Huntington Beach, California. We have Lyle Tick, President and CEO of BJ's Restaurants, and Todd Wilson, EVP and CFO. They are both to my right. By way of background, for those not familiar, BJ's is a casual dining chain with roughly 220 U.S. company-owned and operated restaurants. They are currently in the midst of a very successful strategic reset, prioritizing operational excellence and restaurant economics to pave the way for a disciplined return to unit growth starting next year and the years beyond. We are excited to have BJ's management with us. An esteemed board member of theirs in our audience as well. We want to thank everyone for joining us in the room and on the webcast. I will kick it off with some broader questions for BJ's, but thank you very much. There you go. Gentlemen. Morning. Great. How are you? Good. Good. I had a couple of bigger picture industry questions. Sure. Then dive more specific into BJ's. Sure. I am guessing this will be a question you will enjoy because we have always asked about the health of the consumer, but it seems like your results of late would demonstrate your consumer is feeling okay. I am wondering if you could talk a little bit about how you think about the consumer more broadly, whether there has been any change in trend related to age or income or ethnicity, or whether your turnaround is just capturing, you think, lots of things simultaneously. Sure. Yeah, speaking from the BJ's perspective, specifically in what we see, from our consumer perspective, we are not seeing a lot of stress in the consumer, right? We continue to see strong traffic-driven growth. We continue to see it across age and income cohort, across geographies, across day parts. Now again across channels. Dine-in throughout this whole thing has been very, very strong. Off-premise as well now. So, we are not seeing a lot of stress. If I take a step back and hypothesize, I think the way I look at it is I see a couple of things going on. When you look at all of the data out there, you have to assume that the consumer is under some level of stress. I look at kind of two things. One is what I call durable and disposable transactions. I think we compete for what are pretty durable transactions. So we call it the social splurge space. Whether it is the weekly, couple of times a month, I am going out with friends, I am going out with family. It is an experience-based thing. I think people protect those things. I think the disposable transactions maybe tend to be more of my during the week quick lunch that I am going to grab or a quick dinner on the way home during lunch, before or after practice, one of those types of things. I think you are willing to kind of give up on some of those things and make your lunch or eat at home, to protect those kind of social occasions. That is where we compete, that is where we do well. I think that is potentially a dynamic why we are doing well. You look at the fact that we're not alone in doing well, right? You see there's a number of our contemporaries who are doing well right now as well. You look, then you get into the full service category. I think this is where you start to see the spread of winners and losers. I think, in a time like this, where consumers, when they're giving a transaction, they want to make sure it's a great exchange. I think the folks that are winning are the folks that are investing in their value proposition holistically, right? Their product, their service, their atmosphere, and making sure they have a place where their team members and their guests want to be. Those folks are winning more. I think thankfully over the past couple of years, we've made pretty significant progress across all those areas. No, that's great. You mentioned some food at home on occasion, and being that we're sitting in the same building with a lot of my staples peers, I'll keep this quiet, but I've always said that I think food away from home is taking share from food at home. Do you believe that the most recent push of restaurant value is a driver of that? How do you believe your brand is positioned in terms of the battle versus food at home? Because you mentioned some people might just eat at home during the week, so maybe you feel it on the week, but you make it up on the weekend or. Well, so I think when I'm making that distinction, to me, again, it goes back to kind of the disposable or the durable transactions, right? I'm not sure that for that kind of couple of times a week when I'm getting together with friends and family and I want to have that social occasion, that I'm really competing so much with food at home. But I do think that if you think about, am I going to get a fast food lunch during the week or do that at dinner to just fill a convenience occasion. That's where that choice might be coming into play more so I can protect that social occasion. So that's kind of how I see it. Yeah. Whether it's in meetings earlier today or in recent months, I'm just wondering, you're relatively new to the seat, although maybe not so much anymore. What questions do you get most from investors that surprise you, or questions you don't get that you're wondering why people aren't asking because it's something that you're excited about that maybe that's more beneath the surface? On the surprise me, and I don't know if it surprises me anymore, but I think folks want to compartmentalize the success that we've had or in general into what's