BJ's Restaurants, Inc. (BJRI) Earnings Call Transcript & Summary

Good morning, everyone. Welcome everyone to BJ's 2023 Investor Day. I would like to welcome those that are listening on the webcast today. For those of you that who do not know me, I think everybody does, I'm Greg Levin, I'm the Chief Executive Officer and President since 2005. I came on as CFO at that time. [indiscernible]. And just over a few years ago, just kind of 2021, I gotten the role as CEO. I'd like to thank those that came out to dinner last night. Yes, really, [ the pre ] some of the things that we've been talking about today, how we [indiscernible] program to really further differentiating BJ's, really want to kind of be different than the other casual dining restaurant chains out there. You also have to experience one of our dinners. Again, it's something very uniquely and differentiated at BJ's where we get [ a peek ] at some of our proprietary beers that are made by our [indiscernible]. This is something that's unique to BJ's. It's something that cannot be easily replicated by others. Now our goal today is to lay out a [ 3-year ] strategy for the company and to [ build momentum ] we are making today that [ create pathway ] for accelerating new restaurant growth and growing shareholder value over time. We will encompass what we're working on right now and how that will drive comp sales for BJ's. We'll go over our plan to simplify and optimize to improve our margins but also, where we're reinvesting back [indiscernible] to drive differentiation so that we continue to be a better competitive alternative. By focusing on this plan, we will continue to see margin improvement in our business, better operational execution and better overall hospitality for our guests. There's ultimately increase in cash flow in our business. It really give us this opportunity to [ unleash ] BJ's Restaurants growth. All right. Let me get started. [indiscernible] will include forward-looking statements [indiscernible] risks and uncertainties [ and have everybody look at ] SEC filings in regards to those forward-looking statements that we have. Now today's agenda. We will start today by giving a broader overview of our strategy. From there, we'll have [indiscernible] from Heidi Rogers, our Senior Vice President of Marketing to provide that [indiscernible]; Putnam Shin, our Chief Growth & Innovation Officer, who'll discuss culinary innovation, I think the 2 you saw last night and other sales growth overlays we have for BJ's; Chris Pinsak, our Chief People Officer -- our Chief Restaurant Operations Officer will actually talk about our people strategy and how we're winning with gracious hospitality, driving [ improved efficiencies and improved margins ]; Greg Lynds, our Chief Development Officer, is going to discuss our remodel program. He'll discuss the success we're having with our new restaurants and also the opportunity to build more restaurants; After that, we'll pass it to Tom Houdek, our Chief Financial Officer and Tom will discuss [indiscernible] including margins. And I think he'll discuss [indiscernible] manifest itself into a long-term financial strategy and how that will grow shareholder value. After Tom is finished, we'll open up for Q&A. So our strategy that we're going to talk about today is rooted in our guest research that we did back in 2020 and 2021. At that time, [ there's numerous opportunities ] to better understand why [indiscernible]. And for those focus group, we developed our [ content asset ] project. [Technical Difficulty] All right. So today, we're going to talk about our strategy here, which included [indiscernible] to get folks to get back to 2020 and 2021. And at that time, we had numerous focus groups to really to understand why is that [ unique to BJ's ]? Why do they come into our restaurants? And with those focus group, we developed something called [ content asset ] project, and that helped us define our [ vision and strategic pillars ] that will really going to drive shareholder value going forward. The core of our strategy that we'll talk about today is going to be based on how we can double down on this learning and really grow sales, improve operations and eventually get [ active restaurant ]. [ That research has stated ] specifically how we approach culinary and how we look at branding and marketing, how we look at hospitality and service for our guests. And it influences our restaurant design and the ambience for BJ's going forward. Now for walking away with 3 things today, these are today's key messages. First, we have a very clear vision and strategy to drive sales based on our guest focus work. We have initiatives in place to improve margins, and we're already seeing the fruits of that by our margin improvement initiatives. And with those 2, that's going to allow us to accelerate restaurant growth. So again, if you think about it, we've got one, clear vision to drive strategy; two, initiatives to improve margins. Those 2 together will allow us to accelerate new restaurant growth. And believe me, we have a tremendous opportunity to go from 217 restaurants today to over double over time. We believe those 3 key areas: driving sales, improving margins, building quality new restaurants with the right ROI that will create meaningful shareholder value over time. Now before I jump into our strategic pillars, let me remind everyone what a strong concept BJ's is. Today, we have 217 restaurants. Our restaurant is a little bit larger in format, they're 7,000-plus square feet. We opened 5 new restaurants this past year, our first one in the state of Illinois, and we believe we have potential for 425-plus restaurants over time. Our restaurants are very contemporary. They are high quality. It's what we call polished casual. And polished casual brings us above casual dining, the mass casual dining, but a little bit below the upscale casual dining. We are a place that's really an experiential dining or social dining occasion where we're almost the event of the evening. We have this broad menu. But at the same time, we have signature menu items. The signature menu items include things like our world-famous Pizookie dessert, our beer, our brewing prowess, also our slow roast items as well as our Southern California take on deep dish pizza. Our average restaurants generate over $6 million in sales and includes $1 million in off-premise today. And we did this with a per person average of around $20. Now what that means is we bring a lot of guest traffic into our restaurants. A lot of people are coming in at $20 average check to generate $6 million in sales. Traditionally, our sales are 25% at lunch and 50% at dinner, but we do 25% of our sales in the midafternoon and late night. So we have these 4 day parts. And late night, it's an area that we really own in casual dining. It's been a strong comp sales driver for us currently, and we expect it to be a strong comp sales driver for us going forward, especially as consumers continue to normalize to pre-COVID routines. Now for those that haven't seen some of the things we're getting -- that we've been doing, I'm going to show a quick update of all the initiatives and things that we've been working on over this last year to give everybody's update in regards to how we're building momentum today at BJ's. [Presentation]

