Prepared remarks
Good afternoon, and welcome to the BJ's Restaurants Fourth Quarter 2024 Earnings Release Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead.
Thank you, operator. Good afternoon, everyone, and welcome to our fiscal 2024 fourth quarter investor conference call and webcast. After the market closed today, we released our financial results for our fiscal 2024 fourth 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 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 should refer 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 Brad Richmond, our Interim Chief Executive Officer; followed by Lyle Tick, our President and Chief Concept Officer; and Tom Houdek, our Chief Financial Officer. After our prepared remarks, we will take your questions. And with that, I will turn the call over to Brad Richmond. Brad?
Thank you, Rana, and good afternoon, everyone. We appreciate you joining us today as we discuss our fourth quarter and full year 2024 performance, as well as our outlook for 2025. Before we dive into our results, I'd like to take a moment to acknowledge the devastating impact of the wildfires here in the Los Angeles area. Our thoughts and prayers go out to everyone affected by these fires. I want to express our deep gratitude to the first responders, who worked tirelessly in these challenging conditions. I'd also like to extend a heartfelt thank you to our local restaurant leaders and team members who have gone above and beyond providing support to the first responders and local residents, offering meals, refreshments, and even safe spaces for those affected by the fires. We couldn't be prouder of their community engagement and spirit of generosity. We also know that some of our team members have been directly impacted, and a few have tragically lost their homes.
BJ's team member support fund, which we call Give Us Life, came to the aid of these members in their time of need. The fund is supported by voluntary donations from team members who contribute from each of their paychecks. We are grateful for the generosity and support of the BJ's family. Now turning to the fourth quarter. I'm pleased to report that the breadth of our momentum and our progress is clearly reflected in our financial performance. Comparable same-restaurant sales were very strong. Margins continued to improve, and our cash flow is both resilient and increasing. What's even more exciting is that there's still ample opportunity to build upon these achievements and further strengthen each of these key financial metrics as we move forward. We made significant progress on our first phase of initiatives, and I'm impressed by what we've accomplished in such a short time. This progress also fuels my optimism as I see more untapped potential for the BJ's brand in the near term.
Our early goals have been met, the foundation is strengthening, and we now have more clarity and actionable plans in place to drive future success. To provide deeper insights into our recent progress and near-term initiatives, Lyle will discuss our brand positioning efforts and growth plans later in the call, and Tom will review our fourth quarter and annual results and share our expectations for 2025. But before he does, let me quickly recap our fourth quarter financial results. Comp sales for the quarter were 5.5%, driven primarily by guest traffic with strength across all dayparts and all channels. Each month of the quarter, we delivered sales meaningfully above the Black Box benchmark levels. Also important to note, the quarterly comps did benefit by approximately 100 basis points from favorable holiday shifts. Our margin enhancement initiatives began to deliver meaningful results late in November and leverage our top-line growth to achieve restaurant-level margins of 15.4%, up 100 basis points from last year.
Restaurant-level operating profit reached $52.9 million, a 14% increase from last year, which set a record for Q4 restaurant profitability. Adjusted EBITDA was $33.1 million in the fourth quarter, a 21% increase from the prior year. Our adjusted EBITDA margin was 9.6%, a 120 basis points improvement from last year, and we were able to deliver this significant profit growth while making meaningful investments in brand positioning initiatives. In the fourth quarter, we engaged in significant work around strengthening our brand and business model, leveraging external resources to increase the certainty and accelerate the pace of our efforts. Lyle will go into more detail on this shortly, but we are energized by the preliminary insights and are excited to bring these fresh perspectives to life. Additionally, we made some key leadership changes. The charges for these two items increased G&A's approximately 100 basis points in the quarter, but are largely transitory and already behind us with only a small amount remaining for the first half of 2025.
We also conducted a thorough review of our restaurant portfolio and determined that no restaurants needed to be closed. We also reassessed our new restaurant pipeline, applying a more refined set of criteria, which we believe will lead to more consistency in our new restaurant opening performance. This led to the removal of some sites from our new restaurant pipeline as they no longer meet our revised criteria. These two reviews were the primary drivers of the charge for asset disposals and impairments in the quarter, which I remind you is a noncash item and does not impact our restaurant operations. In summary, Q4 was a strong quarter with meaningful progress across multiple areas. I want to extend my thanks to Lyle, our leadership team, and our more than 21,000 team members for their hard work and agility in delivering these results in quick order. Their efforts have laid a solid foundation as we move into 2025. With that, let me turn it over to Lyle to talk more broadly about our brand refresh and growth initiatives.
