was 110 basis points favorable compared to the second quarter of last year. We made further strides improving our labor efficiency in the quarter, which was driven in part by increased labor retention in our restaurants, which was at its best level in more than 2 years. A number of the labor efficiency metrics we track, including, including items per labor hour, were better this quarter than pre-COVID levels from the Q2 of 2019, illustrating the high level our restaurant teams are operating at, as well as the effectiveness of our cost savings initiative to date with respect to refining and optimizing our labor model. Operating and occupancy expenses were 23.4% of sales in the quarter, which was 20 basis points unfavorable compared to the Q2 of last year. Marketing was 2.1% of sales, which was 20 basis points unfavorable versus a year ago, and 70 basis points unfavorable to last quarter, due to a media campaign using new creative with all of the production cost expense in the quarter. G&A was $21.2 million in the second quarter. Included in G&A was $600,000 of deferred compensation expense tied to fund performance in our deferred compensation plan, which was $400,000 higher than in Q1. As a reminder, this is a non-cash item that has an offsetting entry in other income and expense line in our P&L. Turning to the balance sheet, we ended the quarter with $53 million of debt after repaying $7 million of our revolver during the quarter. Note that our ending cash balance of $6 million was impacted by the July fourth holiday, falling on the last day of our fiscal quarter. We typically receive credit card transaction funds for Fridays, Saturdays, and Sundays on the following Tuesday. Since Tuesday, July fourth, was a bank holiday, we had $19 million of cash in transit from credit card sales that was not reflected in our quarter-end cash balance. Looking ahead to the Q3, we are entering what is typically our lowest sales quarter seasonally. Factoring in recent trends, we expect comparable restaurant sales in the high 3%-low 4% range for the quarter, taking into account less of a pricing benefit once we begin lapping our August 2022 pricing round, which equates to sales in the $330 million area. Factoring in our sales expectations and cost trends, we expect restaurant-level cash flow margins to be in the mid-12% area for Q3, significantly, significantly above last year's Q3 margins. Based on the current momentum in our business and our cost savings initiatives, we remain committed and optimistic to deliver low to mid-teens restaurant level margins on a run-rate basis as we exit the year. We continue to expect G&A in the $80 million-$82 million range for the year. Our CapEx expectations remain in the $90 million-$95 million range for the year, which includes 5 restaurant openings and now the higher 35-40 restaurant remodel target. 2 of our new restaurants are opened and performing very well, and we expect to open the remaining 3 later in the third quarter, 1 which will be a relocation. In summary, we know the best way to grow margins and profit is to grow sales. Recent sales trends have been encouraging, with demand for higher quality, experiential dining remaining strong, especially at BJ's, and we expect to continue making progress with our sales building initiatives. At the same time, we remain committed to productivity and cost savings through our margin improvement initiatives, with momentum continuing to build. We have a clear path to sales and margin growth ahead, and our long-term strategy and stronger consumer appeal for the BJ's concept position us well to continue building on our successes and enhancing shareholder value. Thank you for your time today, and we'll now open the call to your questions. Operator? Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue, and for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Joshua Long with Stephens Incorporated. Please proceed. Great. Thank you for taking my question. Was curious if you could dive in a little bit more on the top-line trends. There's been, I think you noted some strength across region. I would, you know, positive to hear that. Curious if you could talk about day part trends, any sort of other kind of, maybe store-level trends that you're seeing in terms of trade down or kind of check management. I know you have a kind of a holistic approach to both the ambiance, the hospitality, menu innovation, a lot of great things that are working, but just curious what you see from the consumer as you parse through all of those initiatives. Hey, hey, Joshua Long, it's Greg Levin. I'll let Tom Houdek add on here I'm sure. It's been very consistent across all the day parts in our business, as well as looking at the business both on the weekends and the weekdays. We haven't seen much trade down, or I don't want to say much. I don't think we've seen any trade down at all. I think the way our menu is set up with things like Daily Brewhouse Specials seems to be able to bring in people from a traffic standpoint, but we're not necessarily seeing people trade down to Daily Brewhouse Specials. We continue to sell a lot of a lot of our higher-end items, like our prime rib, as well as our rib eye, and alcohol incidents, and all those continue to, you know, do well for us, especially versus 2019. As we look through April, May, June, and into July, as we said earlier, April was a little choppy to begin with, and things got really consistent in May and June. First week of July was a little choppy, I think, just with the way July Fourth played, but as we got out of July Fourth timeframe, again, trends have been consistent. Tom, is there anything you want to add to that? Yeah, that's, that's a great summary. Just to build on the, the incident side, we, we continue to track just across our, our menu, how guests are, are using, using BJ's. We're really seeing very similar levels of, of, dessert attachment, appetizer attachment, drink