All right. Before we get into some of our specifics in regards to our specific strategies, let me level set everyone regarding the size of the industry we play in. The U.S. casual dining industry, it's about a $200 billion industry, and it's really part of today's social fabric. It's a place for people to go and gather and socialize. It's an affordable luxury. It's a place where people get to be taken care of. It's also a highly fragmented industry. The top 25 brands, they only make up 23% of the $200 billion in sales. But size and scale does matter, the large players continue to take market share because, frankly, they can invest in technology. They can build awareness. They can manage the supply chain. They can manage inflation and labor. And even through COVID, the large players actually grew their market share, they grew their size, while the independent and smaller actually closed up shops. And going forward, the larger players will continue to take market share. So what does this mean for BJ's? Well, it allows us to, one, play in this very large sandbox. And it's a sandbox that's frankly dominated by a lot of concepts that came to maturity in the 1990s and 2000s that over time have lost a little bit of their relevancy with their guests. It also -- it allows us this continued opportunity to take market share from these larger players, but it also allows us to take market share from the smaller independent players that, frankly, can invest back into the technology or in the systems or to manage inflation in the current environment. Additionally, our polished casual brand positioning, it allows us to kind of pull guests up from the mass market players that, again, kind of lost a little bit of their relevancy in their differentiation. And at the same time, it allows us to take guests down that are going to some of the higher end, more expensive casual dining restaurants, come to BJ's for a more affordable dining experience. And frankly, just as good of an experience. So when we think about this, think about this large sandbox, it's not about growing in a fast-growing market. It's about growing by taking market share from all the other players in the industry in this $200 billion industry. Now the thing I love about this is BJ's has a history of doing this. Pre-COVID from 2015 to 2019, 18 out of 20 quarters, we beat Black Box in comp sales. Post-COVID, in this last quarter, a few weeks ago, Q3 '23 marked our tenth consecutive quarter of beating the industry in comp sales. And we're doing this with a higher weekly sales average than traditional casual dining. Our sales average is about 60% higher than the average in casual dining. We're doing about $120,000 a week to around $75,000 a week. On the other side of this, we've always been able to build restaurants. We had from about 20 years, we had a 10% CAGR in regards to adding new restaurants. So this growth mindset, building new restaurants, it's in our DNA, and we have the systems in place to grow our new restaurants. But we've always done it at the right time and with the right quality. So bottom line is at BJ's we know how to grow restaurants. So as I said before, it's not about growing in a fast-growing market. It's about taking market share in this large, fragmented $200 billion industry that's part of today's social fabric. And we already have this proven concept that's got size and has scale. We're doing this in 30 -- 30 markets today and we've proven it in numerous different demographics. So thinking about our specific strategy. As I opened up today, I talked about the strategy is rooted in a guest research we did back in 2020 and 2021. In casual dining, it really comes down to these 3 things. It's the product, which is the food and beverage. It's the people on how they take care of their guests within the restaurant. And it's the ambience, it's the energy that comes from the building itself. Now through all this research we did, it helped us define where we differentiate in each of the areas so that we can lean into each of those areas. So we can lean into the food. We can lean into our beverage, our people and our ambience and harness that differentiation to frankly widen the moat and become a better competitive alternative from the other restaurants down the street. Our guests told us specifically on food. It's this familiar transform to Brewhouse fabulous. It's this craft beer and cocktails where cheers is always on tap. It's the fact that our food is innovative, but it's not intimidating, and yet there's something for everyone. The guests that our people deliver a hospitality that is engaging and rewarding. It makes you feel comfortable and welcoming when you're in our restaurants based on our people. It's what we internally call gracious hospitality. And guests feel different right when they walk in the front door of a BJ's restaurant, they feel uplifted and energized by the sight, sound and motion within our restaurants. They commented that our restaurants feel upscale but not apathy. That our restaurants had energy, frankly, for any dining occasion, large or small. Bottom line at BJ's, it's about the total experience. It's the combination of these core differentiators, the food and beverage, the people, the ambience and how they come together to create moments that matter for our guests. Now when we dug deeper into food, what came out was breadth of the menu that was a key differentiator for us. It eliminated the veto vote because we had something for everyone. We also heard over and over again that they love familiar items and how we do a little twist on it at BJ's. It's items like our Deep Dish Ziti or cherry chipotle salmon, it's our slow roasted wings, it's this higher quality product that we are serving at BJ's. They know when they get food at BJ's that they expect it and know it will be better. So from that guest research, that led us to define our culinary strategy around the term familiar items made Brewhouse fabulous. This resulted in removing some items. It's those items that did not fit the familiar and we validated that with our menu research and our frequency