Prepared remarks
Good day, and welcome to BJ's Restaurants Third Quarter 2025 Earnings Release Conference Call. 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 2025 third quarter investor conference call and webcast. After the market closed today, we released our financial results for our fiscal 2025 third 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 today's call with prepared remarks from Lyle Tick, our Chief Executive Officer and President; followed by Brad Richmond, one of our Board Directors. We also have Daniel Duran, 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. I'm happy to report our fifth consecutive quarter of sales and traffic growth as well as our fourth consecutive quarter of profit expansion. From a top-line perspective, Q3 delivered 0.5% same-store sales growth, which included a slow start to the quarter, as we discussed on the last call, with the remainder of the quarter averaging roughly plus 1.5% comp growth for the final 2 months, which has accelerated into Q4. On the profit side, we delivered 12.5% restaurant-level operating margins and 6.4% EBITDA margins, representing an improvement of 80 and 70 basis points, respectively, year-over-year. We have now lapped the launch of the Pizookie Meal Deal, and I'm pleased with the positive year-on-year momentum in the business that closed Q3 and has continued into Q4. In the last 6-plus weeks, our traffic is tracking at roughly plus 3.5% year-on-year, close to 9% on a 2-year basis, and outperforming Black Box casual dining benchmarks again. Our current performance trends, combined with a strong product calendar for the rest of Q4, anchored in our pizza refresh launching next week and 2 exciting seasonal Pizookies gives us confidence to reiterate full year top line guidance of approximately 2%. As I reflect on my first year with BJ's, I could not be more proud of the teams and I remain very pleased with our progress to date and energized about what we can achieve going forward. 2025 has been a year of building the foundations of a stronger and more consistent BJ's guided by our strategic priorities. We are better positioned today to leverage an incremental dollar of sales and win a return visit, and the improvement we're seeing across our guest, operational, and team member metrics gives me confidence in the durability of the progress we're making. Our restaurants are operating more effectively and efficiently, focusing on being great at what we call the table stakes, and both our guest satisfaction scores and team member retention metrics are at multiyear highs. Our ongoing simplification efforts and focus on gross to net have resulted in sustained double-digit improvements in comp food and beverage incidents, improving the guest and team member experience while removing over 0.5 million unnecessary POS clicks for our team members and counting. Our outlier program and drive for accountability have improved overall effectiveness and efficiency as reflected in our restaurant-level cash flow. We continue to build the Pizookie Meal Deal into an everyday value platform, resulting in continued improvements in our value scores and traffic, and we're beginning to see these improvements reflected with positive movement in our guest frequency metrics as we now begin to roll out product and experience improvements with our pizza refresh next week. Speaking specifically to Q3, we further embedded our Pizookie Meal Deal as a core value platform our guests can count on, leaned into the power of social media and seasonal Pizookies to drive brand momentum, and continued the journey of improvement on table stakes operations. Our strong year-on-year momentum since the Pizookie Meal Deal lap began can, I believe, be attributed to a combination of the foundational work I've talked about, as well as the continued refinement of our marketing strategies and tactics that are helping us codify how to most effectively drive the business. In Q3, we continued to shift our marketing focus towards social influencers and word of mouth. Given it's not our strategy to win a share of voice battle, our effort is increasingly focused on driving social dialogue and relevancy. I want to give a shout out to the marketing team for the great progress they're making. Our earned media impressions are up over 300% year-on-year. 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. We leaned into our All-American Smash Burger as a new feature on the Pizookie Meal Deal and garnered over 2 billion impressions on National Cheeseburger Day alone. On September 17, we also rolled our latest menu update and the Spooky Pizookie has been a social phenomenon. Again, the team has taken a more proactive approach to social and influencer engagement, driving a 350% increase in overall engagement and doubling overall impressions year-over-year, further codifying the role of seasonal Pizookies as both a buzz and traffic driver. In addition to the traction of the Spooky Pizookie, our other menu optimizations are resonating with our guests. The 22-ounce beer pour offering is seeing about a 23% pickup rate and helping to improve checks with beer attached. And the Brewhouse Sampler is a top 3 appetizer, resonating with guests while driving a premium trade-up. In Q3 and through October, our growth has continued to be traffic-driven with broadly flat to slightly down