BJs RESTAURANTS INC Q2 FY2025 Earnings Call

Good day, and welcome to the BJ's Restaurants, Inc. Second Quarter 2025 Earnings Release and Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead, ma'am.

Thank you, operator. Good afternoon, everyone, and welcome to our fiscal 2025 second quarter investor conference call and webcast. After the market closed today, we released our financial results for our fiscal 2025 second quarter. 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, and 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 the call today with prepared remarks from Lyle Tick, our Chief Executive Officer and President; followed by Brad Richmond, our Adviser to the Chief Executive Officer. We also have Daniel Doran, our Senior Vice President of Strategy and Financial Planning and Analysis, on hand for questions, which we will take after our prepared remarks. And with that, I will turn the call over to Lyle Tick. Lyle?

Thank you, Rana. Good afternoon, everyone, and thank you for joining us today. Q2 was another strong quarter for the business with continued top-line growth and improved profitability. Importantly, our progress is successfully balancing our short and long-term strategic initiatives. Underpinning all of our work is an unwavering focus on the guest and team member experience. Specifically, we delivered 2.9% comparable sales growth, driven by 3.3% in traffic growth, which underlines the continued resonance of the brand, particularly during our critical celebration season. Restaurant-level cash flow margins of 17% and adjusted EBITDA margins of 11.5% represent year-on-year improvements of 150 basis points and 120 basis points, respectively, reinforcing the continued progress we're making in building the foundations of sustainable and profitable growth. As I reflect on our progress and where we are in our journey, my first 9 months have been about solidifying the foundations of the business and setting the stage as we begin to implement and drive our longer-term strategic initiatives in the back half of 2025 and into 2026. We've clarified our brand positioning and established our 4 strategic priorities focused on the team member experience, our handcrafted food and beverages, delivering WOW hospitality, and keeping BJ's atmosphere fresh. This strategic focus has helped us prioritize the key opportunities that matter most for BJ's. We've built momentum with the compelling value of the Pizookie Meal Deal and kept our brand relevant in the cultural dialogue with the Pizookie Platter, the Snickers Pizookie, Fryckles and more. Most importantly, our gold standard of operational excellence has been the engine behind it all, allowing us to wow more guests than ever during the all-important celebration season in Q2. We're operating more efficiently and effectively across all of our restaurants, setting the foundation for profitable future growth. As I look at the results and drivers, my confidence continues to grow in the resilience of our progress. Looking at the first half of 2025, a few things jump out. First, our traffic growth has been seen throughout the business regardless of how you slice it. Second, our sales and traffic growth has been very consistent outside of clear macro factors such as the impact of weather earlier in the year. Third, our margin expansion has been broad-based and driven by operating our restaurants more effectively and efficiently, as reflected in our NPS scores, which continue to be at multi-year highs, while our comped meals are simultaneously down significantly. Finally, our manager and team member retention continues to improve significantly year-over-year and is ahead of industry norms and ahead of our own 2019 levels. Specifically in Q2, the 2.9% comparable sales growth was driven by strong performance throughout the quarter, including a record-breaking Mother's Day week, where the company broke 82 sales records, followed by a strong Father's Day. The Pizookie Meal Deal continues to resonate with guests, providing a great value and accessible everyday splurge opportunity, driving increased traffic, recruiting new guests, and driving frequency with existing ones. The marketing team has done a nice job leveraging the power of the Pizookie, driving traffic and engagement. Our limited-time Snickers Pizookie was a standout success, ranking among our top 3 selling seasonal Pizookies of all time. It also became a major PR win, generating 5.8 billion earned impressions and strong engagement across social and traditional media. Lastly, our continued focus on in-restaurant large parties aligned with our social splurge occasion focus drove a 42% increase in seated reservations compared to Q2 last year. On the margin side, our operations teams have made great progress and are focused on improving what we call the table stakes, which are the foundations of great operations and hospitality. We continue to focus on helping our team members be more effective and efficient to enable better execution and higher guest satisfaction. As I mentioned earlier, we've seen the benefits of these efforts in our growing NPS and reduced comp meals. A few areas of operational progress I would call out for the last quarter. First, we continue to push forward with practical improvements to our POS and KDS systems, removing unneeded force modifiers, which reduce overall clicks and minimize the opportunity for errors. These changes are some of the drivers of the double-digit reduction in our comped food and beverage year-over-year and flow directly to