analysis, and we tested it for over a year. It also has a push into, how do we make other items more fabulous? It made us simplify some areas yet invest and innovate in other areas to get those Brewhouse fabulous. And we did this, by the way, by maintaining our overall breadth, something very important, a big differentiator for the BJ's concept. On the people side, we heard it's the way we take care of our guests in our restaurants. It's the service and hospitality levels that make our guests feel special. As a result, we're investing back into our people with all new scripting that's just rolled out here in July. We changed our manager training program. We rolled out a new [ craft ] card that tells our team members about our company values. We changed the way we onboard people to reinforce our gold standard level of operational excellence so that we can deliver a quality product every time. And we started to teach our team members what gracious hospitality meant so that we are making moments matter for our guests in our restaurants. These changes, combined with a more focused menu allowed our teams to improve upon our daily execution around our food and to take care of our guests even better and ultimately, improve our margins. And today, this is showing up in better Net Promoter Scores and overall team member retention. We heard time and time again about the differentiated ambience compared to traditional mass casual concepts. It's a best-in-class bar statement, the high ceiling, the linen napkin, all that across a higher quality, more relevant and energetic place to go. It's a place that's broadly approachable for anyone or any occasion. We hear a lot about BJ's being a non-chain chain, and now we compete against a lot of the regional and local players in the markets that we exist. This ambiance, what we're trying to do here, again, helps create this polished casual positioning. It's a differentiator for BJ's. What this led to was our remodel program, and Greg Lynds will talk about that later today and how that's generating positive sales and frankly, keeping us relevant in today's space. Now most companies like to talk about ambience in the clean and maintain. But the sit-down casual dining where 80% of your sales are done within the 4 walls of the restaurant. Clean and maintain, that's required. It's a must. Differentiating the ambience, it plays a role in how you make guests feel. It talks to you about your brand personality. So at BJ's, it really is about the total experience. It is how the food comes together, presented to the guests by the team member and is packaged in a relevant contemporary building and atmosphere. It's the total experience. Look, we know these are the right areas. Every focus group, when you ask guests, why they -- what's the top 3 reasons why they choose a restaurant? It comes down to these things. It comes down to the food and beverage, the service and the ambience. So while we've just begun down the strategic path, our report card today is actually really good. We already rank high in food service and ambience. However, there's an opportunity for us to further differentiate around each of these pillars. And that is what we're going to talk about in even more detail today. So the first 2 key messages are really around the core of the concept. It's about how we drive sales and improve margins. And my colleagues will get up here in a moment and will get into more detail around those strategies to drive awareness, innovate more around the culinary, enhance our people and elevate our ambience. And each of these core strategies will continue to widen our moat and drive meaningful comp sales for BJ's and make us a competitive -- a better competitive alternative out there and drive shareholder value over time. Now as we drive our core business, it opens up the door to #3 here. It opens up the door to accelerate restaurant growth, which enhances that overall end goal of sales, margins, new restaurant growth, overall meaningful shareholder value creation. And look, I get really excited about the opportunity to grow sales over time or to grow new restaurants over time. If you look at this chart on the casual dining space, it's filled with a lot of concepts that came to maturity, as I said, back in the 1990s and early 2000s, but scale matters. As I said, scale and size is important. At 217 restaurants and over $1 billion in sales, we actually have scale today. And on top of having scale, we have proven ourselves, as I said, in 30 states and in a variety of different demographic markets. We just don't believe that there are that many players in casual dining today that have our runway and have our scale and have already proven themselves in those different markets in a mature $200 billion industry that's part of our social fabric and how we eat. So the opportunity, as I said today, is about taking market share, and this gets me really excited. On top of that, our new restaurants, they're doing really well. The sales are above the company average. Our margins are also above the company average. But at the same time, we have this opportunity to reduce the cost by $1 million. And we're putting together another prototype for 2025 that will make our restaurants even more efficient and more productive going forward. When we do this, we're targeting to get ourselves back to a 20% return -- cash-on-cash returns because ultimately lower costs with better margins, equal better returns. Now what's really important here is this newer prototype, it's a prototype we built before. We have a lot of these restaurants in our portfolio that are already smaller, and we know what they do in sales and we know what they do in margins. But now because of all this guest focused work we did over the last couple of years, we know what are the key elements that we must maintain in our new prototype. So when we take out some of the cost to build this updated prototype, it will maintain that differentiation with the best-in-class bar statement, high ceilings, the Brewhouse authority and the higher-end quality finishes. So look, it's really exciting to be at BJ's today. We've got a strategy focused on creating guest desirability and an opportunity to double our restaurant portfolio while we're improving our margins. This will drive meaningful shareholder value going forward. Now I'm going to turn it over to our executives. They're going to go through in more detail of the strategies to drive sales and improve our margins and how we're going to accelerate restaurant growth. We'll start here with Heidi Rogers, our Senior Vice President of Marketing, and she's going to discuss the opportunity we have to drive awareness for the BJ's brand. Heidi?