the one thing. Either what's the one thing that did it, or what's the one thing that you're excited about? From my perspective, it just doesn't work that way. It's not one thing. This has been a combination of things that have ultimately improved our business over the past two years and I think set the foundation for future growth. For me, it's the operational improvements we've made, which we see come through in guest and team member metrics, then followed by unlocking the power of the Pizookie, building an everyday value platform, improving our product, starting with the pizza, obviously moving through burgers and chicken sandwiches, putting a fair bit of money back into our facilities, and driving our remodel program. To me, it goes back to that investing in the full value proposition, and I feel like folks want to compartmentalize it into what's the one thing, and there just isn't a one thing. Also, I think the other thing is, as I look at our business, sorry, last quarter, right? We had obviously great growth. Our operators did an awesome job, I think, running the restaurants and getting labor leverage. We had 70 bits of cost of sales headwinds, which that's going to happen over time, right? In the big picture, I think we did a great job of running great restaurants, and it's a question of, oh, are we still growing profit or not? I guess I take, again, a bigger picture view, which is over the past couple of years, we've put on $500,000 of AUV, about $220,000 of restaurant-level cash flow, expanded margins 240 basis points. We're still running restaurants and leveraging those sales when you look at the operations we control, right? I feel really great about our business and where it's going, but you get the we want you to be building a long-term better business, and then it's but what happened this quarter? I think we try and be really focused on building a better business over time. Hey, Jeff, I'll tip in with one if I could. Please. In the what questions kind of I don't know if surprise is the right word, but sometimes to Lyle's point on the improvement in the unit economics over the past few years, we'll get questions on what do we need to see to really get the new unit pipeline moving. I'd say we've really already seen it, right? We've talked about opening up to two restaurants this year, but we are very active out looking for new sites. We're signing leases. We're negotiating with landlords. The proof points really are over the last eight quarters of same-store sales growth, traffic growth, dollar and margin expansion, that we're building the pipeline. Just takes some time when you're talking 12 to 24-month lead times. But we get that question a fair amount that hopefully that clarifies a little bit. Yep. Well, just to be able to summarize it the way you just did of the volumes, the margins, the cash flow that you've achieved in such a short period of time, the improvement there, that's incredible. So congratulations on that. Thank you. Is there any talk internally or at the store level about GLP-1s? I know that's just something that comes up a lot, and it feels like this is, having done this for a while, this is the most, I think, likely to take a bite out of food away from home and sustainability and whatnot. I have family members, and they're losing weight and eating out less. I'm sharing more with my wife instead of getting two entrees, and it just feels like it's in pill form, and it's cheaper. Do you have any reason to believe it's an area of concern up till now or going in the next few years? Yeah. We haven't seen it as yet. The funny thing I was talking to some of the team about the other day as we were doing one of the market tests that we're doing for some product stuff. We were testing some shareable sides, and it was the most decadent kind of over-the-top shareable side that way outperformed every other one. I remember hearing a Delta Air Lines chef talk about how he puts healthy things on the Delta Air Lines menu, and everybody gets the steak and the potatoes. I think what people say and what they do can be a little different. I do think our occasion, that social splurge occasion, is a little insulated. But the way I think about it more broadly is I do think that overall people are looking for real food that is fresh and made well for them. That is something we are definitely focused on as we think about the menu and the category work that we're doing. We do a lot of stuff from scratch right now. But as I think about evolving some of the categories, how we continue to focus on being scratch where it matters, fresh, real, made-for-you food that makes people feel good about the stuff they're putting in their body. I think over time, that's going to continue to be true as long as it's craveable. I haven't seen anything that has people choose something healthy that isn't craveable. It's got to be a craveable dish. Being that we are in September now, and presumably in the fall period, you spend a lot of time probably thinking about 2027. I do not know if there is one or two initiatives that you would say that is going to define us in 2027 is something or other, whether it is an AI thing that is worth mentioning or not. But what do you think is going to be the highlight going into next year? Look, at the core of our business is food and the product and the menu. We have made progress with pizza, burgers, chicken sandwiches. But I am really excited about the menu