cost of sales. Second, we completed the integration of DineTime in our event portal, removing the need for managers to manually input reservations into DineTime. This has made managing reservations and walk-in parties much easier for hosts and guests alike. Third, we rolled out Ferry Express Pay earned wage access, giving our team members access to wages daily if needed. This may seem small, but showcases our team member-first mentality, driving significantly improved team member retention. Lastly, the continued outlier management work has brought more focus to the fundamentals and is lifting all ships. I want to thank our teams from the restaurants through to the support center without whom our results to date would not be possible. The energy, dedication, and commitment they show every day give me great confidence in what is yet to come. Looking ahead, I'm confident in what we have planned for the second half of the year to continue the momentum we have built in the business as we lap strong top-line performance in the fourth quarter of 2024. While July got off to a noisy start for the category with July 4 on Friday and record travel, performance has since returned to expectations, much like it did in February and has performed in line with our initial expectations, reinforcing my confidence in the progress we've been seeing in the business and that we are focused on the right things. We continue to make progress across all 4 of our strategic priorities, and we'll begin to roll out some of our longer-term strategic initiatives as we move through the second half of 2025. Starting with the team member experience. As we look ahead to the second half, there are really 2 main areas of focus. First, the continued journey of making it easier and more enjoyable to work at BJ's for our team members. As I mentioned before, this will be an ongoing journey led by listening to our restaurant managers and team members. Over time, this will be supported by our menu work as we focus on our core categories and drive greater quality and consistency of execution. The second pillar here is training. Our team members bring our brand promise to life every day, and ensuring they have the training tools and support to do that is a top priority. Our new Chief People Officer, Jen Jaffe, has been partnering closely with our Chief Operating Officer, Chris Pinsak, and our field training team to refine our hourly training systems and relaunch our manager training program at our GM conference in October. With respect to our menu and handcrafted food and beverage, we continue to make substantial progress. Our menu focus is on our core platforms and brand icons, including pizza, Pizookies, craft beverages, and shareables. As part of these efforts, in the fourth quarter, we will roll out a revamp of our iconic pizza platform company-wide. Pizza is part of BJ's DNA, and we believe this is the best version we've ever had, recapturing much of what made BJ's pizza so beloved. The dough is Detroit style inspired, yet served in a familiar round format using unbleached flour, no preservatives, and New York water, which has the perfect combination of iron and minerals to make a great dough. It's crispy, it's light, and it honors the original BJ's inspiration. The sauce is bright, made from 100% vine ripe tomatoes along with oregano, Italian herbs, garlic, and extra virgin olive oil. The whole milk mozzarella is rich and creamy. This is a foundational upgrade to a core platform, and the consumer feedback thus far has been excellent. In addition to the pizza launch, other core platform upgrades include a new tall 22-ounce pour reinforcing our craft beer authority, a new premium shareable Brewhouse Sampler for football season that brings together BJ's favorite bar food hits, and the return of our cult favorite Monkey Bread Pizookie. Our third priority is delivering WOW hospitality. Our ongoing work on great fundamentals has been the driver of our success to date and is the foundation that will underpin our efforts going forward. To complement that, we continue to progress our activity-based labor model test supported by our AI forecasting model. Our ABLM test is in roughly 22 restaurants, mainly in Texas and California, and continues to outperform control restaurants on labor hours. But more importantly, we've seen significant movement across pace, value, recommend, and hospitality scores. We expect to have the ABLM expanded to 20% of our restaurants in Q4. Our fourth priority, keeping our atmosphere fresh. We've completed 13 remodels so far this year with another 7 to 10 planned for the remainder of the year. Our remodeled restaurants continue to perform as expected with improved performance versus control. Building from the current remodel program and the brand positioning work, we're making good progress on our prototype design to ensure that our atmosphere continues to be the most powerful manifestation of our brand DNA and brand promise. I would expect the evolve design work to be piloted in the market through remodels and new restaurant openings in 2026. Our capital expenditure in 2025 related to new restaurant openings continues to be driven by the pace of our pipeline development, ensuring that new locations align with our refined criteria. As we look ahead through the second half of the year, we continue to feel confident in our earnings expectations and comparable restaurant sales growth of approximately 2%. Thank you. And now I'm going to turn it over to Brad to provide more details on our second quarter.

