Huntington Beach-based BJ’s Restaurants Inc. has used new menu items, deft marketing and solid management to defy an industry downturn, racking up steady gains in sales and profits amid challenging times for the mid-level casual dining segment.
Tactics have included everything from new uniforms for workers—who now greet customers in contemporary black T-shirts rather than button downs—to updated fabric booths and new comfort foods such as meatloaf sandwiches.
BJ’s, known for deep-dish pizza, pasta, salads, steaks, desserts and specialty beers, has made tweaks because of the industry’s downturn.
It offered a new take on its popular Pizookie desert—a cookie with ice cream served in a pizza dish. The Pizookie Trio offers three smaller pieces of the dish, making it easier to trim the bill by sharing.
The chain’s also dedicated more space to tables for two as the economy has cut into larger parties.
All of that has come as many of BJ’s competitors reacted to the economic slowdown by cutting costs—trimming their number of servers and shift managers, cutting innovations for their menus, deferring repairs and maintenance and reducing employee benefits.
“We did none of those things,” BJ’s Chief Executive Jerry Deitchle said. “In fact, we continued to make prudent investments in the quality of our food, our facilities and our service to further distance ourselves from our chain competitors.”
Rivals include Glendale-based DineEquity Inc.’s Applebee’s, Calabasas-based Cheese-cake Factory Inc., Irvine’s Yard House USA Inc. and others.
Results
BJ’s moves have kept same-store and overall sales growing. Profits have followed suit.
The company reported $5.5 million in third-quarter profits, up 71% from a year earlier and topping the $4.4. million expected by Wall Street analysts.
Sales were $128.8 million, up 24%.
Same-store sales for restaurants open at least a year were up 5.8% for the nine months through September from a year earlier.
BJ’s shares are up more than 50% so far this year with a market value of nearly $900 million last week.
Some analysts have said they don’t expect to see much more in the way of upside for the stock, saying BJ’s shares already reflect continued business gains expected next year.
The chain now is talking about tripling its size to 300 restaurants in coming years.
For now, BJ’s is sticking to a steady approach. This year, it has opened 10 restaurants, surpassing the 100 mark as other chains have scaled back expansion plans.
Plans for 2011 call for 10 to 15 more restaurants, according Deitchle.
“We currently believe that 2011 will be another year of profitable expansion for BJ’s,” he said.
Business has been strong in Texas, where the economy is faring better than the rest of the country, as well as in hard-hit California, according to Deitchle.
The chain also has restaurants in Nevada, Arizona, Colorado, Oklahoma, Texas, Louisiana, Indiana, Ohio, Kentucky and Florida.
BJ’s plan calls for expansion in existing markets with room to poke into new areas.
The company’s gains come as many of the big players in casual dining chains have curtailed expansion plans amid an extended downturn for the segment.
Cypress-based Real Mex Restaurants Inc., which operates Acapulco, Chevys Fresh Mex, El Torito Grill and other chains, has halted plans for new restaurants in 2011. Irvine-based Claim Jumper Restaurants LLC also is on hold as it looks to emerge from a bankruptcy filing.
“Most of the established casual dining chains have long passed their major expansion periods and are not opening as many new restaurants as they once did,” Deitchle said.
He’s not taking the trend as a signal to relax. BJ’s has seen competition increase from local and regional restaurants looking to expand into full-blown chains, he said.
“There are a handful of emerging local and regional concepts that are beginning to expand and they compete for some of the same sites that we do,” Deitchle said.
BJ’s also has worked hard to bolster its balance sheet during the downturn.
“We have a very strong balance sheet, backed up with about $40 million and investments on hand, no funded debt and a steadily growing cash flow from operations,” Deitchle said. “The industry is currently populated with literally thousands of chain restaurants that, frankly, reflect over-expansion during the past couple decades.”
The combination of dining room and back-room management through the downturn puts BJ’s in a position to continue growth in a competitive segment of an industry that’s inherently vulnerable to economic conditions, according to Deitchle.
“While consumer demand for casual dining occasions may not continue to grow at the rate that it did during the past couple of decades, we believe that the $80 billion market for casual dining is not going to go away anytime soon,” he said.
Deitchle added that he expects that the chain’s restaurants near shopping centers and a relatively busy holiday shopping season will bring a strong final quarter for the year.
“We are looking forward to the prospects of a more favorable 2010 holiday selling season in general compared to last year’s,” Deitchle said.