Thank you, Greg, and good morning, everyone. It was a pleasure meeting many of you last night. I had a goal in mind that I would get to meet all of you, and I know I didn't have an opportunity to do just that. But maybe by the end of today, we will have that opportunity. Today, I get the opportunity to talk to you about 3 very important things that will help fuel our growth and momentum. The first one is our differentiated brand position. I'm also going to talk a little bit about our core segments when it comes to our guests as well as our awareness strategy that will help build awareness and help propel our market share growth. Before I get into it, my background is a little bit on the agency side. So I spent a lot of time on strategic planning, working with a lot of brands and those brands, it was interesting because I got to see where they were in their life cycles. And I bring that up because this is an exciting time for BJ's because we have a lot of opportunity to propel our growth based on the information that I'm going to share with you today and that our colleagues will also share. So let's get into our differentiated brand position. All right. What we're going to cover today is who we are, what we deliver and our overall brand promise. BJ's is a restaurant with a Brewhouse soul, and this is a marketing dream. When you think about marketing and a perceptual light map, we own this. There's no one else in casual dining that can say that they brew their own beer. In fact, we are the pioneers of brewing beer as we started doing so in 1996, and we have over 250 coveted awards. There is no one else in casual dining that can take, produce beer and deliver it at national scale. So when it comes to who we are, that is a differentiator. In addition, Greg touched on this in his remarks earlier. We spent a lot of time going through research, both quantitative and qualitative to help us understand what makes us unique and different in terms of what we deliver. And I'd like to touch on this because it's really important. The first one is alive. It's that feeling of an adrenaline rush when guests walk through our door. It's that sight, sound and motion that makes us different from other casual dining restaurants. In addition, it's the comfort of home. So although we have the energy of a bar, it's the comfort of a restaurant. And whether guests are celebrating key milestones or just going in for dinner with their friends, they can feel comfortable and be the best versions of themselves at BJ's. They also trust us. We give them a consistent, great execution in terms of service. And the human connection really counts. So today, Chris will talk about gracious hospitality and this idea that we pull out the VIP red carpet without being pretentious. And most importantly, when we talk to the most valuable guests, they come to BJ's to escape the every day, mundane and monotony. So it's truly escape for them and escape for them, and they love coming to us because we're an experiential brand, and we make moments matter. So you may be asking yourself, is this unique to casual dining? And my answer is yes. We dug into the research to validate this. And basically, there is this duality of guest needs. And I want to talk about that because in simple terms, it basically means, hey, on one side of it, we're energetic, uplifting and exciting. And on the other side, we're comfortable, familiar and consistent. So some see us as a step above in premium, and Greg touched on that, that's the polished casual. However, we're also seeing as affordable, great value. So that's with things like our value propositions, including our daily Brewhouse specials, our happy hours and our lunch specials. In addition, we have this energy, things are always happening in our restaurants, but it's also quiet enough to connect. And whether you walk in and you have a party of 30, we can accommodate. We also can accommodate a quiet corner booth for date night, although I'm pretty convinced when I've done that, my husband is still watching sports. So. Now let's get into our guest segment. There are 2 segments that we have identified as our core segments and there's a lot of opportunity for growth as we look to the road ahead. The first segment is Cheers on Tap. They come to BJ's to celebrate moments like football and Happy Hour with their coworkers. They make up 37% of BJ's revenue. They're very busy, and they're very social. Now the Escapers segment looks a lot like the Cheers on Tap, but there are some distinct differences. They're also very social but they come to BJ's to escape the every day. This is Susan. So she's a busy mom. She manages work, her work-life balance, they may use us for takeout and delivery. But when she wants to escape from the busy grind of the week, she goes to BJ's to get away. And the Escapers make up 24% of our overall revenue. Now if you listen to nothing more of my remarks today, this is the one you have to pay the most attention to. So this is what gets me really excited. And when we talk about headroom for growth, this is amazing. So what we know is that Cheers on Tap and the Escapers that I just spoke about, make up 60% of our overall revenue and 70% of our diners on a monthly basis. Now we have 19 million social experience seekers, which is those 2 groups. But there's 9 million of them that have yet to discover our brand within a 10-mile radius of our restaurants. So when you think about those opportunities, this is something that we're going to be focused on in 2024 and beyond. And when we talk about headroom for growth in terms of unaided awareness, we do have a gap to the mass competitors. I keep teasing Tom about this because it's in red, but it really should be in green. I know that it says 12%. But for me, this is a dream because we can make that 12% grow in terms of aided awareness and unaided awareness with our marketing, amplification and awareness strategy. So we have a lot of opportunity to grow here. And as long as I've been at BJ's, I've seen these numbers in the single digit, so we've done a good job of closing the gap but we need to invest in the brand, which we are committed to doing to ensure that we reach those 9.3 million people, and we closed the gap on unaided awareness. In addition, as we think about those 9 million guests just like Joe and Susan, we have a messaging strategy as we head into 2024 that connects. I like to call it the heart, brain and wallet strategy, and I want to take a moment and talk about this. So we have our reach campaigns, which happened twice a year, and we use things like Connected TV, digital video and linear TV to build awareness at scale. And those are in