Thanks, Lyle, and good morning, everyone. In the second quarter, we achieved $366 million in sales, a 4.5% increase compared to last year. On a comparable restaurant basis, Q2 sales rose by 2.9%, driven by a 3.3% increase in customer traffic. This quarter also includes a 2.4% rise in year-over-year pricing. The decrease in average checks is primarily attributed to the Pizookie Meal Deal and the higher growth rates in specific times of day and service options, notably delivery and takeout, along with late-night offerings, which tend to have a lower check average. The 160 basis points of higher total sales growth versus comparable sales growth stems from the elevated sales brought by new restaurants that haven’t been included in the comp base for 18 months. Our restaurant-level cash flow margins reached 17% in Q2, showing a 150 basis points improvement year-over-year, as we effectively leveraged our sales growth and enhanced our operations. This was accomplished while investing around $2.5 million in additional marketing compared to last year. Our restaurant-level operating profit rose 15% to $62.1 million, making it our most profitable quarter to date. As Lyle mentioned earlier, our margin improvement efforts focus on what we refer to as essential practices, starting with enhancements in our guest count forecasting. A more accurate forecast allows us to schedule labor more effectively according to guest flows, thereby reducing direct labor costs as a percentage of sales and enabling better product planning to minimize food waste. Together, these elements result in improved in-restaurant operations and higher customer service levels, which is evident in our financial performance through reduced cost of sales and labor as a percentage of sales, while achieving record satisfaction scores from our guests. Another important aspect is our gross to net initiative, which addresses sales deductions from gross to net sales. A significant part of this initiative was aimed at reducing comped meals. We identified the main reasons for our unusually high number of comped meals and took corrective actions. This has led to a 16% decline in comp incidents. The end result benefits guests with a better experience, servers with simpler execution and increased engagement, and our profit and loss statement sees 100% flow-through to earnings from the comp reductions. We have other similar initiatives at various stages of implementation that follow this approach. Regarding specific financials, our cost of sales was 24.8% for the quarter, which is 90 basis points better than last year. Year-over-year food cost inflation was about 2%, down from roughly 3% in Q1, mainly due to lower costs for bone-in wings, although this was partially offset by higher prices for beef and seafood. Our gross to net initiative also contributed to improved cost of sales. Labor and benefit expenses accounted for 35.4% of sales this quarter, which is 70 basis points better compared to last year. Our restaurant teams are performing at a higher level due to better labor scheduling and management along with the gross to net initiative I mentioned. Occupancy and operating expenses were 22.8% of sales in this quarter, representing a 10 basis points unfavorable variance compared to last year. This increase is mainly due to our $2.5 million marketing investment, split between additional media for new markets to boost traffic and extra agency brand work currently in progress. Excluding these investments, occupancy and operating expenses would have been 60 basis points better than last year. We reported a net income of $22.2 million with diluted net earnings per share of $0.97 on a GAAP basis for the quarter, reflecting a 35% increase from the $0.72 per share last year. During this quarter, we repurchased and retired around 438,000 shares of common stock, costing us $15.1 million. By the end of Q2, we still had approximately $57 million available under our share repurchase authorization. Looking at our balance sheet, we ended the second quarter with a net debt of $34.5 million, comprised of a debt balance of $60.5 million and cash and cash equivalents of $26 million. This is a $5.9 million decrease in net debt since the start of the year, demonstrating our strong cash flow supports our share repurchases and investments in new remodels while also reducing overall debt. Regarding guidance, we anticipate annual comp sales to be around 2%, reflecting the impact of July 4 noise on our initial projections and better clarity on the timing of initiatives for the rest of the year. Aside from these effects, the business aligns with our initial expectations, and we are happy with the stabilization of our comp trends following the July 4 holiday. We expect our profit improvement initiatives to continue to enhance margins in the latter half of the year, and we have thus increased the low end of our earnings expectations by $1 million. Our updated forecast is for restaurant-level operating profit between $211 million and $219 million and adjusted EBITDA ranging from $132 million to $140 million. We are maintaining our capital expenditure expectations of $65 million to $75 million and our share repurchase range of $45 million to $55 million, having already repurchased 842,000 shares at a cost of $29.2 million through the end of Q2. Since the conclusion of the quarter, we have bought an additional 92,000 shares for approximately $3.6 million. Lastly, the tariff situation remains dynamic; however, due to the nature of our cost structure, we estimate a headwind of about 30 basis points in the second half of the year. The rest of our purchasing basket is returning to normal with overall inflation around 2%. While beef costs still exceed that figure, they are being moderated by lower prices on bone-in wings and produce. These factors, along with our operational efficiencies, are factored into our improving margins and anticipated earnings growth. Thank you for your attention today, and I will now pass it back to Lyle for any final comments before we take your questions.