work that we have going into next year as we continue through the categories. The food and the menu will probably always be the thing that gets me most excited and will be a continual journey over time because that is who we are. We are a restaurant company, right? The other thing that I get really excited about, and Todd touched on it, is the work that we have been putting into our new prototype and just our new brand standards and how we express our brand is finally going to come to fruition as we end this year and go into next year and bring that to life and building proof of concept around that, which is going to manifest not only through the physical plant itself, but we are really looking at the total experience from menus and menu engineering and plateware and cutlery, and so it really touches our entire experience. I am really excited about standing up proof points of that next year, and I think that is going to be the foundation of a next chapter that we go into with BJ's as we look at how we dimensionalize the full growth story. As I think more specifically about each of the components of your business, so from a comp perspective, the most recent Pizookie, I think you said, doubled the incidence rate year-over-year, which is incredible, and to have 8% traffic, I think the most recent quarter, unbelievable. I guess therefore not surprising that there is a little bit of average check compression if you get people who are maybe getting a small portion or getting dessert instead of. Yeah. But the strategy for, I know you have an upcoming Pizookie launch. How do you think about converting that viral dessert traffic into higher margin entree sales to get back to average check growth going into next year? Yeah, I think there's a couple things. One is we know the people who come into us through the seasonal Pizookie, we see them again. So they don't come back and disappear on us. We see them, and they come back more often. And I think that goes all the way back to, I think, the first point about the levers that play together, which is we're bringing these people into a restaurant that the environment is better, the service is better, and therefore, as we bring new people in theory, some of those people are going to have a good time and become customers. So there's a flywheel there. I think, with the seasonal Pizookies, when those hit a nerve, you see what you saw in Q2, and what you see is they resonate really well with young people, like high school and college kids, right? And recruiting that next generation into our restaurant, I'll take every day of the week. But yeah, we see these things. We call them Pizookie trial checks. You'll see a bunch of appetizers, a bunch of Pizookies, and some drinks which aren't discounted checks, but from a dollar amount, are a lower total dollar check. But we're bringing tons of these folks through the door as we hit a nerve with these Pizookies. And so I feel really good about that overall flywheel. And the other thing that I feel really good about is as I look at our sales, our sales every day of the week, whether it's a Pizookie Meal Deal day or not, whether it's Pizookie Tuesday or not, whether it's a weekend day, are super consistent. So we don't have a lumpy business where we see during the week growing a lot, but not the weekends. We don't have the discount or just the Pizookie Tuesday when we're discounting the Pizookie. We see people coming in across every day of the week, across the weekends, and it's really consistent and even. Hey, just one piece I'd add there too, if I think about the mix that we've seen colored over the past year, people have gravitated to the areas of the menu that we've highlighted, right? They've gravitated to pizza that we reinvented back in the fall of last year, burgers to start this year, chicken sandwiches most recently. All of those things are beneficial to us within their category from a sales and margin perspective. We have seen that pull people out of some of our higher priced items, like our steaks and slow roast. We prioritize those things first for a reason, right? Pizza was our founding product, and that was first. But I think as you look forward, it gives us confidence that as we reinvent those future sections, we'll be able to push people back there to items that, one, they certainly enjoy and have higher satisfaction, and two, that have favorable business financials for us, right? It gives us confidence that we're able to drive mix as we highlight these different areas of the menu. Seemingly that's worked out well for you, not by design necessarily, but to focus first on things that are a little bit more value during a period where consumers probably appreciate that and maybe in a year or two when they're feeling a little bit better and you highlight the steak or the slow roast, you can get people to trade back up to that. Seemingly, that would be set up well. Maybe surprise outside of the smash burger, which is our entry point burger, our second most popular burger is our Wagyu Burger right at the top end. So people, they'll trade up and pay for something that is of quality, I suppose. Right. I do not want to take one data point and spread it too far, but I think you had mentioned that you reallocated the first quarter of this year's marketing funds into the second quarter. Yeah. It generated a 60 some odd percent increase in impressions during your celebration season. Yeah. How do you