select markets. And that's really heart, so we're reaching out to those people who have not discovered the brand and telling them who we are. And based on concept essence, those commercials really tap into the experience that people have at our restaurants and how they celebrate their special occasions with us. In addition, we have always on media that supports social and display to drive action through product and value messaging, and this is where that wallet messaging comes in. It sings like our value proposition, our daily Brewhouse specials, our Happy Hour, our lunch specials and the late-night day part. In addition, social plays a big role in our business, both organic social and tapping into cultural moments. And I want to touch on that for a moment because when we think about organic acceleration, we've got product differentiators that are signature to us that nobody else can own, and we tap into that on a human level in our organic acceleration social. The Pizookie dessert is beloved, it's world famous and nobody else has it. And we have things like our merchandise strategy that have increased engagement by over 40%. In addition, we have beer authority. For all of those that joined for dinner last night, you got to experience that beer dinner, and we do our job to connect with guests and post about that as we think about brewing prowess and our beer authority. And Putnam has done a great job since he joined the team just 10 months ago, creating these innovative products that we can talk about in the social space. And we know that we've won if people are taking pictures and posting about it. And Putnam has done a great job giving us those things to work with. In addition, in social, we want to connect on a human level to become a part of the conversation. And much of this is outside the conversation of casual dining. So we use things within the social space, including content remix, video effects, audio and events that connect with guests. One of my favorites this year, Taylor Swift, you might know her, The Eras Tour. We had a lavender lemonade that Putnam developed for us, and we tapped into the idea of using Taylor Swift and her friendship bracelets to launch our new product. In addition, we have a lot of people that speak for the brand without us even asking them to like Bill Hader from Saturday Night Live. In a moment, I'd like to take the opportunity to share with you our recent brand commercials that run on linear TV, Connected TV and digital video. [Presentation]

So you can see that we're tapping into the experience, a world famous Pizookie dessert, and our brewing prowess. But most importantly, we're taking what we learned from the Cheers On Tappers and the Escapers and tapping into those moments that matter for them throughout their entire life journey out of BJ's. I did want to take a moment to discuss industry media consumption trends. It's up here. It's not syncing. [Technical Difficulty] So just so you know, it is bouncing around on you like without touching it. It's not synced. All right. I think I could carry on, if that's okay. All right. All right. So we continue to leverage the growth when it comes to media trends. And when you think about linear TV and traditional TV, that's something that lead -- that led the way up to 4 years ago. Now it's all about digital video and Connected TV, which basically, over the next 2 years, we'll see double-digit growth. And that works to BJ's advantage. Because of our market scale, we can be super geo-targeted with 1:1 messaging that connects with our Cheers on Tap and Escapers. And I want to talk a moment about boosting our media strategically. We know that we have an awareness opportunity, and we know we have to find those 9.3 million guests and in order to do that, we need to invest in media, and we're willing to do that because over the last 18 months, we've been testing programs. And when we run our digital videos, we see a 2% lift in comp over the industry. And because of that, we've made the commitment to spend approximately 20% more in our media spend. We'll lean into a higher mix of Connected TV and digital video to drive reach and awareness. I also want to take a moment to talk about local marketing domination. This is something that we've been piloting over the last 6 months. And when you think about this, this is us giving our operators the tools to become sales builders and the mayors of their own communities. So what we will be working on is a 3-tiered approach that allows the restaurant to get out into the community and become a part of it and start to build relationships. And this will happen with out-of-home media, PR and events and local outreach. And I would be remiss not to talk about a few of our key signature items. The Pizookie dessert is one of them. I know we had a couple of those last night. Putnam is constantly innovating around them, so I might eat one a day. But we are celebrating 100 million Pizookie sold and that is quite a feat. And that, when I think about it is over 100 million smiles. We've also got the return of our fan favorite, S'mores Pizookie that Scott shared last night. And when we post about anything on social, everyone wants to talk about the S'mores Pizookie. In addition, we've been partnering with major influencers. We launched the first of its kind, the Halloween Spooky Pizookie, with [indiscernible] where we received over 17 million impressions and that, combined with our PR and earned support, we have had over 150 million impressions and it became our best-selling Pizookie by 3 times. I started this conversation today by talking about who we are and what makes us different from a brand positioning perspective. And I talked about being a restaurant with a Brewhouse soul and those that joined us for dinner last night, you got to experience that yourselves. And here, we continue to innovate around monthly seasonal that are on trend. We highlight this through a social content video series called Pint Glass, where our brewers, Alex and Aaron build relationships with our guests. In fact, Pint Glass will launch in honor of grand crew, which tapped last week, and you all have the opportunity to try it last night. Lastly, we have our five-course beer dinners that happened 5 times a year. And we know that, that's differentiated to us. Nobody can do that, and we have over 33,000 guests participate in those every year. So with that, I'd like to turn the meeting over to Putnam Shin, our Chief Growth & Innovation Officer. Today, he'll talk about culinary development and growth overlays that will encompass market headroom and awareness amplification to help build solid growth in BJ's core. Putnam?