attachment, and consistent levels, of what types of things that they're ordering. Yeah, we're, we're watching to see if we'll see any consumer pressure leading to trade down or even increased usage of our things like Daily Brewhouse Specials and Happy Hour and all of that, it, it still seems very balanced. What we're seeing now is more seasonality driven than, than anything else, which is, great. That's very helpful. As a follow-up, when we kind of deconstruct that 4.7% same-store sales result for the quarter, can you talk about price that is embedded there, any sort of other mix or traffic components as well? Then, as we think about just the back half of the year, what does that pricing look like? Is there anything planned, and if not, kind of how would that, how would that pricing component flow, as we get into 3Q and 4Q? Sure. The, for the, for the quarter, the pricing was pretty similar to check and kind of the high single digits in that 7%-8% range. We're exiting closer to that, you know. I think going into Q3, we'll start to lap over a 2% round in August last year. Pricing will come down a little bit going into Q3. That was embedded in the Q3 estimates there. Traffic was down in the low single digits. A little bit better on the dining room side. Yeah, overall, that's about how it worked between the pieces. Great. Then last one for me, as we think about the opportunity around the remodels, exciting to hear that things are progressing. You found some opportunities there to kick that up a little bit. How are you thinking about that? Maybe how is have the units to date flowed in terms of those various, you know, styles or approaches to the remodels? You've got everything from, you know, bar statements to upgraded seating to lighting. There's definitely a, a portfolio or a spectrum of options there. How are you thinking about that? As we think about the kind of incremental upside there in terms of number of remodels, how would you describe kind of the portfolio and how it's shaping up? Yeah, good question, Josh. I think the thing that we've seen out of the remodels is when we spend, or we take the time to redo the bar, you really get- We are having technical difficulties. We will resume in just a moment. Once again, we are having technical difficulties, and we'll begin again in just a moment. ... I'm gonna, I'm gonna take the assumption that we're back on, Josh, and let me answer your question. Josh, are you there? Great. I, I am here. All right. Sorry about that. We'll sort of the technical difficulties. What we found in the remodels is redoing the bar gets that pop to our guests, and it actually energizes our team members as well. As we've been going through the remodels, we've been trying to push more for the bar remodel, which does cost more. The bar remodel, we've said, can be anywhere from, you know, $400,000-$500,000 up to $700,000, but we end up getting a higher weekly sales average increase and obviously a higher profit from it, and it ends up driving still what we consider to be some good ROIs in the mid- to 20%, mid-teens to up to the 20% range. As we continue to work through this, we'll continue with bar and booth remodels, as we call it, adding the expanded capacity and some other remodels. We're trying to concentrate on getting that bar updated and refreshed for our team, for our guests. That's helpful. M aybe just as a follow-up there, as we think about that being maybe the highest priority or highest, you know, return opportunity, how much of the of the current remodels have had the bar, you know, refurbed? Or what does that ultimate opportunity look like as you think about all the stores out there that could receive a remodel? You know, the bars are right now a little bit on the last. We've done a lot more of the bar and booth, and we're going back and doing some of the bars in there. We've expanded the bar movement into or the bar refreshes really into the second half this year. Greg Lynds, Chief Development Officer, who's leading this initiative, might have more on how many you think we can get in total, Greg? Well, I think next year we're thinking about the similar number overall, and the ones where this year, where we didn't do the bar remodel, we'll, we'll, we'll, we'll go back and just, just come back and do a bar remodel. I, I mean, I don't have that number in front of me, Greg, but I, I would say, you know, 70% still, we, we could probably upgrade our bars, at, you know, over time. Yeah. There's, I mean, think about the 130-inch plasma that we're-- or the 130-inch TV that we're putting in there. That is not in any of our restaurants. You take out the, what we've been building the last couple of years, you've-- we've got probably a good 150 or 160 restaurants that we can do this to. Got it. That's very helpful. I'll hop back in the queue. Thank you. Thank you. Our next question is from Alex Slagle with Jefferies. Please proceed. Hey, thanks. Congrats on the progress. I wanted to ask on the restaurant-level margins and just to the degree you're seeing, you know, the slightly stronger comp trends and the new stores opening well and, and now exceeding your previous expectations on the productivity, cost reductions. It, I mean, it sounds like, you know, you're still looking for restaurant-level margins to exit the year in that low to mid-teens range, like you previously talked about. Y ou know, would think that trajectory maybe move a little bit higher and, just kind of wondering what some of the other drivers there that we need to think about in terms of just pricing, commodity inflation trends, that they might be offsetting that, to some degree, or just the pushes and pulls behind where that goes. Yeah, great question, Alex. You know, as I said, there's still a lot of wood to chop here to continue to move the margins up. Our, our big wild card really continues to be where the beef costs are gonna be. We start to look at it going into