average check. Underlying this performance is an increase in frequency that is more than making up for any check compression. Double-clicking on check, there are 3 factors at play. Primarily, it's the increased traffic and number of checks driven by the growth of the Pizookie Meal Deal, which has continued into Q4. Additionally, the outsized growth we continue to see in late night, which carries a lower check, and continued pressure on alcohol beverage attachment are also contributing factors. On the margin side, our operators continue to do an excellent job making progress on the foundations of great operations and hospitality. Despite some choppiness in sales early in the quarter, they delivered another strong quarter of restaurant margin expansion by continuing to focus on the fundamentals. I want to thank all our teams from the restaurants through to the support center for the continued energy, passion, and commitment they show every day. As I look ahead through the rest of the year and into 2026, we remain focused on continuing to make progress across our 4 strategic priorities, and I'm excited about what is yet to come. Starting with the team member experience. Our team members are the heart and soul of BJ's. Our job is to make things easier and better for them, and the guests, and the rest follows suit. I come into this call having just hosted our GM Conference in Dallas 2 weeks ago, and the excitement and engagement was energizing and infectious. We spent 3 days together building alignment and ownership of our brand strategy, learning together and sharing best practices. We rolled out our new company values, which were informed by our engagement survey, co-developed by a cross-functional team, and will guide us in how we deliver on our brand promise every day. Our people and training teams led learning sessions that empower our directors of operations and general managers to bring these values back to their restaurants and bring them to life across the system. Maybe most importantly, we began the rollout of a comprehensive refresh to our manager and team member training that will be fully implemented across the system in Q1 2026. This new training establishes one best way for BJ's while also empowering general managers and team members to deliver Wow Hospitality. I think what resonated most with this training was it was created in partnership with our operations, people, and training teams and was authored by people who came up through the restaurants. With respect to handcrafted food and beverage, we continue to progress development across our priority categories, identify areas for simplification, and are now on the cusp of launching our first major renovation. On November 6, we'll be introducing the refreshed pizza platform across the system. The entire BJ's system is locked and loaded and can't wait to share the new product with our guests. Our team members love the product. And as Chris Pinsak, our Chief Operating Officer, and our senior operation leaders remind me, that is the foundation of creating excitement with our guests. We will ramp up the pizza refresh through the end of the year and through Q1, introducing our first LTO pizza product in over 5 years in Q1, continuing to drive engagement and excitement. We also have 2 exciting seasonal Pizookies launching in November with the Monkey Bread Pizookie coming back after much prodding from fans on social media and a Dubai Chocolate Pizookie and dessert martini taking advantage of this current trending flavor. As we head into 2026, our culinary priorities will be to continue to renovate our core categories, to refresh strong sellers with clear NPS and executional opportunities, and to continue work on simplification. In 2025, we have had a net reduction in menu items of 6. And in the January menu update, we will be removing 2 more items, eliminating 5 additional single-use SKUs. And then additional simplification will be primarily connected to the category refresh work throughout 2026. Our third priority is delivering Wow Hospitality. Our focus in 2026 is to build off the foundations we have laid and continue to improve guest satisfaction, throughput, and efficiency. We will continue to focus on great fundamentals and not ceding conquered ground by continuing to drive accountability through our directors of operations and general managers focused on lifting up our outliers and sharing best practices. As I mentioned earlier in our team member section, the new manager and hourly training is driving a one best way approach to the system, ensuring we're all pulling in the same direction and can deliver a consistent BJ's experience to our guests. Our simplification team continues to work day in and day out to remove unnecessary barriers, and this will be a continued process. Finally, we will advance our technology initiatives to help ensure we have the right people in the right place at the right time with our AI-driven activity-based labor model. This will be rolled out to 30% of our system by the start of 2026, and we're beginning to lay the groundwork for future use cases. In 2026, we will also continue to invest in our remodel program, which consistently has shown strong results, and pilot a refreshed BJ's prototype, setting the foundations to grow our restaurant portfolio in support of our fourth strategic pillar, keeping our