Thank you, Brad. Good afternoon, everyone, and thank you for taking the time to join us today. I'm now five months into my role at BJ's Restaurant and Brewhouse, and I'm very encouraged by the progress we're making driving sales and traffic, as well as identifying opportunities to operate more efficiently and simply. While we're at the beginning of the journey and there is lots of work ahead, we're getting clear on our core equities where we can drive differentiation while also putting in place the right initiatives to drive sustainable and profitable growth. We're at an exciting juncture for the BJ's brand, building on positive sales and margin performance in Q4, while also sharpening our focus for the future. Before I look ahead, I'd like to briefly reflect on Q4. We're pleased with our sales performance, as well as our margin expansion initiatives. Importantly, we believe we can continue to build upon these initiatives in the near term, which will provide learnings to inform our future actions.
On the sales side, the Pizookie Meal Deal and our holiday large party offering resonated with guests, and our targeted marketing investments served as an accelerator in key markets. While our performance across geographies, days, and dayparts were all encouraging, our performance on the weekend when the promotion was not offered and its over-performance in media markets underline awareness and consideration headroom for the brand, as well as brand affinity when we are top of mind. It also demonstrated a real structural advantage we have in accommodating and delivering great experiences for group occasions. On the margin enhancement side, we made progress laying the foundations of initiatives that will help us be more efficient but most importantly, will help us improve guest and team member experiences. Our AI forecasting model has continued to improve and is helping our GMs improve food preparation plans, as well as labor scheduling, ensuring the right people are in the right place at the right time.
We also took a hard look at our comped food and beverages as these generally result in difficult situations for team members, less than ideal guest experience, and would slow the restaurants down overall. We identified that a key driver was items being run incorrectly or prepared poorly, which stemmed from complexity in how we ring items into our POS and how they display in the kitchen. To give you just a couple of practical examples of how we address this, we simplified the process for how we ring in our craft margaritas. This simple change resulted in about a 20% decrease in comped margaritas and mistakes making their way to guests. We added takeout and delivery tailored cooking and packaging guidance to our kitchen display systems, driving our accuracy scores up about 10%. While both examples benefited margins, their larger impacts stemmed from creating better experiences for our team and guests.
Our operations and technology teams are partnering and continuing to work on mapping additional simplification opportunities. On the facilities and equipment side, we completed two important projects. We tagged every critical piece of equipment across our system with a QR code that allows us to track repair history, manage warranty work, and apply predictive analytics to determine the optimal replacement cycle. This ensures our equipment is in the best possible working order for our team members and ultimately provides savings and efficiencies in our repair and maintenance spending. It's all about setting our teams up for success. We also implemented preventative maintenance programs for major kitchen and HVAC equipment. Early feedback from the team indicates this work has improved their experience with less equipment failures, and we're saving with less costly and frequent repair orders.
Taking a proactive approach with our facilities and equipment is paying immediate dividends, and we believe there are additional opportunities ahead. Lastly, as part of the menu work, we're in the process of taking a comprehensive look at our value strategy and promotional platforms. Ultimately, we want to ensure that our guests looking for a great everyday price point have craveable options they can count on and that our guests looking for an accessible splurge or treat have exciting premium BJ's handcrafted options, all of which deliver great value for their role on our menu. These near-term initiatives provide a springboard for our longer-term strategy. Since our last call, we have also completed extensive brand research to better understand our core consumers' needs, our brand's core equities, and how we can uniquely deliver value to our guests. This has allowed us to clarify BJ's brand positioning, which provides focus and clarity to the teams as we move forward.
There is a cross-functional team that is now diligently working on our plans to position the brand for sustained, profitable growth in the mid to long term along four strategic priorities, which include the team member experience, our handcrafted food and beverage, delivering WOW hospitality and keeping our atmosphere fresh. First, I'd like to talk a little bit about our team member experience. At BJ's, we're working from a relative position of strength here. Our turnover is below pre-pandemic levels and below industry norms and we see a high correlation between manager tenure and restaurant performance. Our managers and team members are the heartbeat of BJ's, and our research signals that our hospitality can be a real differentiator for us. What we also know from our research and our team members is that we have an opportunity to provide great hospitality more consistently. To enable this, we're focused on two areas in the short to medium term: simplification and training.