think about? It seems like marketing is a powerful tool for you, especially as you now re-accelerate unit growth. I think you are talking about maintaining full year marketing spend flat as a percentage of sales. How should we think about the back half of this year and going into next year as you think about the marketing dollars spent? Yeah. So, pure dollars, we'll spend more because we're growing. We're maintaining the percentage. We don't see a reason right now to increase the percentage as we have growth that flows more dollars, and we're able to continue to drive the marketing. We're getting smarter on our channel mix and our message mix, and how we drive that. We shifted out of Q1 into Q2, because we felt like we were going to get more bang for our buck during celebration season. Q1 has all of the weather that you can't control, and coming out of New Year's, which you can't control. So we felt it would be an advantageous reallocation of dollars, and it was. I think as you look through the balance of the year, you'll see, again, us spending the same percent, us spending more dollars, us optimizing those more towards social and word of mouth, more behind Pizookie and product, and then being very choiceful about broader media where we drive our value message. So, I think going forward, for me, it's about that intersection of the right channel and the right message at the right time is what we want to deliver. I think we continue to get smarter and optimize against that. But certainly a shift towards social and word of mouth has been clear in our business over the past couple of years. The fact that you recently overhauled pizza, burgers, and chicken. So what percentage of sales are those? Obviously, you start with the biggest buckets, but is that 75% of your menu? Well, it's not necessarily the biggest buckets, actually. Pizza was probably only about 6% or 7% of sales, but because it was our founding product. Now, 6% or 7% of sales, it touched like 20% of checks. So a lot of checks have pizza on it, but it was only about 6% - 7% of sales. But it's our founding product. I'm a brand guy, so I kind of start from, are we clear in our brand positioning? Are we clear in our consumer? Then is your foundation strong? So, being our founding product, and we had seen eroding guest satisfaction, we had seen an increase in comps, and we'd seen sales go down. So we had to get our founding product renovated. So we started with that. Burgers, handhelds, ballpark here, but I'd say between those three categories, I'd say 25% of our sales. It's a nice chunk, but one of the benefits I think of BJ's, right? We have a broad menu. That's one of our benefits. There's still plenty of runway ahead. Right. Over the next 12 months, Where do you see the biggest opportunities on the menu to make upgrades that could be meaningful to the overall business? Yeah, I think as I'm looking across the menu at the categories we haven't hit yet, I think steaks and slow roast is an area we're spending a lot of time on. Shareables and appetizers is an area that we're spending a lot of time on, which is core to us and touches a lot of checks. We also have work on the salad category going on, and we'll get to specialty entrees. We're going to touch every category of the menu over the next 12 - 18 months as we ultimately look to get to a menu that we feel like holistically is a more compelling offering. Got it. The traffic expansion was broad-based. I think you said across all quintiles, so that is encouraging. Including the stores that are already sitting at your top, your best AUV stores. The specific operational unlocks that are necessary for that, whether it is kitchen productivity or labor scheduling, how does the high volume restaurants at least accelerate traffic growth and essentially the learnings you then take to the bottom quintile? Yeah. It is interesting because I even think about Mother's Day, I think about Father's Day, and across all those restaurants, even though those are the biggest days of the year for even our heavy hitters, that we were growing traffic and we were growing sales. I think a lot of that, first of all, is credit due to our operators, right? The focus that Chris, our Chief Operating Officer, was driving through the teams during those periods is you got to be really, really clean on your shoulder periods. Like coming in and out of kind of your day parts so that we are not creating false waits, so that we are moving people through. Full hands in and out of the kitchen, never in an un-bus table for more than a couple of minutes. It is kind of the urgency and hustle, and hard work of working the restaurants. On top of that, we have talked about how about a third of our restaurants have this activity-based labor model, which is AI forecasted labor model. That helps us get the right people in the right place at the right time. That has told us that we need more people during our peak hours and less people in our non-peak hours to really drive through and optimize the volume that is coming through the restaurant. Then there is a lot of the smaller things, they may seem smaller, but it is what are the things that are getting in the way or making it longer from a team member entering something in, or how we are sequencing things on the KDS. Right? There is a kind of constant feedback loop with our GMs, with our executive kitchen managers as we are optimizing how things come from the front of