the second half of this year. We're expecting a little bit more commodity inflation, even though we're working on some additional initiatives around the commodity side. I think that's gonna be our, our biggest challenge from that perspective. As Tom mentioned on his formal remarks, we do have some pricing rolling off, and we'll, you know, look and determine what's the right amount of pricing to go into the second half of this year to offset some of those inflationary pressures. Then we continue to work through other initiatives around labor productivity. Some of it we've talked about before, like using AI to help us sales forecast and therefore write a more accurate schedule, which should deliver both labor productivity improvements, but also better, efficient, better guests, better taking care of the guests because we'll have the right people on at the right time. Now that we've just rolled out our smaller menu, we're continuing to work through that and optimize the labor on that smaller menu, and that'll take a little bit of time. As much as we removed that menu, let's call it July 1st, we haven't seen any changes from our guests from that smaller menu, which is the reason we tested over the last year. We still have to continue to adjust schedules down a little bit based on how this new menu is rolling out, and that should give us additional efficiencies as well. I think as we, you know, mentioned it in our, the remarks here, as a result, you know, we feel very good about the momentum in our business and the optimism to getting to where we want to go from our margins in regards to kind of low to mid-teens exiting this year and then growing margins into next year. It's helpful. To clarify on G&A, I guess it's stepped up a little bit from Q1, or maybe you're now tracking more towards the midpoint of the range versus lower end of the range. Is that the right way to think about it? Yeah, Alex, we called out the deferred compensation expense because that did, you know, just with the market going up, we see that run higher, which pushes G&A up. That's, that's probably fair. There, there is an element that's just market driven, that, that could move it up or down in, in the second half. Yeah, we gave up some of the favorability based on, you know, this non-cash item that, that reverses out further down in the P&L. Yeah, that's, you know, we're still targeting at least the midpoint, if, if could potentially get it lower. Yeah, I think the midpoint's a, a good place to, to model. Okay, then just a final one on the traffic and weather impacts, if you're seeing anything kind of from the heat waves and smoke from Canadian wildfires, anything like that impacting your business from what you can tell? I can't really tell. I mean, the trends have been just really pretty consistent, throughout our, throughout our business and throughout different, markets. We're not seeing any major changes one weekend or the other based on, you know, the, I guess, weather conditions. Awesome. Thanks. Thank you. Our, our next question is from Brian Bittner with Oppenheimer and Company. Please proceed. Thanks. This is Michael Tamas on for Brian. You know, in the Q2, your same-store sales were kind of where you guided to, your restaurant margins of 14.5% were well above the low to mid 13% range that, that you guided to. The first question is, you know, what were the positive surprises relative to what you were thinking internally for Q2 at that time? Was there anything timing related there, or how sustainable do you feel some of these movements are? Thanks. Mike, it's Greg Levin. A big part of the increase in margins was really on the labor line, and I got to give my hats off to Chris Pinsak, our Chief Restaurant Operations Officer, and our Vice President of Operations, and really the entire restaurant management team. As we kind of mentioned in the call, the tenure in our management team, working through the challenges of rehiring people back and then driving the efficiencies or managing the efficiencies as we, as we increased our weekly sales average week to week, year from last year, really improved. Ultimately, our, our restaurant level, or our-- since our restaurant, our, our overall labor, I think, came in at a 36.2, and last year it was like a 36 or a 35.9. When I start to think about that labor line, it's gotten really, really close to where we were in 2019. Again, that's a hats off to the operators. They, they did a really nice job in regards to driving efficiencies within our business. I'll let Tom talk through anything on cost of sales or operating occupancy. Yeah, you know, we've also mentioned on the food cost, you know, we are getting some nice benefits from the, the margin improvement initiative, but also the, the market has, you know, was, was a little better than, than we were expecting. There was some areas that we saw some deflation across the, the menu, even from Q1 into Q2, that we weren't expecting. Things like our, prime rib, salmon, ribs, we, we saw some modest upside, as well as cheese. We saw it go the other direction on things like tri-tip and ground chuck, but there was there was definitely areas that we saw some modest improvement there, too, that were, were above and beyond just what we were, gathering from our margin improvement initiatives. Yeah, to Greg's point, the labor side really helped when we could get these big sales weeks and get some great leverage off of them while driving those top sales. Yeah, across the food cost as well, it's it was better than expected there as well. Yep. Thanks for that. You know, in the release, in your prepared remarks, you, you talked about getting past a $25 million in cost savings. You, you also highlighted some additional cost savings that you're now attacking. You know, what are those new areas, and can you put any guardrails around, you know, either timing or dollar amount for us? Thanks. Yeah, I don't know if they're necessarily