Thank you, Brad. I'm proud of our teams and the progress to date. We've made substantial improvements to our profitability, continue to learn and refine our top-line growth drivers, and are in a position to begin to roll out our longer-term strategic initiatives and drive continued growth in 2026 and beyond. We're building for sustainable growth, and we'll continue to get a better understanding of the full potential of our programs and initiatives as they roll into market. While the path will likely not be linear, the energy, engagement, and alignment behind our strategic initiatives have allowed us to create early momentum and lay the foundations for an exciting and ambitious agenda that lies ahead. We're right on track with where I would expect to be at this stage, if not a bit ahead on the foundational work. Thank you very much, and now I'll turn it back for questions.

And your first question today will come from Alex Slagle with Jefferies.

I wanted to ask about the value proposition and the next steps in refining the everyday value proposition. Could you discuss the success you've had with the meal deal and other platforms like the Daily Specials and Happy Hour, as well as where you see the opportunities and how they might evolve moving forward?

Yes, sure. Thank you, Alex. This is Lyle. I think the overriding theme here is we're looking to build platforms versus trying to go from LTO to LTO. So probably the single biggest opportunity is the continued evolution of the Pizookie Meal Deal and the continued growth of that platform. It continues to resonate with guests. It's driving new and repeat visits. It has a healthy check and those guests that engage in it continue to come back more often. So we believe that that platform is something that we can build on and evolve. Two examples of this are, actually going into the third quarter, we just introduced upgrade opportunities, allowing guests to add soup and salad for an upgrade appetizer to the meal or to turn their mini Pizookie into a full-sized Pizookie for $4. And we're seeing encouraging pickup on those upgrades in the early days. We think this is a big opportunity. We're still learning here and plan to continue to test, learn and scale the right trade-ups to continue to build the Pizookie Meal Deal platform. But given its resonance, we see it as a big opportunity. The other part of that is looking to keep that menu itself fresh. So we actually just introduced a new Smash Burger and introduced it only on the Pizookie Meal Deal menu, and it's quickly become one of our top performers on that menu and so much so that people are actually requesting it and buying it at full price on the weekend. The other thing that might not seem as linear with respect to value, but I would point us to is the relaunch of our pizza platform. Pizza complements kind of our value platform in a number of ways. I think, firstly, it allows us to reinforce what I would call the value equation by pointing towards quality and craft as we've upgraded the pizza foundationally, as I mentioned. As an iconic platform for the brand, it also helps reinforce kind of the core of our brand at the beginning of our menu work. But importantly, because of the shareable nature of pizza, it delivers on the brand, it delivers on quality, and it actually delivers a great value. So being able to lean into the pizza platform under kind of pins, I think, the strong value proposition that we have, plus pizza hits a different and complementary occasion to some of our other entrees. So I think it's both about building on those core platforms and then seeing how the other work that's coming out complements it.

And I had a follow-up on just the training improvements and efforts to drive better service and guest experience. I mean, what's the progress look like here? I know it's early and you have some changes kind of coming up, and if you could offer some context there.

