BJRI Q1 2023: Remodels Drive 20% Higher New Unit Sales, Margin Expansion in Focus
BJ’s Restaurants delivered record Q1 revenue, with new remodels and unit openings posting sales 20% above system average, while margin initiatives and menu streamlining advanced. Management’s focus on operational efficiency and disciplined expansion signals a pivot to quality-driven growth, but commodity and traffic headwinds remain watchpoints for the balance of the year.
Summary
- Remodel and New Unit Outperformance: Recent remodels and new restaurants are generating weekly sales 20% above the chain average.
- Margin Expansion Initiatives: Cost savings and menu rationalization are driving operating margin gains despite inflationary pressure.
- Quality Over Quantity Expansion: Management is prioritizing high-ROI locations and operational consistency over rapid unit growth.
Business Overview
BJ’s Restaurants, Inc. operates a national chain of polished casual dining restaurants under the BJ’s Restaurant & Brewhouse brand, offering a broad menu anchored by signature items like deep-dish pizza, slow-roasted proteins, and craft beer. Revenue comes primarily from on-premise dining, with a meaningful off-premise business (takeout and delivery), and is driven by both comparable restaurant sales and new unit openings. The company’s major segments are dine-in, off-premise, and bar, with a growing focus on experiential dining and menu innovation.
Performance Analysis
BJ’s posted record first quarter revenue, up over 14% year-over-year, with comparable restaurant sales increasing 9% and average weekly sales per restaurant exceeding $121,000. The company maintained robust off-premise sales in the low $20,000s per week, while dine-in exceeded $100,000 per week. Notably, California led with 12% comp growth, and both lunch and late-night dayparts outperformed, reflecting a return to pre-pandemic consumption patterns.
Restaurant-level cash flow margins improved to 12.6%, a 280 basis point gain from last year, as cost savings programs and pricing actions offset food and labor inflation. Menu pricing averaged in the mid-7% range, with no material guest pushback or trade-down observed. Newly opened and remodeled units outperformed, posting weekly sales roughly 20% higher than the system average, and remodels delivered incremental $1,500–$3,000 per week in sales, depending on scope.
- Daypart Recovery: Lunch and late-night traffic rebounded, though these periods carry a lower average check, slightly diluting per-guest spend.
- Labor Efficiency: Retention hit a multi-year high, reducing overtime and training costs, and supporting improved service consistency.
- Menu Rationalization: Testing of a 10% smaller menu showed neutral-to-positive guest response, enabling labor and inventory savings without major sales loss.
While inflationary pressure persists, particularly in beef, the company’s cost savings and operational initiatives are gaining traction, setting the stage for further margin improvement as sales leverage increases and additional cost actions phase in through the year.
Executive Commentary
"Our first quarter comparable restaurant sales and guest traffic continued to beat the industry as measured by BlackBox. We are unmatched in the industry given our polished casual positioning, broad varied menu with AUVs of more than 6 million and growing, and our focus on delivering gold standard operational service and gracious hospitality to our guests each and every day."
Greg Levin, Chief Executive Officer and President
"Our restaurant level cash flow margins were 12.6%, an improvement of 280 basis points compared to the prior year. Adjusted EBITDA was 25 million and 7.3% of sales in the first quarter, which beat the prior year by 11.9 million with a margin that was 290 basis points higher."
Tom Hodick, Chief Financial Officer
Strategic Positioning
1. Remodel Program as a Growth Lever
BJ’s remodel initiative targets at least 30 locations in 2023 (15% of the base), with nearly half already completed. Remodels add seating, modernize bars, and enhance ambiance, delivering incremental comp sales and higher guest traffic. Lower-cost remodels add $1,500+ weekly sales, while full-scope projects drive even larger gains.
2. Menu Optimization for Execution and Margin
The company is rolling out a streamlined menu with 10% fewer items, focused on “familiar made Brewhouse fabulous” core offerings. This move is designed to reduce inventory, prep hours, and labor, while improving execution and enabling future innovation. Early tests showed neutral sales impact, with more SKUs eliminated than menu items, amplifying back-of-house efficiencies.