atmosphere fresh. In 2025, we will complete 20 remodels, bringing the total to 72 over the past 3 years, impacting 50% of our pre-2016 fleet and are pleased with the value-accretive results we continue to see. In 2026, we will continue the program and are refining our 2026 remodel targets now. With the progress we're making on the core business, we're now laying the groundwork of reigniting new unit growth and have signed 2 leases with a number of deals in late-stage development. We're actively building a flexible pipeline as we target up to 2 new openings in the second half of '26 to pilot the refresh prototype and set the foundations for further growth in 2027 and beyond. As we drive towards a strong finish to 2025, we've made great progress in building the foundations of a stronger and more consistent BJ's and now are on the cusp of beginning to introduce product and experience improvements. I will wrap by reiterating what I believe are the 3 key themes coming out of Q3 and looking ahead. The first is continued progress. Q3 marks our fifth consecutive quarter of sales and traffic growth, along with our fourth consecutive quarter of profit expansion. The second is stronger foundations. All of our financial, consumer, and team member metrics continue to indicate that we're building a stronger and more durable BJ's. We are better positioned today to leverage an incremental dollar of sales and win a return visit. And the third is momentum. Since the lap of the Pizookie Meal Deal, we have seen increasing momentum and strong traffic-driven growth year-on-year. This momentum, combined with the strong product lineup through the end of the year with the pizza refresh and 2 seasonal Pizookies, gives us confidence in maintaining strong performance. Before I turn it over to Brad to take us through more detail on our Q3 financial performance and outlook, I'm excited to share that we have finalized an agreement with our next CFO, who brings deep restaurant industry experience and will be starting at BJ's in mid-December. You can expect more details in a public announcement next week. Given that, I also wanted to take a moment to thank Brad and the entire Board for their continued support, partnership, and guidance. It has and will continue to provide great value to me and the entire management team.
Thanks, Lyle, and good afternoon, everyone. As Lyle has just outlined, BJ's brand is healthy, thriving. During the third quarter, we achieved record sales and profitability levels we have not seen in over 6 years. The cash flow of the business is durable and growing to support our growth drivers with ample excess cash to repurchase shares when the market price is a meaningful discount to its intrinsic value. To the latter point, we repurchased and retired 996,000 common shares for $33.2 million during the third quarter. And for a year-to-date total of 1,838,000 common shares for $62.4 million. With the Board's authorization today for an additional $75 million in share repurchases, we have updated our 2025 annual share repurchase expectations from $45 million to $55 million to $65 million to $80 million. Importantly, our balance sheet remains healthy as we ended the third quarter with a net funded debt of $64.1 million, comprised of a debt balance of $89.5 million with cash and equivalents of $25.4 million. In the third quarter, we generated sales of $330 million, a 1.4% increase versus last year. On a comparable basis, Q3 sales increased by 0.5 percentage point, all driven by traffic growth. This quarter included a little over 2% of year-over-year pricing. The compression in check is driven by 3 factors: the outsized growth we continue to see in the late-night daypart and the Pizookie Meal Deal, both which carry a lower check. These comprised about half of the check compression. Continued pressure on alcohol beverage sales comprised the other half. However, to put the check conversation in a larger context, I would highlight that gross margin, that's check less food and beverage is up 90 basis points and margin after direct labor is up 130 basis points this year over last year. This is a testament to our menu and marketing team's management of the menu and our operations team's delivery of the menu. We achieved meaningful increases in our restaurant-level operating profit, adjusted EBITDA, and EPS. Lyle highlighted what I call the 4 drivers of this margin improvement. But to briefly recap, it's our focused efforts on table stakes, simplification, restaurant outliers, and the Pizookie Meal Deal platform. This has driven our restaurant-level operating returns to 12.5% in Q3, which represents an 80 basis point improvement year-over-year with our restaurant-level operating profit increasing 8.8% to $41.3 million. This included approximately 40 basis points year-over-year headwind on this line as we wrote down certain asset valuations this year that's included in the operating and other expense line. Our adjusted EBITDA margins reached 6.4% in Q3, which represents a 70 basis points improvement year-over-year with our adjusted EBITDA increasing 14.1% to $21.1 million. On a line item basis, our cost of sales was 25.7% in the quarter, which was 90 basis points favorable to a year ago. Food cost inflation was approximately 2% on a year-over-year basis, driven broadly by higher beef and seafood costs, partially offset