Yes, I have been really impressed with the progress we’ve made in that area. Our operators have achieved remarkable advancements, which is evident in our NPS scores reaching multi-year highs. As Brad mentioned, we are continually exploring ways to simplify processes for our restaurant team members. When costs like complimentary food decrease, it enhances the experience for both guests and team members, benefiting our profits as well. I believe we’re making significant strides here and look forward to further improvements. On the training front, it’s essential that we establish a unified BJ’s way that everyone understands and practices daily. This begins with our managers who need to embody and champion this approach. We must prepare both internal and external hires to deliver on the BJ’s promise. We are launching a redesigned training program in October that is streamlined and tailored to specific roles, blending BJ’s cultural immersion with operational excellence for all candidates. The training and tools we provide our team members are crucial for ensuring they consistently deliver our brand promise. We have made remarkable progress in these foundational aspects, making it easier and more enjoyable to work at BJ’s, which in turn enhances the overall experience. Now, we need to reinforce the systems, tools, and training we offer to ensure that our team members and managers can elevate their hospitality even further.

Congrats on the CEO role.

And your next question today will come from Jon Tower with Citigroup.

Maybe just following up to the question around value. Just in general, I know Pizookie Meal Deal is relatively new for the brand in general. But as a percentage of mix today, where does that sit maybe as a percent of sales? And then just as incidence, where does it sit today? I'm just broadly trying to think about how a consumer comes to your stores when they walk in there, they might get drawn in by the meal deal, but how many are coming in because of that and then trading up when they come in because they see something else on the menu that they're attracted to once they get in the door?

Yes. So it's about 15% when you look at the total week and about 22% when you look specifically at the week. Interestingly, when you look at those checks, the checks remain really healthy. They're kind of in the high 40s. And so what you see on a Pizookie Meal Deal check is not just everyone coming in and getting a Pizookie Meal Deal, but either people getting the meal deal and hanging stuff off of that or some people at the table getting the Pizookie Meal Deal and some people at the table getting other things. The thing that we've really liked about what we're seeing is that these guests have shown that they're coming back more often. So the Pizookie Meal Deal is bringing in new people. But once those people come in, we're seeing them return at a higher rate than folks who previously came in.

And those folks that are coming back, are they just going back to the Pizookie Meal Deal? Or are they coming back and then trading around the menu when they're coming back?

No, it's really interesting. We are seeing them trade around the menu. We're seeing them during the week and not the week. And interestingly, a high percentage of them are becoming omnichannel customers. So we're seeing them on and off. And actually, our omnichannel customers tend to be our highest value customers. So we're seeing a big percent of those customers become omnichannel customers, which we're encouraged by.

That's great. Okay. And then maybe just going back, Lyle, you talked a little bit earlier about the activity-based labor test that you've done in 22 stores and you're expanding it to about 20% of the system by the fourth quarter. Can you just talk about what you expect to get from that? It sounds like hospitality pace value, but from a high level, how should we expect it manifesting itself from an economic standpoint in the model?

Yes. Look, I mean, I think the core driver of this model is about getting the right people at the right place at the right time to get a better experience and drive sales. So our core metrics that we are looking for are around pace, recommend, hospitality scores, and ultimately, as leading indicators seeing that in sales, which, of course, takes more time given our frequency. We are seeing some benefit from a labor hours point of view, mainly around efficiency in the shoulder hours, where sometimes in our kind of peak hours, it's actually suggesting we need more labor. But net-net, it has provided some efficiency. But I would say the bigger gain on the ABLM is going to be the improvement in our hospitality, our pace, our recommend, our throughput, and ultimately, its impact on sales over time.

Okay. Cool. And maybe just lastly, broadly on the industry, curious specifically in your markets heavy in Texas and California. When thinking about the competitive backdrop, have you seen much by way of changes specifically on the independent side? Or you could speak to chains as well, but any changes in the landscape? We can see at high level that it seems to have gotten more promotional, but are you actually seeing any changes by way of door closures or frankly, even doors opening up more than in the past 24 months?

I haven't personally observed any significant changes in store closures or openings. What I can share is that our consumer behavior has remained very consistent, except for the weather impacts in February and some travel disruptions in early July. Aside from those factors, we've experienced a lot of stability in our consumer base. That's the best I can provide regarding your question.

And your next question today will come from Jeffrey Bernstein with Barclays.