3. Disciplined Expansion and Site Selection
New unit development is focused on high-quality, high-ROI sites, with five openings planned for 2023. New restaurants are averaging $150,000 in weekly sales, or 20% above system average, but management is cautious on build costs and operational staffing, prioritizing quality over rapid expansion.
4. Margin Expansion via Cost Savings Program
BJ’s is midway through a $25 million four-wall cost savings initiative, spanning food cost, labor, and occupancy. Actions include renegotiating supply contracts, optimizing packaging, leveraging improved labor retention, and implementing kitchen system upgrades. Management expects further gains as menu changes and additional efficiencies roll out in the back half of the year.
5. Brand Building and Marketing Investment
Marketing spend is being increased in Q2 to support new creative and brand awareness, with a focus on digital and TV channels. The messaging highlights unique offerings like the “confetti pizookie,” reinforcing BJ’s differentiated positioning in experiential dining.
Key Considerations
This quarter marks a clear inflection in BJ’s operational discipline and margin focus, with management prioritizing sustainable growth levers and operational excellence over top-line-only expansion.
Key Considerations:
- Remodel ROI Validation: Incremental sales and traffic from remodels support continued investment, but long-term uplift and cannibalization risk must be monitored.
- Menu Rationalization Execution: Early tests show minimal sales loss, but ongoing guest preference tracking is needed as further menu simplification is considered.
- Commodity Cost Volatility: Beef and other proteins remain a wild card, with only one-third of the basket locked; margin guidance assumes no major shocks.
- Labor Market Normalization: Improved retention and lower wage inflation support margin, but any reversal in labor trends could pressure results.
- Expansion Pacing: High build costs and staffing quality are gating factors for new unit growth, with management signaling a return to 5%+ annual growth as a medium-term goal.
Risks
Commodity inflation, particularly in beef, and macroeconomic uncertainty could pressure cost of goods and traffic trends, especially as menu pricing power normalizes and food-at-home costs ease. The risk of guest pushback to further price increases or menu changes remains, and labor market conditions, while improved, could shift unexpectedly. Expansion is constrained by high build costs and staffing quality, limiting near-term unit growth acceleration.
Forward Outlook
For Q2 2023, BJ’s guided to:
- Average weekly restaurant sales growth of 4% to 5% over last year’s $118,900 baseline
- Restaurant-level cash flow margins in the low to mid-13% range
For full-year 2023, management maintained:
- CapEx of $90–$95 million (five new restaurants, 30+ remodels)
- G&A trending to the lower end of the $80–$82 million range
Management highlighted several factors that will shape results:
- Menu pricing to remain in the low- to mid-7% range, with no additional increases planned until October
- Further cost savings and menu streamlining to drive margin improvement, particularly in the back half of the year
Takeaways
BJ’s is leveraging remodels and menu optimization to drive sales and expand margins, while disciplined expansion and operational focus underpin a more sustainable growth trajectory.
- Remodel and new unit ROI is validated by outsized sales uplift, but expansion will be paced to ensure quality and cost discipline.
- Margin expansion is being achieved through a mix of pricing, cost savings, and operational efficiencies, with further gains expected as initiatives mature.
- Watch for menu simplification and cost actions to deliver sustained profit improvement, but monitor commodity and traffic risks as the year progresses.
Conclusion
BJ’s Q1 results demonstrate the power of targeted remodels and disciplined cost management in driving both sales and margin improvement. The focus on operational excellence, menu clarity, and prudent expansion positions the company for durable growth, though commodity and macro risks require vigilance. Investors should watch for continued execution on cost savings and guest experience in the quarters ahead.
Industry Read-Through
BJ’s performance reinforces the value of experiential dining and targeted remodel investment in the casual dining sector, especially as traffic patterns normalize and consumers seek differentiated in-restaurant experiences. The success of menu rationalization and labor efficiency initiatives offers a blueprint for peers facing similar inflation and staffing challenges. However, the need for pricing discipline and cost vigilance remains acute across the industry, with commodity volatility and labor normalization as sector-wide watchpoints. Competitors should note the importance of balancing menu innovation, operational efficiency, and prudent unit growth to navigate an uncertain macro backdrop.