On the simplification side, there are two main aspects. One is addressing task saturation. Our teams are in the business, and at BJ's specifically because they want to deliver great guest experiences. We have a team focused on identifying and eliminating or automating tasks that do not add value to our guests or get in the way of our managers and team members operating as efficiently as possible. The other part of simplification is simplifying our processes and systems. As I mentioned before, we're working to simplify our POS and kitchen display systems and processes, including how items are rung in and how they show up in the kitchen, and this is already showing promising results. Turning to training, our managers and team members alike have conveyed to us that we have an opportunity to support them better with training. This is an area where striking the right balance of technology and shoulder-to-shoulder training is key.
During and since COVID, training for many has gone almost all digital. Our team members have expressed that more shoulder-to-shoulder training is important. To address this, we have just rolled out new team member training, with new manager training following suit. The training makes the digital modules more streamlined and gets team members shoulder-to-shoulder quicker. The feedback has been very positive. What I'm hearing from our managers is that they're seeing improvements in hiring and retention in the first 90 days because our new team members get paired with others from the beginning, helping them quickly feel part of our community and executing better for our guests. The second strategic priority is our handcrafted food and beverage. The brand work we've undertaken has reinforced that we have powerful core pillars on our menu with strong brand equity and associations, as well as some emerging opportunities.
The work we're doing on the menu revolves around making strategic choices about where we will drive meaningful differentiation while also identifying opportunities for simplification. Pizza, our world-famous Pizookie, and our award-winning craft beverages anchored in our craft beer program are clear areas of strong brand equity and association. Our wings, steaks, and slow-roast are emerging areas of potential strength. It’s also clear from our research and guest feedback that we have opportunities to improve consumer satisfaction on some of these core platforms. In these platforms where we choose to compete, we want to ensure we have the best offering and can deliver it consistently great. This is where a great deal of our short-term focus lies, and I’m pleased with the progress we're making here. We've also identified an opportunity to optimize our menu offerings. Like many, we have a core group of offerings that drive an outsized portion of our total gross margin.
We will be focusing across categories on the long tail to do two things. One is to streamline and remove items that are not delivering from either a commercial, brand equity, or turf perspective, and this will allow us to achieve our second goal, which is to bring exciting innovation to our guests and keep our core platforms fresh. Our third priority is delivering WOW hospitality. Hospitality has always been at the heart of BJ's brand, and it's a big reason why our loyal guests keep coming back. This pillar is about how we put our managers and team members in the best position to deliver WOW hospitality to our guests, both on and off-premise. On-premise, the core focus is ensuring we have the right quality and quantity of staff in the right positions at the right times. As we continue to refine our AI forecasting model and labor scheduling, we're discovering opportunities to be more efficient and effective as a whole, particularly around our shoulder periods, while also identifying crucial peak hours where we need more team members.
We believe this, combined with some of the simplification efforts I outlined earlier, will empower our teams to deliver our BJ's WOW experience more consistently. And just beyond the horizon for off-premise, our main focus will be on delivering a seamless end-to-end experience and removing friction points. We have a robust off-premise business, around 17% of our total sales, and we believe we have the right product offering to continue to grow in this area. However, we have a clear opportunity to optimize that end-to-end journey and simplify things for both guests and team members, from how we merchandise our items to how we ultimately fulfill and convert that demand. Lastly, our fourth priority is about keeping our atmosphere fresh. BJ's atmosphere has always been a long-term differentiator for our brand. In 2025, we will continue to focus on keeping our footprint fresh by remodeling up to 30 existing locations to expand our successful remodel program while continuing to optimize based on our learnings.
We plan to open one new restaurant in 2025 in Queens Creek, Arizona, in just a couple of weeks, and we're very excited about this restaurant and believe it will be accretive to our total restaurant portfolio. In addition to this, our team has been closely analyzing recent restaurant openings to identify key success factors and maximize our return on investment. The preliminary findings are promising, and as such, we will return to building our new restaurant pipeline with more restaurants to come in 2026. Our capital expenditures in 2025 related to new restaurant openings will depend on how quickly we can develop a more robust and targeted pipeline that aligns with our refined criteria for new locations. We're excited about the future unit growth for BJ's and we will keep you updated as we move throughout the year. While I'm pleased with the progress made so far, we are early in this journey.
The clarity we gained from our brand research, operator feedback, and learnings from recent performance, combined with the organizational alignment behind these strategic priorities give us confidence in the path ahead. Thank you, and now I want to turn it over to Tom to provide more detail on our fourth quarter results and our outlook for 2025.