Great. And again, congrats, Lyle, on the formal title. Curious to start with the mix shift. I think you mentioned it was down, I guess, 280 basis points seemingly with the greater value focus on the meal deal. I'm wondering how long you think something like that lasts, maybe what your expectations are for the back half of the year, whether you think something like that should moderate or whether you're comfortable with that if it's driving traffic?

Yes. Well, so I mean, on balance, when I look at our growth and the shape of what we're doing right now, I am comfortable having traffic-driven growth with less check and our value scores continuing to improve because that, to me, is a strong foundation that gives you more levers to pull from. Having said that, when you look at that mix, I think Brad mentioned about half of it is from PMD. The other half of it is from growth we've been seeing in the late-night daypart and in off-premise, which has a bit of a smaller check. But when I kind of dig in specifically to PMD, I think I would draw back to 2 things. One is, as we look at building the platform and some of the things I talked about earlier, I actually think there's an opportunity for us to continue to build check around PMD and manage some of that mix impact. I feel really good about the foundation that it's built and the amount of attachment that it has because it gives us a platform that we can start building off of. Having said that, if you look at the shape of this year, it's playing out as we expected it to, and we would expect in the second half, the traffic and check mix level to level off a bit as we lap PMD in Q4.

Got it. I think you mentioned the challenging comparison in the fourth quarter as you lead the brand. I'm curious if that affects your marketing plans. Are you focusing on internal metrics to maintain positive comparable sales, or do you prefer not to enter the limited-time offer business? I know you referenced the new pizza for the fourth quarter, and you also mentioned the new pour, the new Sampler, and the Monkey Bread Pizookie. I'm not sure if all these new items are for the fourth quarter, and I'm wondering if they are part of your response to that challenge. How do you view the outlook as you approach the fourth quarter?

Yes. We will continue to develop the Pizookie Meal Deal and are confident in our plans for media and marketing to support it. While there won't be many limited-time offers, we are introducing strategic elements like the 22-ounce pour to strengthen our craft beer reputation and encourage upgrades. Add-ons to the Pizookie Meal Deal, such as Monkey Bread Pizookie and Smash Burger, are designed to enhance our fourth-quarter performance while aligning with our strategic goals rather than diverting us. Additionally, as we introduce pizza in November, we expect it to build momentum gradually rather than being an immediate major success. This represents a reinvention of a core product, and we've seen positive feedback in our test markets. As more customers try it, we anticipate a continued momentum that will carry into 2026.

Your very detailed description of it made me hungry ahead of dinner time. And just lastly, I think you said new units as you look for new units and whatnot, there's a refined criteria. I think investors are always looking to see a reacceleration in the new unit growth. I know this year was more about the remodels. As we think about '26, the balance of how many more remodels versus, I guess, the refined criteria, whether you think that you have enough time to kind of really ramp up the new units in '26? Or are we looking years out from there?

Yes, sure. So we've been actively looking at kind of building our pipeline, as I mentioned, but being pretty judicious about sites to make sure that they meet kind of the new criteria. I think what we talked about previously, which is making sure that we're building concentric circles from where we have performance and awareness and consideration because we think we have room to grow there, and it helps us with performance. Realistically, given the timing of new units, as I'm sure you're aware as you build pipeline, we're talking about the end of next year being kind of the first ones and then into 2027 and beyond. But we would say that new units are absolutely part of the thesis going forward. And we'll continue to work on the remodels. I'm excited about the prototype work I've been seeing from an agency that we're working with. And so we'll continue to refine what a BJ's looks like going forward and how that applies to remodels and NROs. You'll probably see it start to get applied to a remodel earlier in the year and then the NRO would be later in the year, just given the timing of that platform.

And your next question today will come from Todd Brooks with The Benchmark Company.

First one, Lyle, it sounds like you're far along in testing of the new pizza platform. Can you level set maybe where pizza was mixing under the old platform, kind of what you're seeing in test? Just trying to dimensionalize how big of a needle mover that this can be for the brand once you get the product where you want it and you roll it out system-wide in November.