by lower cost for bone-in chicken. Cost of sales also benefits from our 4 margin drivers. Labor and benefit expenses were 37.1% of sales in the quarter, which was flat to last year. Our restaurant teams continue to operate at a heightened level from better guest count forecasting, enabling better labor scheduling and then managing to that schedule. We leveraged hourly and management labor by approximately 50 basis points, but this progress was largely offset by accruals for higher anticipated medical cost inflation related to workers' compensation despite the progress in reducing the number and severity of claims. Occupancy and operating expenses, which includes marketing, was 24.7% of sales in the quarter, which was flat to the third quarter last year. Marketing costs increased by 10 basis points and sales leveraging offset the approximately 40 basis points of year-over-year headwind on the write-down of certain assets I mentioned earlier. General and administrative costs increased 40 basis points year-over-year, largely driven by investments in our strategy and a negative 20 basis points impact of mark-to-market accounting, which is fully offset below EBITDA and other income. Preopening costs declined 30 basis points from fewer new restaurant opening activities this year. Depreciation expense increased 20 basis points compared to last year, reflecting the remodel investment in our restaurants. And as Lyle has already mentioned, we reiterated our 2025 comp sales guidance of approximately plus 2%, restaurant-level operating profit of $211 million to $219 million, adjusted EBITDA of $132 million to $140 million, and capital expenditures of $65 million to $75 million. And as I mentioned earlier, we increased our expected share repurchases to $65 million to $80 million, depending on market conditions. Our earnings assumptions include an overall inflation increase from approximately 2% in the third quarter to the mid-2% in the fourth quarter. And with that, we'll take your questions.
Questions and answers
The first question comes from Alex Slagle with Jefferies.
I wanted to ask about the drivers of the acceleration in traffic. And it looks like the back half of September and into October, just kind of runs opposite of what some others have seen in the benchmarks show. So just maybe you could expand on that a little bit more on what drove that acceleration.
Yes. Sure, Alex. Thank you. It's Lyle. As we're looking at it year-on-year, there's a couple of things that I would point to. I think there's kind of a combination of factors that go into it. Some of it, I believe, is some of the foundational stuff that I've talked about on the past several calls. We're seeing improvement in guest metrics, improvement in satisfaction, improvement in value. And eventually, you expect to see that starting to come through in frequency, and we're starting to see those frequency numbers improve across income cohorts and age cohorts. So that kind of works together. The Pizookie Meal Deal has continued to grow. So as we came into the lap, the numbers that we were seeing coming into the lap that I think we alluded to probably last quarter is that PMD continued to grow. We continue to see more people coming into it and more frequency. So it gave us confidence going into that. And then I mentioned the marketing and the lean on the social side. I wouldn't underestimate that increase in social dialogue and buzz and influencer engagement. I'd say the 2 kind of main platforms for that were the Pizookie Meal Deal and the Smash Burger. But really, the Spooky Pizookie was really a phenomenon this year and the team leaned in, and it really gained a lot of traction on social. And I think that resonated. And we saw it coming through, obviously, in traffic, but we also see that in the rise in Spooky Pizookie incidents. So we kind of can see that correlation there that helps us point to that.
Interesting. And I guess you've been here a year and I guess, started the CEO role in June, but kind of curious if there's anything in the business that's surprising you now or just shaking out a little bit different than you expected coming in?
I don't know if there's anything that is particularly surprising. I mean, look, I'll tell you, I'm pleased with the performance we're seeing and the level of acceleration we're seeing in the business recently. I think the team came together, did the hard work on the strategy and the priorities, and we're remaining kind of guided by that and trying to keep ourselves focused on what matters and continue to build a stronger business, right, over time. And so I'm pleased with the progress we've made. I'm pleased with the progress the team has made, and I'm excited about where we're going with the business right now.
The next question comes from Brian Bittner with Oppenheimer.
Congratulations on solid results. You clearly have reiterated the guidance for full year same-store sales. And you also said that the 1.5% comps you were seeing towards the end of the third quarter accelerated into the fourth quarter. And getting to that kind of 2% range for the full year would suggest something in the fourth quarter that is closer to like the 3% range. So I'm just trying to level set because there's a lot of outcomes for 4Q to get roughly 2%. Is kind of the 3% range the right way to think about the fourth quarter?