Good morning. My name is Putnam Shin, and I'm the Chief Growth & Innovation Officer. And I'm new here. I started here 11 months ago, and for the -- prior to this, for the last 20 years, I spent my time mostly in entertainment and media, theme parks and hotels, in management consulting, in the Walt Disney Company and Merlin Entertainments. So I look forward to bringing new perspectives to not only BJ's but the industry. And it's just good to be here. And it's good meeting everyone here last night as well. So thank you. Today, I want to talk about how recently we've been accelerating our momentum in 2 areas: culinary development and growth overlay initiatives. But before I do that, I want to get back into the foundation of everything, of who we are at the core of culinary proposition. And that is familiar made Brewhouse fabulous. This is who we are. This is how we're positioned. This is why we're differentiated. This is a culinary proposition. So what does this mean? Well, first, there is familiar, the Mac & Cheese, the chicken wings, the steak and shrimp, the S'mores. That's familiar. Why? Because familiar brings comfort. Familiar, you brought nostalgia and familiar brings mass relevance. We are everybody, and it's just good to be here. We serve familiar. But we add something extra to it, that extra that makes coming to BJ's worth it. It's not just Mac & Cheese, it's Couscous Mac & Cheese made into a ball, fried with special dipping sauce that makes a share experience social. It's not just wings. It's slow roasted that retains the juiciness. It's not just steak and shrimp, but it's made with a special sauce that's especially plated for that visual wow. Or it's not just S'mores, which oftentimes when we do it, it's either overly burned or not cooked enough, but at BJ's, it's always perfectly roasted as a marshmallow to a golden brown served in a Pizookie format. This is fabulous to our familiar. But we're in the precipice of something, something that's been seeing us elevate our culinary promise to a higher level. And this initiative picked up momentum recently in 2023. And those of you who were with us last night that saw some of this in person for the before and after -- but here are some examples of what we've done in 2023. The top is the before and the bottom is the after. You'll see on the left-hand side example some of our margaritas, the before and after, where we've actually represented this into a more Insta-worthy way. Or to the second picture, the Peach Margarita changed into the Peach Boba-Rita where we literally not only added a visual, but a literal pop to it. The ribs or the chicken Caesar salad are now replated with a visual wow and a theatrical side of it where you take the night out and has a social element to that. This is what we mean by elevate. This is what we mean by familiar made Brewhouse fabulous. So why are we doing this? In today's post-COVID, new generation of guests who eat out, they are looking for something different. Gone are the days when people come to casual dining and just eat out so you don't have to cook. Guests are looking and eating with their eyes. They're looking for unique and they're bragging about it socially. They want better. They want wow. They want the total experience. And because guests are looking for this, we need to step up to that ask. And the culinary side of that promise, we're shooting for that magic formula. And we know that in the triumvirate of taste, visual and theater when we hit all 3, that's when we have created something wow. And that is why we're doing this. That's what started with our existing core items. But we're not just investing back into our existing items, we're developing new ones as well. And to the extent that we develop new items, we actually are doing this selectively and targeted with objectives. The first one is yielding up. You'll see some of the new appetizers, the garlic shrimp appetizer or the hickory brisket nachos that increased reach and overall category incidence of all the guests who order appetizers or the premium entrees like the surf and turf that encourages upgrades to higher-priced items or some of the premium drinks you see in the bottom like the Tipsy Snowman or the premium nonalcoholic beverages that broadens the appeal and increases both incidents and upgrades. The second objective is to create seasonal followings. We want to develop cult following of items that are only available certain times of the year, but at the same time every single year. Like the S'mores that's only available in the summer or the Spooky Pizookie, a recent innovation only available during Halloween and then it turns out to be a huge hit this year for us and achieved the highest incidence of any dessert in BJ's history, 3x the last next best-selling seasonal dessert. And the third area for us is value where we're innovating lower-priced items so that we remain within the reach of our value segment. So how are we doing so far? Well, on the left-hand side, you can see the pace. In the first half of the year, in the first 6 months, we've done 4 of these upgrades. By the time we hit the second 6 months of the year, we've increased up to 15 items. Momentum is growing. On the right-hand side, you can see the 4 objectives of our development, and you can see that it is working whether it's enhanced core where the items are selling double or items going from eighth place to now a #1 seller on the list or the yield up category where our NPS are improving, or in the seasonal following where we have the best-selling dessert in BJ's history or in the value segment where more guests are now entering the category where we see the overall appetizer category now growing. And because this is working, this is what gives us conviction that this is a direction we need to be heading in. And this leads us to our vision. Our vision is that in 3 years' time, 50% of our items through innovation are going to have an upgraded wow. About 20%, again, through innovation is going to appeal back to the value segment. We are investing back into our product, and we have a plan. It's ambitious, but it's methodical and it's tangible. This is our clear vision, this is our strategy, and this is what we're all pulling towards. And in this video, we hope to show you some of the things that we've been talking about. [Presentation]