Yes. I mean, pizza, and Daniel, keep me honest here, but pizza was mixing around like 5% to 10%, depending on where you were in the country, California on the higher end, outside of California on the lower end. What we've seen in our test markets in the restaurants that we're testing in, we've seen sales up, we've seen traffic up, and we've seen profitability up in those restaurants overall. Underpinning that, we've seen a significant movement in pizza incidents and improvement in NPS overall. So I'm encouraged about the role it can play, both in energizing kind of a core market like California, where we've heard from a lot of existing guests that it reminds them of what they loved about BJ's Pizza always, but also had pizza play maybe a little bit of a larger and different role outside of California where it hasn't gotten its footing quite yet.

And is the early testing showing that this is an easy check add-on for groups that are out celebrating that you're actually building check by having the enhanced pizza available? Or is it replacing other individual appetizers and people opting for pizza as a way to kind of get scratch everybody's appetizer at the table at once?

Well, the pizza check has a distinct pattern. The interesting aspect is that it's not simply replacing appetizers. Pizza serves as its own unique occasion, and the checks are quite healthy but are structured differently. When people order a pizza, they're also likely to add more drinks, appetizers, and sides, resulting in a higher check total. This means that while they share a pizza, they tend to order more appetizers and drinks than they would if they were focusing solely on a main dish like Rib-Eye or Prime Rib, for instance.

Yes, that's right. Todd, this is Daniel Doran. I appreciate the question. I'll add a little bit of color. In the initial tests, we've seen very little cannibalization, to Lyle's point, if anything, it's neutral to slightly positive check. What's really nice is that we've seen the uplift, like you mentioned, of about 10% to 15% on our pizza incidents, and that's really the check driver there. On top of that, we've seen a little bit of traffic benefit over time. I mean, it's early in the test results, but again, very encouraging in terms of that frequency and that return guest.

Super helpful. My other question is about your recent celebration season. You mentioned the Mother's Day week and the number of records you received. As your team reflects on operations during that high-volume period, what insights were gained? Was it a sort of stress test for your current situation? Did you identify any opportunities or find that you were better equipped to handle more customers during this peak compared to last year?

Yes. I mean there's always opportunities. What I would say came out of it was I just think with the heightened focus on the fundamentals, the outlier work, forecasting and preparation. When I talk to Chris, our COO, I think he would say and the VPOs would say, it was about being prepared. And so the teams were just really dialed in, very prepared, working very efficiently and effectively together. And the result of that is you get more people through. I think the reservations, of course, help because they help with a planning perspective. But to be honest, I think we're still at the beginning of that journey with reservations even with the growth that we've seen. But I think if you talk to the operators, they would just tell you that they're feeling more dialed in and more on top of the fundamentals and that that dialing in is really helping them operate the restaurants better at this point.

Okay. Great. Just one final quick one. I don't know the timing of a new menu drop. But as you're looking at the second half, where do you see menu pricing running relative to where you ran in the first half?

Yes. This is Daniel again. We should be seeing carried pricing of about 2.5% in the back half of the year. We're going to be lapping about 90 basis points around in September, and we're going to be taking about the equivalent this year. So neutral impact in the back half.

And your next question today will come from Brian Mullan with Piper Sandler.

A question on the off-premise business. I think you said it's something you'd take a look at later this year. But just can you talk about what you'll be evaluating and maybe any early hunches or suspicions of what you might find or where there might be some opportunities to improve this at the company over time?

Yes, we recently appointed a new Director of off-premise who is currently getting acclimated and analyzing our operations. There are a few significant issues in our off-premise journey that stand out to me. First, there's too much friction from ordering to fulfillment, and we need to simplify this for our guests and our third-party partners. Second, we're facing challenges with missing and inaccurate orders, which is a common issue across the industry. In my previous experience, we found that many discrepancies were related to drinks and side items due to how orders were printed, and we managed to reorganize that system effectively. Lastly, when customers order online, they see the entire dine-in menu without it being tailored to off-premise needs. This means we could significantly improve our merchandising and menu organization to better cater to off-premise occasions, whether for individuals or groups. We've made good strides during COVID in growing this business, but we are still in the early stages of optimizing our online presence for off-premise dining.