house into the back of house and then come back through, and it is a continual improvement kind of process. The thing that is exciting is, again, you see our heavy hitters being able to churn more traffic and churn more volume, so it just gives you a sense of how high is up. Yep. Right, you mentioned when we talked about digital marketing a little bit, getting the loyalty conversion and ramping that up, with social media influencers, and it just seems like you are hitting on a lot of cylinders here. But the strategies to convert those first time promotional guests into long-term loyalty members and how do you think about that? Where are you in that process? Because presumably you can control your business better when you have a better understanding the frequency with which your customers visit and how to accelerate that. Yeah, absolutely. Look, we want to continue to grow our loyalty program and our loyalty base, right? If you look at our loyalty program, our loyalty customers get us about an extra 1.5 to two frequency per year. Right? So, getting them into the program is great. Obviously, learning about them in the program both helps you in terms of optimizing them, but it also helps you understand better what your best customer looks like, which you can take into lookalike targeting outside of your restaurant. So it is a virtuous cycle. I think on our loyalty program, we are growing our active base again. We made a little bit of a change last year where it used to be if you signed up for the loyalty program, you would get a free Pizookie immediately. What we saw was a lot of people signing up, but a lot of people not coming back. So we changed that to you get that free Pizookie on your next visit. So we actually saw less signups, but we saw those people returning a lot more often. So we did that, and we saw a little bit of a contraction in signups. Now that is kind of evened out, and we are growing what we call our active loyalty base again. So that is people transacting within six or 12 months. That is what I really look at, is are we growing the base of people that we are seeing in a six-month or a 12-month period? Because the vanity metric of how many people you have in your loyalty program, if half of them are not transacting, I do not care about that. We're growing that again, and it's definitely a focus on the restaurants. We look at little things. For whatever reason, and I don't have an answer for you as to why, but from a server script point of view, we weren't really asking about loyalty until the end of the meal. That's a problem, right? At the beginning of the meal, I want to ask you if you're a loyalty member, because if you're not, I can sign you up. If you are, you feel recognized and important. When you don't ask about it until the end of the meal, if somebody's already decided, "I want my check and I want to go," they're not going to at that point want to sign up and go through the process and give you their phone number and do all of that. We've changed our server scripts recently, and we're seeing signups. A lot of focus on it, a lot of tweaking. It's funny how much the execution at the restaurant and some of that sequencing can make a big difference. I think you said the loyalty member, did you say they come one and a half, two times more per year than a non-loyalty member? Correct. How many times per year? So you're looking at a non-loyalty average of just under two, and so the loyalty member is getting closer to four. Yeah. Shifting more from the top line drivers to maybe the cost side of things. First and foremost, people like to talk about commodities. Which tend to be a little bit more volatile, and I think you said beef costs surged 20% in your most recent quarter. You thought there was going to be additional sequential inflation in the back half of the year. Maybe let's talk about how you achieved or how you think you were able to achieve that restaurant margin target despite that inflation and maybe how much pricing comes into play to help with that going forward, or what are the levers you have available if commodity inflation remains elevated? Yeah, I'll jump in there. Just the fact base of part of the inflation dynamic and what's impacted our margins over the last four quarters is commodity inflation, in particular beef, really started to see its biggest increase in Q3 of last year. Right? On a year-over-year, we felt that in Q3, Q4, Q1, Q2. Now, to your point, what was a 20% beef inflation in Q2, we think falls to call it 10% inflation in Q3. So still an inflationary period, but less so than what we've experienced so far. The way we've thought about it and what our modeling shows is that Q2, as an example, on a year-over-year basis, cost of sales was a 70 basis point headwind in Q2. As we now turn the corner into Q3 and start to lap some of that inflation from a year ago, we see that turning into, call it, a 20 or 30 basis point headwind in Q3. What was a 70 basis point, excuse me, make sure I said that right, 70 basis point headwind in Q2 becomes a 20 or 30 basis point tailwind in Q3. Tailwind. Tailwind. Yeah, I think I misspoke there. Thank you. It doesn't mean deflationary, it means less inflationary. That's right. Yeah. There's less inflation, but that allows us to actually improve that margin on a year-over-year basis. We think there's a 90 or 100 basis point benefit just from that dynamic. Now, I'll give our operators a ton of credit, too. In