And to complement our endeavors in elevating our food, we're also elevating the way in which we sell and present our food to our guests. The first example of this is the menu format where we innovated a better and more visually stimulating menu. More images will showcase our culinary upgrades and improved physical menu quality better evokes our polished, casual positioning and better visual merchandising, which we've shown in tests have increased both traffic and check, and this is rolling out at the beginning of next year. Another example is our loyalty program. Today, we have 9 million members across our 217 restaurants. And the data shows that when a guest becomes a loyalty program member, as their frequency increases, their higher average check become more off-premise and they comes up more often during off-peak and we can have a more personalized relationship with them. And our plan is to both grow new members and amend some of the features so that we increase frequency and improve engagement. Now as an example, we know that if we can get a guest to come 4 times a year, we hit an inflection point. They come more often, they spend more per visit, and we get a higher share of restaurant business. That guest becomes a loyal guest. So we're designing our books, whether overtly mass or individually targeted via personalized offers to get to 4 visits and get to 4 visits sooner. And on top of that, we are able to target them. Using personalized offers, we can actually induce higher frequency. Using a data-driven approach, we can target guests that we know are not due for another visit recently or soon based on their history of frequency patterns and actually induce them to come, and this has worked not only 40% -- up to 15% to 40% of the time, but we know that 100% of these visits are incremental. This is a powerful tool, and this is a powerful outcome for us. Today, our loyalty members comprise less than 20% of our revenue. And our goal is to double this over the years. The third exciting area of growth for us are subscription programs. We have proven through tests and initial launches that this has been very profitable for us. But to succeed, we need to leverage assets that BJ's had an advantage in, assets that other people cannot copy. And for us today, that is our Beer Authority and Pizookie. And the first one with Beer Authority, the Beer Club subscription program has been a stable performer for us so far. But it's only been in California. So there is tremendous growth potential to the extent that we want to expand this outside California. The Pizookie is actually an exciting opportunity for us. I mean, as a product, it has a much wider reach. So we did a beta launch of a subscription program. And in that beta launch, we actually sold out all of our passes in the first 8 hours. And so far in the results we've seen, we've seen both significant uplift in traffic as well as revenue per guest. Across both Beer Club and the Pizookie pass, the uplift has been pretty compelling. Frequency has increased to the point where revenue per guest has increased 2 to 4x between before and after subscribing. The uplift patterns have been consistent month after month. And because both of these items are high affinity items, we've seen very little churn so far. Guests in these clubs are sticky. There's significant headroom in both of these and potentially more as we identify other unique BJ's advantages. And my last example today is going to be off-premise. In a post-COVID world, this area has grown to be a significant portion of our business. And in 2023, we actually outgrew the industry. We beat the industry by 2 percentage points over the year. And going forward, our strategy is to protect and grow this part of our business. And we're going to do this in 3 ways. The first thing is we need to be in the consideration set. We need to be in the top 3 choices when consumers pick the right occasion to order out and that we're in the food category that they want to serve. The second area is a seamless user journey. We painstakingly gone through every single touch point and has basically sought to improve every part where the consumer interacts with us to make it a useful and painless experience for customers. And the last area is usage expansion, whether through channel expansion like catering or in formats like a 6-pack beer or ready takeaways that we sell inside our restaurants. So whether through menu formats, loyalty, subscription or off-premise, we've exciting areas for growth overlays. So my colleague, Heidi, has talked about how we have headroom in the market that our awareness is amplifying. I've taken us through how we are developing our culinary proposition and how we have exciting growth overlays. In a minute, I'm going to hand it over to my colleagues, Chris and Greg, who will talk about our gracious hospitality and how we're going to energize our ambience, which together, this is what is going to give us solid growth in BJ's core. And with that, I'm going to hand over to Chris Pinsak.