new areas in, in the sense that we're always going after the commodity basket, we're always going after labor, and we're always going after operating occupancy costs. As we've mentioned before, supply chains have normalized. We've been able to find additional opportunities to work with vendors to take on additional items or different products for us. That has helped to come in at a lower cost that have not run through our system yet, hopefully we'll get, we'll get these in, in Q3 or Q4. I mentioned earlier, in regards to the new menu that we just rolled out with 15% less menu items, that should help us going into the back half of the year as we get our sea legs under us in regards to those menu items, what the new par levels will be, and so forth. On top of that, I also mentioned some artificial intelligence in regards to helping us labor schedule. Then, in the operating occupancy side, we're just being able to go out and bid things like takeout containers, things we use for to-go containers as well, looking at the way we do some of the facilities work and so forth. It's a lot of small rocks that we're moving, or as I said earlier, a lot of wood that needs to be chopped. There's nothing that I would say is huge dollar savings. It's a bunch of little things that we just have to continue to execute and be disciplined against. Thanks. Then, just one quick follow-up. I think, you know, originally expected inflation, commodity inflation to be like in the mid-single-digit range. Is that still fair, or, or is there anything that has changed on that front? Thank you. For the full year, I'm sorry. Sure. It's probably a little lighter than that now. It's probably more in the kind of low to mid single digits, so it's we still are expecting some inflation in the back half of the year, especially around beef and the different items we sell there. To Greg's point, we're still going against a lot of these ideas of ways to bring the cost down. You know, we definitely, you know, even looking into Q3, we've seen some items stepping up as we went into the year, but we've also negotiated and got some lower rates elsewhere. You know, there's reasons for optimism, but yeah, it's, you know, still where we came in for the year, it's modestly better, but we are still expecting inflation going into the back half year. Thank you. Thank you. Our next question is from Andrew Wolf with CL King. Please proceed. Thank you. Good afternoon. On the sales side, I just wanted to focus on, on the traffic trends, kind of in the context of you all expressing, you know, it's been consistent most of the, you know, the quarter and into the current quarter. I just wanted to basically ask you that, you know, if you take out the low of the July 4th week and probably the high traffic, I guess, Mother's Day week, you know, has it been pretty close to that kind of low single, negative, low single-digit traffic trend? Is that sort of what your expectation for this quarter is, too? Yeah. You kinda summed it up, Andrew. I would say, as we talked about, that April was a little choppy. I don't know if it was the shifting of spring breaks and Easter tax returns, but as we exited April and we got into May and June, our traffic trends frankly improved a little bit. Still negative, low single digits per se. Again, take out the first week of July fourth and look at the last, let's call it two weeks here in July. It's again, kind of lowish single digits. You know, it's flattened out a little bit here and there, but we're kind of expecting, it's been, as I said, kinda consistent, low single digits, negative. Got it. Thank you. O n the, you know, the some of the sequential deflation and just the lower expectations for, you know, food cost inflation, could you give us sort of your thinking? I know you at least last reported you were about one-third forward, you know, bought. I guess you were expecting the market to be friendlier, and it, and it has been. Is that still the case? Are you still, you know, kind of a below normal forward bought position, or are you starting to enter into some more forward contracts as you see some more potential for some more inflation? Or do you expect it to continue to slow and, and deflate in certain categories? It's a great question. There are a couple of items that I'm thinking of that we probably will be entering into some, you know, more contracted positions than, than we have recently. It, it has worked out for us. I think the going into the year, the, the risk reward on, on where the markets were and what you had to pay to lock, it's, it's worked out. We've seen some, some items move in the right direction, but it, it does seem like that, that shift there is a shift happening, at least in some markets, where we can lock in things now at, at some attractive rates or ways to get some, you know, take some of the, the risk off the table. Yes, I, you know, percentage-wise, I, I don't have that for you, but I, I would say just more conceptually, there are a couple of areas that we are circling that we think that it, it does make some sense to, to enter into some contracts. Okay. Because I think last quarter you said some of the, you know, the, the premium or whatever you wanna call it, the, the premium your vendors were asking was just too much. It sounds like they're seeing things normalize and lowering their, their risk premium to, to lock in longer term. Is that right? I think it's some of that, and it's some of just more supplies coming to market. When, in the past, where there might have only been one or two s uppliers to talk to, now there's more. More competition is better for, for us and other restaurants. I, I think it's some of what, what you said and just some of just, a little more balance in, in the market, where we can, you know, be more creative and work with our, our great partners to, to find win-win scenarios for, for both of us. I think when, when there's more competition, it