Q2, we actually were really happy with how we managed labor. We saw labor margins improve significantly in Q2. For the clarity of it, that is not us reining in labor. We still want to deliver a great guest experience. What that is the economics of this business, right? When you're growing traffic at over 8%, growing sales at 6.5%, you should be able to leverage those fixed costs, and our operators did a great job of that. We fully expect that we can continue to do that in the back half of the year. That commodities change, we always knew the front half of the year would be more limited from a margin percentage expansion, in particular. We very much expect, which we always have, that the back half of the year, we see those margin dollars and percentages grow much more on a year-over-year basis. And your reference to beef inflation 20% going down to maybe 10%, how much of that is because beef prices that you've secured have come down versus just the comparison from a year ago? Is beef less of an issue or it's just the comparison? Yeah, look, the headline is, it's the fact that last year the comparison changes. The dollar per pound that we're paying for beef, in many cases is flat, if not maybe a little bit more. But that comparison is what helps us, and gives us the confidence that we will be able to grow the margins the way we've talked about in Q3 and Q4. Yep. You also mentioned keeping your fleet in good condition. I think you talked about incremental R&M investments to achieve the gold standard across the system, repair and maintenance, I should say. How do you think about, as a public company, balancing the short term P&L cost burden of doing that against the targets for margin expansion? Hopefully inflation subsides going into next year, but how do you think about that spend? Yeah, I'll start. You want to jump in? Please. On the R&M side of it, our big focus is on shifting from unplanned to planned, which we've made good progress on, and we plan to continue that. What does that mean? That means preventive maintenance. Are we doing all of the right preventive maintenance, getting all those PMs in for all of the equipment in the kitchen for the refrigeration, for the salamander, for the stoves, for the fryers, for the vents? Are we doing all of the PM? Because if we can get to the planned maintenance, what really eats you up on the R&M side is the unplanned maintenance, right? When something breaks and you're reacting and going in that cycle, right? From an R&M point of view, preventive maintenance so that we're in better working condition all the time. On a capital side is also where we're leaning in, which ultimately will help this as well, which is getting much more planful on our repair and our replace intelligence, right? Being able to identify very clearly where we're seeing repairs, repeated repairs, and ultimately we want to replace, and being really planful about our big equipment replacements. You're talking about HVACs, you're talking about refrigeration and that kind of stuff. Making sure that we are proactively working through that from a capital side to make sure our team members have the tools they need to deliver the standards that we expect from them, and to be able to more effectively manage the kind of OPEX R&M on an ongoing basis. I'll be brief on this one. To Lyle's points, we're very much committed that we've got to have great restaurants for our guests and our operators, so we're committed to that. All of the, whether it's the P&L side with repair and maintenance, the CapEx side, all of that's contemplated in our guidance. We've been thoughtful on how we've approached that from all sides. Lastly, just because you said it's a question you get a lot in terms of the comps are moving in the right direction, the four wall returns are getting better and better. The new unit growth with only 200 and some odd units and visions to potentially be a lot bigger. You said two units maybe this year, by the end of the year, maybe one rolls into next year. How should we think strategically about next year, the year after? Where does that go to as people get excited about the potential for both comp and unit growth simultaneous? Yeah, look, I think you're looking at one to two this year, a handful next year. When we talk about ramping up, the way that we've talked about it is getting towards double digit units, not percentage. Which would be probably closer to 5% when you look at a footprint like ours. But the key for me, like much of the work that we've done on this business overall, it's about making sure that we're taking a methodical approach, getting these things stood up. Getting the learnings, applying those learnings as we go forward. So I want to be more driven by doing it right and sustainably and durably than hitting a specific number. But that's how you should think about as we think about the ramp over time. Well, it seems like you're sitting in a unique spot. If you can get some comp momentum and get some unit growth going and the margins expanding, that's a good flywheel. Yeah. Thank you. The team has been doing a lot of hard work, putting a lot into it, and has made great progress, and I'm proud. Well, we want to thank you for joining us, BJ's Restaurants, and specifically Lyle and Todd. Hopefully you will have productive meetings throughout the day. Hopefully you get a chance to see them, if you haven't already. Thank you very much. Thank you.