Thank you, Brian. As we're looking at our models and kind of where we're at today as we speak and how we're rolling things forward, we're looking at about 2% to 2.5% growth, and that will land us right around that 2% for the year.
And that's still incredibly impressive, the acceleration, given what we're seeing. And just elaborating on Alex's question, I'm just trying to understand what's going on. Are you guys just not seeing any pullback in consumer behavior? Are you not seeing in your data and insights any changes in frequency or anything like that, that basically everyone else is talking about?
We are observing an increase in frequency across all age and income groups, which is leading to a rise in overall average spending per customer within those segments. While we are experiencing some check compression across these cohorts, the increase in frequency more than compensates for it. For the lower-income group, frequency gains are stronger but accompanied by a bit more compression, whereas for the higher-income group, we see less frequency gain and milder check compression, with no significant differences between the two. On the age demographic front, both older and younger consumers are showing higher frequency along with some compression. In between, we see increased frequency to a lesser extent and reduced average checks. This trend suggests that the higher frequency and spending in certain cohorts indicate a stronger engagement with our products. Overall, increased frequency is also leading to more incremental spending occasions, which reflects positively on what we're observing. I am pleased with these developments and the underlying dynamics.
No, it certainly suggests the foundational work you've been doing on the brand is working.
Our next question comes from Jeffrey Bernstein with Barclays.
A couple of things you touched on from the unit side of things. The first one was on the remodels. It sounds like you're still on track for the 20 in '25. And I think you said that's 50% of your class of units opened prior to 2016. I'm wondering if you can give us an update in terms of the cost of these remodels, maybe the sales lift, and how many you think you might do in 2026 as you move towards presumably 100% of those stores opened more than 9 years ago? And then I have one follow-up.
Yes. I mean what I'll tell you is on the remodels, we continue to see a return that we're pleased with, which gives us confidence that it is a good use of our capital to continue to invest in the remodel program. As I look into 2026, we're definitely going to continue the program. I'd say it might be at somewhat of a moderated pace next year as we start to also get the refreshed prototype out there and then apply those elements to the remodel. And then as we gain a little bit of experience with that, I think returning to that pace of, like we're doing this year, 20 to 25-plus remodel units as we work through the rest of them. So I feel really good about the program. I want to do a little bit of learning with the new prototype and then accelerate again. But we're going to continue it next year.
You mentioned a potential reacceleration in growth from new units, with two possibly opening in the second half of '26. I'm curious about your thoughts on the ramp-up in '27 and beyond, given the abundant opportunities across the U.S. What do you see as the constraints to that growth? It seems like you have plenty of opportunities, but are there limitations related to staffing, real estate, or operations? How do you envision your plans for '27 and the years following?
Yes, part of our strategy involves building the pipeline, which we are currently working on. Another crucial element is establishing confidence in our prototype and ensuring a good return on investment. I anticipate that by the end of 2026, we will take a significant step forward, and by 2028, we should see our full operational capacity return. From a geographic perspective, we will concentrate on areas where we already have a presence. We plan to expand in markets where we need to increase our density to enhance awareness and business consideration, or where we can grow our existing locations. This strategy allows us to leverage our management and supply chain infrastructure more effectively. We will eventually enter new markets, but we prefer to develop our current areas first rather than scatter our efforts. We have many markets where we only have a few restaurants, so you'll notice some new leases in states like Arizona, Pennsylvania, and Illinois as we grow from our existing locations.
The next question comes from Sharon Zackfia with William Blair.
As we think about those 2 new locations and 2 new prototypes for next year, are there any key changes that we should be looking for either in the size of the box or the features of the box that you're really keen to explore?
As we evaluate the new design, we initially focused on whether the environment aligns with our branding and overall identity. We want it to feel welcoming to our current customers while also appealing to newcomers and evolving BJ's for a new generation. I believe we have the chance to create a lighter atmosphere in our prototype. I strongly support the idea of getting the size, cost, and location right. You'll notice prototypes that clearly reflect what defines BJ's, with consistent design elements recognizable across all locations. However, we'll adapt these elements based on market specifics and varying sizes and costs. In some areas, we might explore converting existing spaces instead of starting from scratch. Our goal is to define the essence of BJ's and apply it in a flexible manner to ensure a solid return on investment.