just, you know, makes sure there's the, the right type of balance there. Got it. If I can ask just a, a follow-up on the labor question or the labor area, I should say. You know, labor was up to... With the benefits, was up, I think, 2.8% year-over-year, obviously leveraged up to sales. Can you kind of maybe unpack that a little between, you know, what was the, the rate of wage inflation versus what was the, you know, the partial offset, I would imagine? Well, from, from, you know, the, the better you call it, efficiencies or productivity. You know, you're, you're being able to do more with the amount of labor hours that you have. In other words, I would assume the wage rate inflation would be higher than that figure, and there'd be an offset from improved productivity. What does that mean going forward? I assume, you know, if you keep the productivity, can you increase that as, as wages inflation stays the same or even goes down? Just some flavor for that. Yeah, in terms of the inflation on the hourly side, it was in the 4%-5% range. Pretty similar or even a little bit less than it was in Q1. Right in line with expectations there. Yeah, that's right. We did get the benefit of the efficiencies on top of then this, you know, what we're paying on the hourly, on the hourly front. Can you comment on how you, you see things evolving in the back half? Pretty much the same, or you think there's room for improvement on either the wage inflation side or the productivity side? Well, I, I think, Andrew, as I, I mentioned before, we are expecting to get improved productivity in the restaurants because we have 15% less menu items. As we look at our current menu items and make sure that our new menu is focused on our guests and what our guests want, we should be able to continue to drive sales, but then we would have less prep hours because certain items we're no longer prepping. That would in, in, be another step of improved productivity. Now, that being said, as you look through it, we just came off our highest weekly sales average. We start to think about it as purely as a percentage of sales. We're not expecting Q3's weekly sales average to be nearly what it was in, in Q2, at 124,000, and even Q4, where weekly sales averages go back up, it's still not as high as Q2's numbers. That's gonna play a little bit into the percentage side. Generally speaking, we would expect to continue to see, I think, mid-single digit labor inflation. Labor is still challenging out there as much as it's normalized. Everybody still wants to get and hire good team members. We want to hire hard and manage easy by bringing in the right people, within, within BJ's from that perspective. That's still gonna be kind of that low to mid-single digit labor side of it. We've got to continue to do our job to drive efficiencies with this new menu, less items to continue to drive overall good labor percentage in our business. Great. Thank you. You're welcome. Our next question is from Jeffrey Bernstein with Barclays. Please proceed. Great, thank you. Just following up on a couple of the points mentioned earlier. The menu pricing, I think you said high single digit, or I think you said 7%-8% for the Q2, which was similar to the average check, which I guess is seemingly encouraging, that there hasn't been any consumer pushback or much negative mix. I think you mentioned you're lapping a couple of points in August. I'm just wondering what your thought process is as you think about going beyond August, whether you're comfortable to, or the thought process of fully replacing that, or maybe not keen to remain at that level as the food at home cost eases. I'm just wondering, it seems like peers are talking about maybe taking a little bit less price going forward, but just wondering your thoughts, especially as inflation prevails. Yeah, Jeff, it's a really good question. We're always trying to make sure that we provide the right amount of value and balance on our menu. While we continue to look at it and haven't determined the exact amount of pricing quite yet, we'll look at certain areas where maybe we have the ability to take pricing up. It could be something around some of the Daily Brewhouse Specials, where we're giving some really great value at an unbelievable price point because they include starters and desserts and so forth. That is just, frankly, a great discount comparative if you're gonna piece them individually. We'll also continue to look at how that barbell and the good, better, best strategy lines up. We will, you know, look at another round of pricing. We want to make sure we're doing on things that are unique and differentiated to BJ's, that also sit in a position where they're not necessarily known value items that you're competing on from a commodity standpoint. Thankfully, you know, we have a lot of unique and differentiated items, and we also, at the same time, which I think is really important, and it gets missed at times, is we're investing back into our restaurant. We've talked about the fact that people are coming to BJ's for a social dining experience, and price point and value are so important, but we're not necessarily competing on the pop-in guest that is just looking for a burger versus a burger. We want to continue to evolve that, and that will, you know, be some of that pricing. At the same time, we continue to look at certain menu items that we put on that are uniquely differentiated for us and have a little bit more, what we call the Brewhouse Theater, that brew, that Brewhouse fabulous, that allow us to have some pricing, and we can move the guests around on our on our average check. Long-winded answer, there will be additional pricing. Don't know if it's going to be exactly where it is there. I think we also have some other areas that we've been very cautious on that can give us a little bit more ability to take pricing that's not necessarily directly on the menu, but comes