Okay. And then on the Pizookie Meal Deal, you talked about that platform continuing to evolve from here, things you can do with it along those lines. I'm curious, is there any consideration towards eventually offering some form of this on the weekend? Could that work for the business? Would it not work? What are the pros and cons if you thought about that?

Yes. I mean, broadly, if I take a step back and I think about a program like that, you tend to want to put an external motivator on folks when you have capacity, right? So in other words, I have free capacity, so I'm willing to invest a little bit to fill that capacity. On those times when I have less capacity and people are intrinsically motivated to come to me, I'm probably less inclined to put an extrinsic motivator in there because the net benefit of it won't be as high. So I feel comfortable with Pizookie Meal Deal doing its job during the week right now. So I think I won't say never as it evolves. But right now, I think it's doing the job it's supposed to do pretty well.

Brian, again, this is Daniel. I'm going to add a little color to that, too, just to kind of piggyback on the commentary from Lyle. He mentioned earlier kind of the strength of the meal deal and sort of the repeat visits. One of the notable findings in that guest is that we're seeing strength in traffic and growth on the weekends as well without the meal deal, but we find again that there's a halo effect to this. And as these folks become more repeat guests, they're coming back on weekends as well. So kind of echoing what Lyle was saying around the need for this program to be really weekday driven, but there's certainly a positive impact on the weekends as well.

And your next question today will come from Sharon Zackfia with William Blair.

I don't think this was addressed, but can you talk about kind of how your alcohol mix is trending? It does feel like there's been more innovation and more emphasis on certainly the core beer platform, but also you've got the hard root beer and some innovation with the margaritas going on. So I'm just curious on kind of what you're seeing there? And if there's any opportunity with that Beer Club that you have in California to replicate it, what might be working there and what isn't?

Yes. Well, first of all, I love how plugged in you are to what we've got cooking, which is awesome. So thank you. I mean, look, alcohol incidents overall, not just beer, have been declining a bit for a number of years. So that has not changed. I will tell you that some of the items that you mentioned, like the hard root beer has gotten off to a super strong start for us. And so I'm really pleased with what that's doing as you start to think about like that beyond beer platform and again, kind of a low ABV platform. And the individual margaritas that we do in future as well as our margarita platform overall does very, very well for us. And then I think the other thing that we're focused on or as I work with the team and my challenge to the team is don't just think about the alcohol platform. Think about total beverage. Nothing is changing with social drinking. People still want to come together and engage over food and drink, and drink is still a crucial part of that. The way they're doing that is evolving. And so the team has been doing some good job with mocktails and some non-alcoholic beverages, but we need to take kind of a long-term view at how we grow overall beverage, which is obviously inclusive of alcohol beverage.

And then the Beer Club?

The Beer Club in California is steady and does very well. We are evaluating that. So I don't have an answer for you on that right now. I find the Beer Club to be a very interesting proposition, and we're evaluating what that looks like potentially outside of California. But I don't have in the list of priorities and sequencing; it's on there, but I don't have an answer for you on that today.

Okay. And then as we think about kind of ramping up unit development again late next year, are there any particular regions you're interested in kind of filling out? Or are you just kind of looking for best shot on goal, best site?

I believe it's important to build concentric circles from our existing infrastructure, awareness, performance, supply leverage, and management leverage. When I examine our markets, I've identified growth potential in every market, including California. We are focusing on our core driver markets and planning to expand from there. If an exceptional opportunity emerges in a new area, we will consider it, but our primary strategy is to grow from our core markets.

And then last question. There is kind of noise as we think about the back half, right? You had the soft start around July 4, but then you've got this really tough comparison in the fourth quarter. How are you thinking about comps in the back half? Are you thinking about it relatively steady between quarters? Or is there some give and take?

Yes. As I reflect on the year, we initially expected a comparable sales increase of about 2% to 3%. However, as Brad mentioned, our current outlook has adjusted to around 2%. This adjustment accounts for the impact of July and provides better clarity on how our initiatives are progressing. We have refined our expectations for the remainder of the year, and overall, things are unfolding largely as we anticipated, with the exception of the impact we experienced in February.

This will conclude our question-and-answer session as well as conference call. Thank you for attending today's presentation. You may now disconnect.