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18. BJ’s RESTAURANTS INC.

Is it the pizza or the beer?

Whichever is drawing the crowd, Huntington Beach-based BJ’s Restaurants Inc. has been busy,growing sales 148% during the past three years ended June.

Revenue for the 12 months through June stood at $278.2 million, versus the $112 million generated three years ago. It ranks No. 18 on our list of the fastest-growing public companies.

A few things are behind the growth.

The company reported 43 consecutive quarters of sales gains at restaurants open at least a year, according to Chief Executive Gerald Deitchle. Annual sales per restaurant range from $4.5 million to $5.5 million. Last year, BJ’s same-store sales grew 5.8%.

It posted a 37% increase in second-quarter revenue to $79.3 million, compared to the previous year. Profit jumped 40% to $3.3 million. Same-store sales rose 7.5% during the quarter.

The chain’s also been pushing new restaurants.

In March, BJ’s entered the Midwest and Southeast, with restaurants in Columbus, Ohio, and Tampa, Fla.

The plan is to expand in those two regions, Deitchle said.

It now has more than 60 restaurants in 10 states, up from 30 in 2002.

This year, plans called for 13 more to open. In 2008, the company’s set to see 15 more restaurants.

Entering new markets is always risky, Deitchle said.

BJ’s wants to avoid becoming one of the many restaurant chains that have fumbled while growing rapidly, he said.

The company plans to open more restaurants in California, Texas, Arizona, Nevada and Colorado during the next five years.

BJ’s is looking at going into urban areas. Its first urban restaurant in California is set to open this year in a large office tower in Glendale. If that location does well, BJ’s will look at opening more restaurants in urban locations, Deitchle said.

To help fund its growth plans, the company raised $61.5 million in November by selling 3.1 million shares in a private placement to new and existing investors.

BJ’s has found favor with customers.

It attracts diners by offering an upscale dining experience at an affordable price, according to Deitchle.

Restaurants typically feature a big menu with $11 to $12 entrees, on par with a Chili’s or Applebee’s.

Keeping the menu,which boasts deep-dish pizza, pasta, salads, steak and sandwiches,reasonably priced is key, he said.

“We’re trying to provide a higher quality experience yet still keep our average check at about $11.60 per guest,” Deitchle said.

Specializing in pizza,about 16% of the company’s sales,and beer, which accounts for 11%, has its perks, according to Deitchle.

The two offer gross profit margins of about 80%, he said. That helps the company keep prices low and allows it to invest in upgrading food and ambiance, he said.

Upgrades include new menu items, flat-screen TVs, updated silverware, china, glasses and uniforms as well as incorporating high-technology software to help restaurants run more efficiently, Deitchle said.

It also helps BJ’s appeal to two types of guests: those on a budget and guests with higher incomes, he said.

“BJ’s is the middle of the fairway. We have a dual appeal,” he said.

BJ’s started in 1978 in Santa Ana with one small pizzeria serving deep-dish, Chicago-style pizza. The idea evolved through the years under BJ’s current co-chairmen, Paul Motenko and Jeremiah Hennessy, who bought the chain in 1995.

In 1996 the company opened its first restaurant with a brewery in Brea, about the same time it went public.

The brewery concept took off and the company opened a few more with breweries. Most don’t have their own beer-making capabilities now. The restaurants are typically 8,500 square feet with high ceilings, brick walls and flat-screen TVs.

BJ’s biggest obstacles going forward include finding qualified workers and keeping up with beer production.

It’s in the midst of tackling how it will handle beer production as it expands into other states.

States have different laws that dictate where beer can be brewed and the company has found that centralizing its beer production improves its quality and consistency.

A good chunk of BJ’s beer production is at its Reno, Nev., restaurant, which can produce 15,000 barrels a year.

BJ’s other breweries produce about 5,000 barrels a year.

As the company opens more restaurants, it plans to outsource more of its beer production.

BJ’s makes 85% of its beer and contracts for the other 15%. It provides the brew contractor with BJ’s recipes.

Companywide, BJ’s employs more than 8,291.

Adding 60 or so restaurants during the next several years will require the company to find an equal number of general managers, a handful of area directors and another regional vice president, Deitchle said.


THE NUMBERS

Three-year growth: 148%

Yearly sales through June 30: $278.2 million

Yearly profit: $10.1 million

Market value: $510 million

Employees: 8,291, 1,315 in OC

Company: restaurant chain

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