to things like our Daily Brewhouse Specials, lunch specials, and so forth. Understood. Clearly, it's, it's encouraging that you're not seeing any change in consumer behavior thus far. Just wondering, if you were to see any kind of slowdown, you know, the levers that you'd be comfortable to pull, whether it would be to ramp up advertising or again, bump up the discounting or maybe there's further cost cuts. Like, how do you think about that in a slowdown? Obviously, we've gone through slowdowns before. I'm assuming you have some learnings on that front, but just wondering what you would consider to do versus what you'd avoid doing if and when we were to see a slowdown in the back half of the year. Thank you. Yeah, again, another good question, Jeff, and I. Well, we haven't necessarily gone to this playbook yet. We do know that in the past, pushing things around our lunch specials, pushing things around the Daily Brewhouse Specials that I just talked about, generally have been great place from a value perspective, that have been able to drive guests into our restaurants when it's been more challenging times. Both when I think back to the Great Recession, lunch specials worked really well for us. We also introduced snacks and small bites. Small bites. We introduced kind of lower-priced appetizers that have worked well for us to allow guests to kind of splurge without spending a lot. We still have those aspects on our menu, so we can lean into that side of it. At the same time, we've, we've always been saying this as well, it's really important that we continue to invest into our restaurants and into our people, because during challenging times, guests want to go out for better. What we're trying to do is make sure we're positioning BJ's as a better alternative, and not, not an alternative that's gonna just compete on the lowest price point that's out there. Again, as we continue to think about how to play, how to play to our strengths and play to the guests that come to BJ's, we wanna have great price points. We wanna have that good, better, best that we've been continuing to evolve, but we also wanna make sure that that's being matched with the gracious hospitality, gold standard level of service, and frankly, the remodels, so that you're going out to a place that's got energy, ambiance, and it becomes that dining experience. Understood. Lastly, just because you mentioned the, you know, the ideal scenario of getting back to the high teens restaurant margin, obviously, there's lots of, I think you said, wood to chop. Just wondering, I mean, from a realistic perspective, I mean, the range of stores that you have that are already achieving this, I mean, is it a, a target you think you can achieve across the system in the short to medium term? I mean, maybe you already have some stores that are doing well above that, and there's some commonalities there that you'd like to apply to the rest of the system. Just trying to get a sense for the, the opportunity to really get back to that high teens level, what gives you the confidence you can achieve that over time? Thank you. Yeah, look, we, we've got strong beliefs and optimism in our ability to get there. One is we're seeing great momentum in our business. Consistently, you know, month to month right now, the things we're doing inside our restaurants, as I just mentioned, around the remodels, taking our menu and being more focused on who the BJ's guest is, so we're giving them the right things, but that also drives efficiency 'cause it's less items to produce. Then right now, we have seen less inflation, and that less inflation allows us to adjust our numbers up. When we think about over the last several years for the BJ's concept, specifically, being a little bit concentrated in California, that was taking the dollar minimum wage increase through some of the challenging times going through COVID, hurt our restaurants and hit our restaurants pretty hard, as well as the fact that we had a very large menu and complex menu. We continue to work through that to concentrate on our core, California is now more CPI tied, it's given us the ability to kind of manage against the inflation side of it. Then, as Tom talked earlier, just the normalization of supply chain has allowed us to be able to go out to bid on certain products that we couldn't a year ago. You've heard us talk about the wing story many times before. Well, the wing story came because we couldn't get wings. It just didn't exist a year ago. If we were probably in this same environment today, we might not have made the move on wings that we have done. That saved us a lot of, saved us a lot of money and made a better product for us because we would have been able to get supplies at a lower cost. We've taken that same mindset, though, and, and started to ask ourselves, "What else can we do internally that's different to save us, money and drive up our margins?" That's a lot of where the new menu is coming from. I guess, it's, again, it's based on consumer research of who our guest is, but then we continue to look at how can we do something a little bit differently that we weren't doing before that allows us to drive improved margin and frankly, have an improved product. Great. Thank you. You're welcome. Our next question is from Mary Hodes with Baird. Please proceed. Good afternoon. Thanks for taking the question. On the traffic, you're running down low single digits, I guess, can you talk a little bit about how you're thinking about traffic-driving initiatives in the current environment? Are there any internal initiatives other than maybe ramping up the focus on Brewhouse Specials that you're excited about for the second half of the year? Well, I think the big one we've talked about is remodels. Remodels have tended to drive improved traffic into our restaurants. Remodels is one that's a that's a pure traffic driver for us in, in, inside the restaurants. We also continue