Can I ask a follow-up about the revamped pizza launch? As you introduce this, how should we consider its impact on check size? Since you already offer pizzas, I'm curious about your expectations for the attach rate or incident rate to increase. I assume this will provide more value to consumers compared to everyone ordering individual entrees. I'm interested in how you foresee this developing and whether you will position it as an additional value offering alongside the PMD.
Yes, sure. I think pizza inherently does provide a value and fills kind of a different occasion for people, which is really nice. And so I think it's historically played that role. But I think as the pizza kind of quality and satisfaction eroded, it did that less effectively. And so part of what we're doing is refreshing the pizza to help it play the role it's supposed to play in our menu more effectively going forward. I think when you look at kind of the way I think about pizza, it's a core product improvement that I would expect to kind of build over time as we drive trial. And I think of it as just another layer in building a stronger, more sustainable BJ's and kind of working in combination with the other improvements we talked about. So what I don't expect is like a short-term inflection point in short-term performance, but rather another layer in building kind of sustainable growth over time.
And this is Daniel. I'll expand on that just a little bit here. In terms of the check, what we've seen in the test locations is we've actually seen a little bit of an uptick in our average check in those locations versus control. Part of that is, I think we mentioned previously that we're seeing about a 10% uplift in our pizza incidence overall. So just kind of wanted to add a little color so you get a little more clear answer there around kind of what we're anticipating to happen with our check there.
The next question comes from Todd Brooks with Benchmark.
First question, Lyle, you mentioned that you've been here for a year and spoke about the foundational improvements made during that time. Regarding unit growth, we're noticing some potential on the culinary side. With a year of foundation building behind you, how is the brand better positioned to be proactive as we move into '26? Are there other areas where we should expect you to assert yourselves more in the business instead of just focusing on stabilization?
I am quite pleased with the momentum we have and the work we've accomplished. I refer to it as foundational because it is focused on creating a better, more sustainable, and more appealing BJ's. As we consider moving forward, this relates to the product and experience enhancements I mentioned. The two main drivers for this will be our ongoing menu renovations next year, where we'll shift our focus toward non-pizza categories, and the new prototype we are developing. Strengthening our foundation enables us to explore new ideas in our restaurants, and our teams will be ready to implement these changes effectively. Additionally, as we solidify our foundations and operate more efficiently, it empowers our general managers and team members to provide more valuable hospitality. With more systematic processes in place, they will be able to deliver a higher level of service, which is crucial in our industry.
And my final question. You spoke on the last call about the Pizookie Meal Deal evolving the platform to have some add-on and kind of check builder type of capabilities for customers that are accessing there. Just wondering, A, success that you've seen with that, any other iterations that you're looking at with the program? And how are the teams doing from a front-of-house standpoint kind of selling that ability to build a higher check on that platform?
Overall, PMD is growing not only in frequency and attachment but also in the average check amount. However, I wouldn't say we have fully mastered it yet. The full-size Pizookie upsell has been easier for our team members to promote at dinner compared to lunch. Other add-ons we have introduced so far haven't gained much traction. The Smash Burger has generated significant momentum and attention for the Pizookie Meal Deal, which is encouraging. We're still exploring the next steps for add-ons, check building, and menu refresh for PMD, with plans to test and implement those changes in 2026. While we are seeing some early success, I don't think we should take too much credit just yet.
The next question comes from Brian Mullan with Piper Sandler.
I wanted to revisit the pizza launch. In the test locations you mentioned earlier, were you actively working to raise awareness, or did the increases occur naturally? Additionally, could you elaborate on your strategy to create awareness when it launches next week, whether through social media or in-restaurant initiatives?