Thanks, Lyle, and good afternoon, everyone. Before looking at our fourth quarter results, let me reflect on what we accomplished in 2024. During the year, we generated record sales of $1.36 billion as our sales-driving initiatives gained traction throughout the year, culminating with a 5.5% comp restaurant sales growth in Q4. We produced record restaurant-level cash flow of $195.6 million, which increased by 10% from 2023 levels. We improved our restaurant margins by 110 basis points to 14.4% for the full year, including 15.4% margins in Q4, and we delivered adjusted EBITDA of $117.1 million, which was 13% higher than the prior year. Turning to the fourth quarter, we generated sales of $344.3 million, which was 6.4% higher than last year. On a comparable restaurant basis, Q4 sales increased by 5.5%, driven primarily by traffic growth. This represented our best comp performance since 2018, when excluding the COVID recovery quarters, as our sales-driving initiatives worked to grow sales, traffic, and market share during the quarter.
In Q4, our comp sales beat the industry by 3.7 percentage points and our traffic beat by 6.8 percentage points as measured by Black Box. Our traffic outperformance was driven in large part by our key promotion, the Pizookie Meal Deal, which we launched in September, as well as investment in media to build awareness of this promotion and the BJ's brand overall. We also built guest excitement around limited-time offerings such as our Spooky Pizookie and the 25th anniversary of our Grand Cru Belgian ale. Our restaurant-level cash flow margin was 15.4% in Q4, which was 100 basis points better than a year ago. We effectively leveraged our strong sales and delivered improving margins while also investing in food and marketing costs. Our restaurant-level operating profit increased 14% to $52.9 million for Q4, marking our most profitable Q4 ever. We are pleased with our progress on improving our margins to date.
As Lyle and Brad outlined, we have a range of strategies and initiatives to continue to grow margins both on a dollar and percentage basis going forward. Adjusted EBITDA was $33.1 million and 9.6% of sales in the fourth quarter. Q4 EBITDA was $5.8 million higher than last year, while also marking or making longer-term investments in our brand positioning, which Brad and Lyle both highlighted. We reported a net loss of $5.3 million and diluted net loss per share of $0.23 on a GAAP basis for the quarter. The net loss included a few extraordinary items, including a $15.4 million charge for loss on disposal and impairment of assets, a $4.6 million charge related to an extension of a warrant, and a $1.5 million charge related to leadership transition costs. However, the loss on disposal and impairment of assets was elevated this quarter as we completed a review of our existing restaurants and potential future sites, resulting in several impairments and our planned replacement of our pizza pans as we work to upgrade the pizza category of our menu.
We added supplemental non-GAAP metrics to our earnings release to account for these items. Adjusted diluted net income per share grew 5.1% to $0.47 per share compared to $0.45 per share last year. For more detail on restaurant expenses, our cost of sales was 25.9% in the quarter, which was 40 basis points higher than a year ago. Food cost inflation was approximately 3.5% year-over-year, which we did not fully recapture in menu pricing. Additionally, our Pizookie Meal Deal had modestly higher food costs than our menu average. Labor and benefits expenses were 35.8% of sales in the quarter, which was 70 basis points favorable from last year. Our restaurant teams hit their stride, delivering strong results and leveraging labor effectively while still maintaining strong guest sentiment scores, driving meaningful traffic and sales in the quarter. Occupancy and operating expenses were 22.9% in the quarter, which was 70 basis points favorable compared to the fourth quarter of last year.
We continued to achieve strong efficiency gains over the prior year from our cost savings initiatives and leverage from higher sales. We achieved these gains while investing an additional 50 basis points in marketing, which was effective at driving incremental traffic to our restaurants. G&A was $23.7 million in the fourth quarter. Included in G&A was a $2.1 million cost related to the acceleration of our brand positioning work and $1.5 million related to leadership changes. Without those costs, Q4 G&A was approximately 1% lower than our expectations. During the quarter, we repurchased and retired approximately 234,000 shares of common stock at a cost of $8 million. Reflecting the progress on our plans and our cash flow growth expectations, our Board of Directors approved an increase in the repurchase program to $50 million. We currently have approximately $83 million available under our share repurchase program.
Turning to the balance sheet, we ended the fourth quarter with net debt of $40.4 million, comprised of a debt balance of $66.5 million less cash and equivalents of $26.1 million. This equates to a $7.7 million reduction in net debt from our balance at the end of Q3. Next, we provided our 2025 financial outlook today. We anticipate full-year comparable restaurant sales in the 2% to 3% range. This takes into account multiple third-party forecasts for both food-away-from-home and industry traffic, as well as our own idiosyncratic growth drivers. This forecast also accounts for recent sales trends, which have softened somewhat from Q4 2024 levels due to weather in certain markets and more general conservatism in consumer spending coming out of the holidays. Specific to Q1, we continue to deliver positive comp sales and traffic and continue to beat the Black Box index on both of those measures, though the spread has tightened since Q4.