to work on our on our loyalty program and doing updates on our loyalty program through our customer relationship management. I think as we go into next year, we'll end up with some changes to the mystery program-- or mystery program, to our to our loyalty program, so a mystery shopper program. The other one, which we continue to work on, is still building back that late-night business. We've talked about on, on prior calls, adding the additional half hour back in there and driving the late-night business, which is a guest traffic part of our driving business as well. The other area, which has been a big surprise for us, we haven't talked about a lot this year, has been catering. Catering has been driving a lot of traffic for us in the off-premise side of our business and helping continue to keep consistent off-premise sales numbers in, you know, in that $21,000-$22,000 range. Great. Thank you for that. On the remodels, would you be willing to dimensionalize the sales lift you've seen for those that have been completed to date? Yeah, we, we've talked about that sales lifts go from anywhere from $1,500+. If we just were doing kind of a Brewhouse remodel or a, I say a Brewhouse remodel, a bar and booth remodel, where we add the capacity. As we expand that and do bar remodels and some of the others, we'll see obviously that $1,500 number come up even higher, so that we're seeing, you know, high teens, trying to target around 20% cash on cash returns on that. Great. Thank you so much. You're welcome. Our next question is from Todd Brooks with The Benchmark Company. Please proceed. Hey, thanks for squeezing me in. Congrats on the margin progress in the quarter. Wanted to follow up on some of the earlier restaurant-level operating margin discussion. Obviously, over-indexed performance-wise in Q2. Forward commodity outlook, I know you mentioned maybe being worried about beef, but the full year, you're bringing it kinda down to low single to mid-single. You're exceeding your cost save goals on the $25 million. I guess, and I think Alex asked about this earlier, that, that low-to-mid teens type of target, I guess, what, what keeps us from hitting the mid-teens relative to the setup right now on the cost side as we're exiting the year? Well, Todd, the business is always predicated on driving top-line sales. Our formal remarks, and we've always talked about it on this call, is about sales-driving initiatives and cost savings initiatives. We're not gonna get to our margins, nor will any company get to their margins if they're not paying attention to top-line sales and driving top-line sales. When you think about the back half of the year, we have to have the viewpoint that the consumer is gonna hold up. It looks like based on, you know, GDP numbers and so forth, that have come out, that the consumer continues to be in a, in a good position. Then I think the biggest challenge for us, separately, would probably be around commodities. We've seen a shift in the consumer that's really much more kind of into maybe the red meats and indulgent menu items. Those are areas that we aren't as locked. That would be a little bit of a hit on, on commodities. I think those are the, the two bigger areas for us within our business. I, I think our teams have done an outstanding job on labor. I'm really excited about the, the smaller menu to help us there. Some of the AI forecasting so forth, to maintain our labor standards and our labor efficiencies to take care of our guests and deliver gracious hospitality. I, I like that aspect of it. I really think it comes down to the commodity side. It's the consumer side, because you got to drive the top-line sales. We're always doing our, our best to manage operating occupancy costs. I'd probably tell you right now, if you haven't thought about it, we're running pretty high energy bills right now with the, with the air conditioning being used because of the heat out there. That puts a lot of strain on our air conditioning units, puts a lot of strain on the equipment in our restaurants that we use to cool down things and keep things temped. That's an area that I know our facilities team looks at every day. I know our restaurant managers are looking at every day, and our vice president of operations are looking at that every day. I think that's a short-term challenge for us from a just a utility standpoint and the heat that's going on there. We, we see the same thing in winter months with cold weather and, and gas usage and so forth. Taking those out of it, it's really, I think, where commodities go and where the consumer goes. That's great. Then just following up on that, Greg, if you look at where things seem to be tracking for this year, you're probably looking at 200 basis points of improvement in restaurant level margins. As you roll to 2024, and you think about all the work that you've done on the cost side, how does, how does the next step function look as far as the operating margin recovery? I know it's top line dependent, certainly, but there are improvements that you've made as well. Just kind of walk us through maybe what you're looking at as the slope based on some of the early wins that you've had and the, the upside that you saw in the Q2 here for restaurant level margin recovery in 2024. Well, I, I think it kind of continues to move up in that regards to where the consistency of mid-teens is there for next year versus kind of the bouncing up and down that we've seen now, right? We started in the 12s and moved to the 14s. It's gonna go down because of weekly sales average, then move back up. Where I'd like to see us as an organization move to next year, and we continue to work on that, is while we'll have those ups and downs, but those ups and downs will, will the floor on all those ups and downs will be at least a teen number, if not, you know, and then moving up, versus now being in, in the 12% range. I don't wanna be there next year. I