Yes, certainly. In the test market, the awareness was primarily organic. We have a good understanding of our loyal customers who frequently visit our restaurants, so we communicated with those loyalty members associated with those locations. However, there wasn't any significant proactive marketing for pizza outside of in-restaurant displays. I mentioned previously that our team members really enjoy it, and when they do, it translates into them promoting it and customers noticing it. All these elements will remain in place as we expand. For our broader rollout, we plan to implement external marketing driven by social media, public relations, and influencers. Our strategy focuses on word of mouth, encouraging people to try the product and talk about it. We will also conduct sampling at restaurants to ensure we are promoting trial. So, while we'll be engaging in marketing, it will be centered around social influence and word-of-mouth efforts.
And then just a question on the share repurchase activity, notable step-up here in the third quarter. As you evaluate whether or not you want to continue with that moving forward, is there a leverage target we should keep in mind, whether it could be a turn of debt, maybe it's something different? Just any color on the philosophy or the parameters from here?
This is Brad. I would say, no. I mean, if you look at our balance sheet, you look at our debt levels, we have plenty of capacity. So if the situation presents itself, we'll continue to buy at a heavy rate. But also, we will keep some dry powder, if you will, because we're on the cusp of ramping up new unit growth. We'll get back to a brisk pace on remodel. So we want to keep some powder for that. But even with that said, there's a lot of capacity to do that. And so we'll gauge that as each day goes by, but we don't feel constrained at this point.
The last question comes from Jon Tower with Citi.
Maybe just a few quick ones, if I may. First, obviously, you had mentioned that you're seeing a bit of check pressure, particularly from the higher mix of PMD rolling through the business today. But I'm just curious from another perspective, how are you thinking about that informing your pricing power going forward? And frankly, how you're thinking about pricing over the next 12 months and the broader menu?
Yes. As we consider pricing moving forward, I want to take a step back. The approach we’re taking is to focus on the value we provide. We need to assess whether our product and experience justify the price and if we are delivering a worthwhile experience during special occasions. Price is a factor, but it's not the only consideration. What I appreciate right now is that our value scores are increasing, our guest metrics are improving, and we are experiencing growth in traffic. We are clearly finding a good balance at this time. Additionally, as guest satisfaction and value scores rise, if we continue to meet those expectations, I believe we will identify pricing opportunities, particularly with the Pizookie Meal Deal and Daily Brewhouse Specials. These offerings provide certain consumers with a way to engage in social splurges, whether through PMD, pizza, or steak. It’s important for all these elements to work together. Furthermore, as we approach next year and consider category refreshes, I am focusing on category and revenue management to create upsell opportunities and encourage better mix. There are numerous strategies I plan to employ as we move forward to enhance our sales. Pricing will be part of that strategy, but we will approach it carefully while monitoring guest and value metrics. Yes, we believe we have some pricing power, but we want to be cautious to ensure we maintain traffic and positive scores. As long as we can leverage that effectively in our profit and loss statements, which we have been doing consistently, I feel optimistic about our situation.
Could you provide an update on your digital and off-premise business? You've mentioned in the past that there was potential to enhance the online presentation for guests. I'm interested to know where you currently stand in that process.
Yes, that will be one of our priorities for 2026. It's a comprehensive effort to enhance our off-premise operations. It begins with addressing issues of missing and incorrect data, which we are already working on, even if it's not very visible right now. We've been making adjustments to our KDS and how products are presented in our restaurants for our off-premise teams and cooks, leading to improvements in our M&I, which is encouraging. As we establish a stronger foundation, we can focus on consumer-facing improvements. These enhancements include reducing friction in our digital consumer flow by optimizing the technological aspects and merchandising, ensuring that relevant off-premise items are prioritized rather than presenting the entire menu. There are many opportunities for improvement that we will tackle next year, but they needed to be sequenced in our priorities this year. Therefore, 2026 is when we will really start to see progress in these areas.
And then just last one, bookkeeping. Fourth quarter, obviously, you gave some commentary on where you think comps might shake out. But is that accounting for some of the calendar shifts? I know Halloween hits this Friday versus, I think it was a Thursday last year. And then I think New Year's Eve falls out of the fourth quarter for you guys this year.
Yes. Jon, this is Daniel. That's correct. Our guidance there accounts for all the holiday shifts that you just called out. So you can take kind of the full quarter adjusted for those holiday shifts.
This concludes the question-and-answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.
Thank you, everyone.