We expect Q1 comp sales near 2%, which assumes the recent weather headwinds begin to moderate as we move through the remainder of the quarter, which has tended to be the case historically. Our full-year 2025 guidance assumes comp sales shifting higher in Q2 and Q3, similar to expected Q1 levels without the weather impact before moderating in Q4 as we lap our strongest comp sales from 2024. We expect restaurant-level operating profit in the $205 million to $215 million range and adjusted EBITDA of $127 million to $137 million. These profitability levels take into account a range of top-line scenarios, as well as our expectations for inflation and the initiatives planned for this year to drive increased profitability while investing to position BJ's brand for future success. We expect regular seasonality in our profitability and additional margin expansion in the second half as further margin-building initiatives are implemented.
We expect capital expenditures of $65 million to $75 million. In 2025, we plan to open one new restaurant and remodel up to 30 existing locations. By the end of 2025, approximately 60% of BJ's restaurants will either be recent prototypes or have been refreshed within the past four years as part of our ongoing remodel initiative. Our capital expenditures in 2025 related to future restaurant openings will depend on the speed at which we can develop a more robust and targeted pipeline that aligns with our refined criteria for new locations, as Lyle outlined. Finally, we expect to repurchase $40 million to $50 million of shares in 2025. Our increased repurchase program will provide ample capacity to execute our repurchase plan this year. In closing, we are proud of our fourth quarter results and the strong foundation we are building for sustainable, profitable growth. We have a clear path to sales and profit growth ahead, and our long-term strategy and the strong consumer appeal of the BJ brand position us well to continue building on our successes.
With strong and improving cash flow, expanding margins, and a healthy balance sheet, we are well-positioned to execute multiple initiatives aimed at enhancing shareholder value. Thank you for your time today, and we'll now open the call to your questions.
Questions and answers
The first question comes from Alex Slagle with Jefferies. Please go ahead.
Thanks. Congrats. Great to see the progress through the quarter. A couple of things I just want to clarify. First, on the restaurant-level profit guidance and the implication for restaurant-level margin, I guess if we assume revenues are up a little bit, maybe low single near mid-single-digits towards the lower end, really just given the unit growth. I mean, restaurant-level margin, should we assume them sort of flat to up 50, 60 basis points? Or how should we kind of clarify the margin implications?
Sure, Alex, and thanks for the question. As we look at the year ahead, we see a path to expand margins. So, in the range we gave on the upper end, it does imply margin expansion. Even on the lower end, a little bit of that expansion. And it really is across the categories of margin. We see opportunities in food cost, labor, and occupancy & operating. There is some reinvestment that's happening that helps us build traffic and continue to beat the industry. But net-net, we do see a path for margin expansion and are planning for it.
Okay. And the pricing expectations, you mentioned, I guess, the pricing lagged a little bit, the inflation. But if you could talk to what you're thinking on pricing and if you think that will be enough to offset the inflation?
Yes. As we look at just generally around comp right now, it's mostly driven by traffic. And getting into the components of check, there is pricing, and we have underpriced in terms of inflation. We like what that's showing in terms of our value scores, our different scores as we measure guest sentiment and how that's driving traffic. But also, just looking at mix shift, we are seeing some mix shift into things like the Pizookie Meal Deal. There is some negative mix shift in our off-premise channel still. So net-net, as we look at the forecast for this year, our expectations are that it's mostly driven by traffic. There will be some pricing in there. We'll price to offset inflation, but that's not a driver of where the margin improvement is coming from; instead, we're expecting our initiatives to be the main driver there.
Hey, Alex, Brad here, and I would just jump in as well that we have a lot of arrows in our quiver now marked around margins. So you're going to find us remaining agile there. We really want to build the total absolute dollars of profitability is what we're after. And so we've had some success already with that. We're going to continue to explore that. And so yes, the margin percentages are important, but we're more guided by the absolute dollars that we can drive, particularly when you look at our unit economics and very large boxes with high average unit volumes. As you saw in the fourth quarter, driving just a little bit of sales there provides leverage all the way down the P&L. You may not see it as much on food costs, given just where the cost structures are these days. But I think the real message to take away is there's a lot we can do. We're going to remain agile. We've learned a lot. We're still learning a lot more. But we're comfortable putting out guidance for the year in that range. And as the year develops, we'll update that. But I don't foresee any major changes to that right now.