think that's where we continue to move it forward, and I think we've got things in there from a productivity initiative, as we talked about on labor, getting some other things coming through on the operating occupancy that will continue to bring those numbers down, and then we'll be able to offset that with, with better commodities going forward. If you think about our business and where we used to be, I, I, we still need to move labor, or not labor, I'm sorry. We need to move cost of sales really into the mid-25s, and that should be more of a consistent number for next year. There's an additional 50 bips that we've got to go after. I think you start to move those things in there into the numbers. It starts to move us more towards a low teen in the, in the slower quarters and more in the mid to upper teens in the other quarters. That's perfect. Thank you. One follow-up for or separate question for Tom. Tom, you kind of implied with the August pricing rolling off to think about 6%, for the third quarter before any other pricing actions with upcoming menus. Where, where do we stand on the test of the third-party delivery pricing? I know that BJ's has been one of the few that had not taken a menu pricing premium. I think you were testing a couple different tiers. I guess, where does that stand, and how should we factor that into pricing across Q3 and Q4? Thanks. Sure. Just to be clear on the, the overall pricing, the, the 2% rolls off in August, so it's not purely the, the entire quarter that, that will be at that kind of 6%. I, I think we'll still be more in that, call it 7% or so level in- into Q3 as, as we carry pricing forward. Yeah, we, we continue to test in, in terms of the, the third-party delivery pricing. I know we're one of the, the last in casual dining that hasn't taken that price yet. So we'll, we'll update once, once we have something to new to report there. Tests, I, I would say are, are going well. Does anything roll off after the August price increase, or should the 7% carry through Q4 as well? The, as, as Greg mentioned, we do have another menu print that's happening at the end of September. Nothing else from last year that'll roll off. It's just a question of exactly what we end up doing for our late September pricing or, or menu that could have some more pricing in it. Okay, great. Thanks to you both. Thank you. Our final question is from Nick Setyan with Wedbush Securities. Please proceed. Thank you. You know, I hate to belabor this point, but do we exit Q4 with costs under 26%? Nick, well, we got under 26% in Q2. I hope we get there, and I hate to use the word hope. We've got plans in place, I guess, to look at other items in regards to commodities, as Tom's talked about before on today's call, where we're looking at many different things that we have input in into commodities, into, like, soup sauces, dressings, some of the other things we're doing and trying to see if we can get other vendors to help us here, work with vendors from a commodities market perspective and continue to work that side of it. The real wild card is, I think, beef. Honestly, I want to say, you know, like, rib eye steaks are now one of our number one selling items for BJ's, and it's something that's changed really coming out of, coming out of COVID. That product, you know, we don't have locked, so we see a little same thing with our prime rib. Our prime rib weekends are huge. Again, that, that's a product that floats on the market. When we think about cost of sales and where it is, a lot of that's dependent on some of the market dynamics in regards to commodities. As I mentioned earlier, even, even to Todd, you know, our goal, as you just kind of mentioned, is we would, we would like to get cost of sales to be really in the mid-25s. While we're happy at 25.9 in Q2, the next step is to move that down to the mid-20s, and that's why we're working with our suppliers. We have some great suppliers that are helping us try and think through this, that we can figure out ways to bring that down, that provides the same quality and differentiation that, that we do at BJ's. We've mentioned many times on this call of things that we have just said no to. You know, we're not using frozen salmon. We're sticking and staying with our fresh salmon. Like, those things make a difference for us and what we're trying to do as a differentiated concept out there, that's focused on what our guests want and what our consumers want. We heard loud and clear from our consumers that we provide a better quality dining experience, and that comes with better quality products. We're gonna continue to do that in the right way to move our margins in the right direction. That's very helpful. On labor, you know, with all the productivity, et cetera, year-over-year, the seasonality is pretty much the same, but, like, why can't we see the similar amount of leverage year-over-year in Q3? I think year-over-year, we'll see decent leverage there. It's really that weekly sales average, and then you lose the ability to leverage your fixed costs and labor. You're gonna not be able to leverage manager labor, that's why you won't see that as much versus Q2. You're not gonna leverage your hospitality desk as much as you do in Q2. Yeah, I'll, I'll give a little more background, too. When, when we launched our margin improvement initiative in Q3 of last year, we, we did make some changes to our labor table starting then. We're gonna start lapping some of those efficiencies we put into place. We've done more since then, but it, it won't, when you think about Q2, year-over-year versus Q3, year-over-year, we, we will start going over some of those efficiencies that we, we implemented last year as well. Got it. Thank you very much. We have reached the end of our question and answer session. We will close the conference. We want to thank everybody for their participation and to have a great day. Thank you. Thanks, everybody.