Okay. Thanks for that.
The next question is from Todd Brooks with The Benchmark Company. Please go ahead.
Hey, good evening, guys, and congrats on just a really stellar fourth quarter. A couple of questions, if I may. One, with the success you talked about with some incremental marketing spend in the fourth quarter, how are you thinking about using marketing as a lever to drive traffic going into fiscal '25? And any thoughts on kind of a percentage claim on sales for marketing spend? Or is it more about different new tactics? If you could just kind of dig into that a little bit, that would be great.
Yeah. Thank you for the question. This is Lyle, by the way. First of all, we're still learning, right? We had obviously a great Q4, and I think as I've mentioned before, we saw outperformance in our media markets, and we saw even more outperformance in our non-California media markets where we have the bigger gap on awareness and consideration. So those things suggest there's headroom there, and we're going to take those learnings to shape what we're doing going forward. I would say at this point, though, strategically, we're not planning major shifts in our spend strategy. It's going to remain very targeted, looking at accelerating performance in California and some of our other kind of core markets where we have some lagging awareness and consideration. We're not going to suddenly compete for share of voice with some of the big national media spenders. We need to continue being efficient and selective about the spend.
I think given the share gains that we saw in Q4 and the outperformance in those media markets, I'm encouraged that we can be selective about where we focus our efforts. And once we get some more time under our belt, we can decide if we want to make any sort of material changes or acceleration there. From a channel perspective, it is helpful; we are not a big linear TV spender. We are looking for more efficient ways to reach our audience and spend our money effectively. So our broadcast strategy is more focused on connected TV versus linear and heavily invests in digital and social.
Okay, great. That’s helpful, thanks. And then you highlighted kind of core brand pillars that BJ's has been able to deliver for a long time, and then some emerging categories that you hope could expand into those brand pillars. If you think about what worked value-wise in Q4, especially around the Pizookie Meal Deal, are you delivering enough value based on the results? And I would argue that the results probably say, yes, we are, at least at that point in time in Q4. What are your thoughts on how to deliver value across fiscal '25? Is it about taking what worked in Q4 and continuing it in some sort of perpetuity here? Or are there other levers that you feel could be as impactful as the Pizookie Meal Deal was?
Yeah. Thank you for the question. I think it's probably a bit of a multifaceted answer. On your first part, is there more headroom with the Pizookie Meal Deal? We like what we're seeing in the Pizookie Meal Deal, and we appreciate the traffic it's generating. We're actually seeing that as people come in during the week, there's been a halo benefit in non-Pizookie Meal Deal categories, with some unit growth in other areas. People are coming in, with someone at the table ordering the Pizookie Meal Deal while someone else at the table is ordering different items. So we like that. We like what we've seen in terms of marketing overhang into the weekend, ensuring that we create awareness even when the deal is not active. We think there's more to be gained from the Pizookie Meal Deal. I think we also want to take this opportunity, as I mentioned in my remarks, to take a comprehensive look at our value strategy and promotional platforms so we can really lean into the successful elements while phasing out offerings that may not be performing as well.
Additionally, our value strategy combines the experience that we're delivering—the food experience and the service experience—over the price. What we need to do is continue to have options like the Pizookie Meal Deal for guests looking for that everyday value driven by price, while ensuring our premium handcrafted trade-ups meet high expectations for our guests looking for accessible splurges or treats. Therefore, value to me reflects a holistic occasion and is applied differently to various guests or cohorts.
Yes, that's great. And one more, and I'll jump back in queue. Tom, if you think about the commentary of expecting to get to 2% same-store sales in the first quarter, is there a way to quantify what's been lost to weather and potentially the fires in the California market in terms of either lost service days year-over-year or maybe alternatively, you often talk about how strong those tent-pole holidays are, which I believe Valentine's Day is a big one for the brand. Could you speak to either aspect, where we could assess the strength of the consumer absent these exogenous factors and understand that 2% without these headwinds reflects performance closer to mid-single-digits than low single-digits?
Yeah. Thanks for the question, Todd. The way I look at it, or we look at it, looking at January and the comp really when weather was a cleaner lap, that was closer to the higher end of our full year guidance. Since coming into February, we've seen a lot more weather impacts that have weighed on results. So there is— I've talked about this in the guidance, assuming that that moderates as we go through the quarter. But yes, there has been some worth probably over 100 basis points from the weather we've seen so far. There wasn't as much on the California fires as there were a couple of restaurants in close proximity. However, we saw some days impacted while we also experienced an influx of traffic in the restaurants. So net-net, nothing to report on the California-specific area, beyond what Brad mentioned about the excellent work by our teams in supporting the communities. But as for the comp, that won't have much of an impact in the quarter. It really comes down to how we navigate from here through the weather issues and come out stronger—that is where we see ourselves hitting back to the true run rate.
Thank you.
Thank you.
The next question is from Brian Mullan with Piper Sandler. Please go ahead.
Hey, thank you. Just a question on your simplification efforts. On the menu side, in the prepared remarks, one of the things you talked about was streamlining. So I'm guessing you see an opportunity to shrink the size of the menu. Do I have that right? If so, any sense of the scope or the magnitude of what you might be able to do? And then how much time do you think you would need before you would want to move forward with something like that?
Yeah, sure. This is Lyle again. So as we look at the menu and simplification, this isn't new for BJ's, but we have a concentration of items that do not have significant gross margin. So as you start to evaluate these items, you can identify opportunities to streamline those that aren’t unique to us from a brand equity perspective or may not yield satisfactory results commercially. I don't have a targeted number of items that we are looking to remove at this moment, but I do see the potential to ultimately streamline our menu. It is about creating room for new innovations and keeping news on our core platforms fresh. With everything in place, we do not have too much leeway to introduce new options. As we further delve into the menu to streamline items, we will find opportunities to innovate and build engagement. We anticipate starting this process roughly in the second half of this year, especially as we prep for some of our planned menu refreshes.
Okay. And then just a follow-up. I would be curious to know your assessment of the service levels in the stores right now. Assuming you can find efficiencies elsewhere, do you envision being able to put more labor hours in the front of the house? Or maybe that's not necessary? Just share some of your thoughts on this matter at BJ's right now.
Yeah, I would say this—what we hear from our research and brand work is that where we deliver great service, it becomes a significant differentiator for us. However, we are not meeting that standard consistently across all occasions. This is where simplifying processes and evaluating task saturation can take precedence because we need to make it easier for our teams to offer that exceptional experience reliably. I think I mentioned training—I'm a firm believer that our business runs through people, and our training approach needs to reflect that. Many team members have expressed the need for more shoulder-to-shoulder training. To address this gap, we've just launched new training for team members, and new manager training will follow suit. The feedback has been promising, as managers report improvements in hiring and retention in the first 90 days because our new team members are buddying up from the beginning, letting them quickly feel included in the community and perform better for our guests. Regarding labor, as we look ahead, we’re seeing an opportunity to allocate the right people to the right tasks at the appropriate times. We have the data support to evaluate peak hours and staffing needs; this is helping ensure we position our labor wisely.
Yeah. This is Brad. I just want to emphasize what Lyle was saying. Even though I'm in a different role, you can't take the finance guy out of my focus. To me, optimizing our hourly labor staff is essential. The potential of these larger volume boxes is significant, but we need to be cautious about merely cutting costs. There are many tools available today to optimize labor and ensure it's allocated in the right places at the right times, and that makes a true difference. In Q4, we added hourly labor, and we observed positive returns reflected not only in our service but also in consumer sentiment scores, indicating that this investment should bode well for future expectations. Thus, while we did add labor in Q4, we believe we are in a stronger position to optimize rather than cut our way to profitability.
Okay. Thank you both.
The next question is from Jeff Bernstein with Barclays. Please go ahead.
I've had that happen before, so I'm glad it wasn't me. So I guess a question on brand positioning. I follow the company long enough to remember when pizza and beer were the driving forces behind when people went to BJ's; that was the first thing you thought of. I'm curious—it's been a long time since I heard anybody update on where pizza and beer stand as a percent of the mix, either in California versus historicals or in newer markets, and where you believe those non-California markets stand in terms of perception.
Yeah. So let me—this is Lyle, by the way. I'll cover the last part of that question, and then Tom may follow up with the specifics. I firmly believe brands must operate from a position of authenticity and strength. Pizza and our craft beer, which has evolved into a craft beverage program—including our sodas and emerging cocktail offerings—remain core equities for us. The Pizookie is another strong equity for us. You have to build from solid positions. When thinking about associations by geography, in California, pizza is our primary association and traffic driver. Outside of California, while pizza remains a strong brand association, it isn't as significant a traffic driver. You may recall Tom mentioning changes regarding pizza pans. Another insight we've gained is that while pizza carries significant brand equity, we have opportunities to enhance consumer satisfaction concerning this product. Therefore, focusing on core strengths, one of our significant projects is renovating our pizza platform because we aim to create the same level of excitement we had in our early years. Thus, pizza is part of our mix; it has lost some weight over time due to the introduction of Slo Roast and steak offerings; however, it remains an important driver and is excellent for group occasions, yielding larger checks.
Thanks for that. There was a comment about a cautious consumer in the comp commentary for the first quarter. I just want to clarify if that was more of a statement reflecting consumer trends or if you are actually observing shifts in the menu or a more value-conscious decision-making process manifesting in your business for 2025?
Yeah, I mean, for now, we see resilience from the consumer perspective. We continue to see strength among 100,000-plus household guests, where we do well, but some softness exists below 50,000 households. Overall, we haven’t seen a significant shift in consumer behavior in the first quarter. January was particularly strong for us, aligning with the top end of guidance despite the New Year calendar shift. February, however, has seen more weather impacts. Therefore, it’s hard for us to pinpoint consumer behavior as a clear driver right now based on the data we have.
Okay. Thank you.
The next question is from Brian Bittner with Oppenheimer & Co. Please go ahead.
Hi, thanks, guys. This is Mike Tamas on for Brian. Congratulations on the strong results and the rapid progress against your priorities here. Regarding the journey from restaurant-level profits to your adjusted EBITDA guidance for '25, are you assuming that G&A holds flat or decreases slightly? Can you just discuss that?
Thanks, Michael. Yeah, if you think of 2024 in our G&A, there were some one-time items in there. We highlighted some that were Q4 specific around some extra consulting for brand positioning work and some leadership transition costs. Year-over-year, we're expecting G&A to decrease modestly.
Okay, thanks. And then, Tom, I want to clarify about the Q2 and Q3 commentary. You indicated comp should reflect 1Q without the weather headwind. So if you're at 2% in 1Q, like you discussed, adding back that 100 basis point headwind you mentioned yields roughly 3% for those quarters. Is that the right way to interpret it? I want to ensure we're aligned.
Yeah, generally, that's how we view the quarters. We were discussing comp here, and some seasonality influences the dollar of our restaurant-level sales and the margins as the flow-through occurs. We typically see the highest peak of restaurant-level cash flow percentage in Q2 around Mother's Day, Father's Day, and graduations—these are strong periods for us. We just saw robust performance over the Valentine's Day weekend. We're consistent in being a destination for large parties and celebrations. Therefore, we're expecting similar seasonality moving forward. However, regarding comps, we anticipate some higher returns for Q2 and Q3, given the current projection.
Perfect. Thanks so much.
Thank you.
The next question is from Jeff Bernstein with Barclays. Please go ahead.
Hi, thanks. This is Pratik on for Jeff. We appreciate you squeezing us in here as I got disconnected. I wanted to ask about the real estate pipeline—a bigger picture question. It’s clear you’re ramping up to open new units soon. In your prepared remarks, you spoke of updated criteria for these new units. Could you share the primary differences between the old and new criteria? Looking down the line to '26 and beyond, will you focus on infilling your existing markets, or are you exploring new markets, or will it be a mix?
Yeah, no problem. This is Lyle. We have studied and refined several site-specific criteria while looking at our unit pipeline and how to refill it. The two biggest factors we are focusing on are brand awareness—so markets where we have existing and/or growing brand awareness—and human capital, which ties into the above. These are markets where we have the management and team member bench strength to roll out restaurants swiftly. We will prioritize building out our pipeline in existing markets where the brand is strong and delivers decent performance, as opposed to venturing into new or greenfield markets in the short term. Looking at recent openings like Tracy, California and Cypress, Texas, reinforces this strategy as a winning one. We believe Queens Creek, Arizona will also support this upcoming restaurant opening.
That makes perfect sense. I appreciate that color. Just one more for Brad. You've been in the seat for about six months now. Have there been any high-level insights that have surprised you compared to your initial expectations? Could you point out any major opportunities for future value creation?
Yeah. Actually, a rush of ideas comes to mind. If I start back to the beginning, I find the brand and business model to be much healthier than I anticipated, which provides us with a much stronger foundation from which to build. I think many individuals overlook how expansive our locations are and the potential volumes they can produce, allowing for significant leverage in our operations. We are currently plotting out where the major opportunities lie, and Lyle and his leadership team are focused on identifying the right paths to pursue. I say this somewhat jokingly: our brand has been solid, but we have the potential to elevate it to a truly great level. I am optimistic about that. You heard Lyle lay out our near-term focus, but of course, new opportunities may arise as we seek to pursue our aims while remaining vigilant.
That’s much appreciated, and congrats on a strong result.
Thank you.
This concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.