Thank you, Putnam. Good morning, everyone. I'm Chris Pinsak, Chief Restaurant Operations Officer. I've been with BJ's -- I'm the old guy. I've been here for 19 years. And as Greg mentioned, to start off the day, and you heard mentioned by Heidi and Putnam already, gracious hospitality is our service philosophy here at BJ's. We believe that hospitality is the difference between a great restaurant and a good restaurant now and moving forward. We also believe that food quality is the price of entry moving forward. And we believe what Maya Angelou wrote, which was, "People will forget what you said, they'll forget what you did, but they'll never forget how you made them feel." At BJ's, we strive to make our guests feel special every single day. And it's working. Here's a quick scorecard of us versus the competition. It shows us scoring very well. This really is a testament to our team members. Executing a large menu is very difficult. And to average 6 percentage points better than our competition on food and beverage is a great win for our team members. Additionally, we also scored well in ambience, consistency, cleanliness. The only note on here that's in red is speed and an interesting note on speed. In my 19 years with BJ's, we've looked at increasing our speed numerous times. And what we've learned is, yes, speed is important, not as important as accuracy or quality. We will always err on this side. But what our guests really wants? They want us to work at their speed, and that's what our goal is, to operate at the speed of the guest and score well in the pace of the meal. And by the way, 30% of our guests order a Pizookie dessert, so roughly 1/3 of our guests stay a bit longer than the casual dining meal. Overall, our team members do an amazing job, and I think you saw that last night. Let's take a minute and listen to a few. Let's hear how they feel about BJ's, our culture and some gracious hospitality. [Presentation]

All right. I love that video. We have great team members. And this past year has really been about readying them for growth. Like many of us in casual dining, after the pandemic, we needed to hire and train about 18,000 new team members. And we took a very balanced and thoughtful approach. And the team, they executed it fiercely. We targeted hiring team members with a high hospitality IQ. We knew we needed to increase our product quality. So we put -- and we also need to increase our profits. So we put a game plan in place to do that. And let's take a look at what we did and what we are doing. The first thing we needed to do is hire the right people. So we've been very intentional about our hiring. Like I said, looking for those team members with a high hospitality IQ. And in order to ensure gold standard training, we focused the teams on proper onboarding and training the right number of team members based on the number of experienced trainers that we had in our restaurant. This was very successful. And as you can see, we're currently beating the industry in retention. This has also helped our bench strength to grow as we need tenured team members to help open in new markets. Lastly, on this slide, we've seen some large savings in our training and over time as we get back to our pre-pandemic and better than pre-pandemic staffing levels. It's a nice win for our teams. It's also a nice win for our guests. Next, we took the opportunity we had, as Greg mentioned, to enhance our hourly training. We have all the traditional steps of service into a more hospitable conversation with the guests, giving them choices around our beer, the Pizookie, as well as scripting to help remind our team members of our Brewhouse specials, our loyalty program and our seasonal beers. As we resumed opening restaurants, we updated our opening process by increasing the live training days by 7. We also increased the sales generating weeks by 1 through implementing a soft opening and a grand opening process. During the grand opening process, we introduce our guests to our beer through our beer experience night. That's the same as you all experienced last night. We're always looking for opportunities to be more efficient in our kitchens. And again, we took the opportunity this year to look at our prep systems. We reorganized them to align with the skill of the team member more accurately, created greater repetition by having the kitchen team members prep the same list every day. And we simplified multiple multistep prep items, which not only saves us labor but also saves us in portioning and supplies. We targeted these efficiencies to take effect in conjunction with a midyear menu reduction that we had already planned. And in June, we reduced our menu by 17 items. As I said, we needed repetition in prep. We also needed repetition on the menu items in order to get our recipes completed accurately and on time. The menu reduction immediately helped increase the speed and the product quality coming from our kitchens. It reduced prep hours as we removed 25 prep recipes, and it lowered food waste due to the elimination of 30 SKUs. As you can see on the slide, we now have approximately 100 menu items. And we're seeing a 20 basis point margin benefit from both the enhancements in prep and the menu reduction. Another nice win. On the technology side, here are a few of the guest-facing items we launched this year. We know that the guest has less anxiety when they know where their food is in the process. So our IT team created this digital tracker that you can see on the screen, it looks like a beer glass. It fills as the order is prepared. It gives the guest confidence with real-time visual updates and curbside check-in functionality for the guest as they arrive at the restaurant. Our automated wait list gives our guests the ability to call the restaurant and put their name on the wait list using voice recognition. We have seen already an increase of 100% in this application and in our dine-in waitlist entries. This also increased team member productivity because they're not on the phone constantly, and they're able to spend more time with the guests in the building. And the last one on this slide, the takeout status board. You may have seen this. If you're in the room, you may have seen this last night. This monitor and shelving units are located in the takeout area of all of our new restaurants and in many of our remodeled restaurants. As you can see here, both third-party drivers and our takeout guests who have already paid can pick up their food and go. If the food is not yet ready, it will be prepared on -- be on the right side of that screen up there that you can see on the preparing side of the board. This gives us greater organization, convenience, confidence, and increased team member productivity, a great win for us. On the team member side, we have -- we're beginning to test on our server handheld tablets. And what we're calling this as a hospitality dashboard. And in its current form, it gives the servers allergen and gluten information so they're able to help the guests more quickly. Additionally, it lets the team member know when their food is ready as well as when the table is set. These coursing alerts help reduce the number of steps a team member needs to make, walking to and from the kitchen, looking for their food or for a newly set table. We see quite a bit of opportunity here to help our team members be more efficient, save steps and deliver even more gracious hospitality than we do now. We have also digitized over 95% of our management checklist. This not only gives us better reporting and follow-up ability but also is saving us money. And then artificial intelligence. We have been using artificial intelligence to help us forecast sales. Our sales forecast drive the allocated hours for scheduling and help -- and also the prep amounts for food. So accuracy here is very, very important to us. Let's take a little bit closer look at this AI. As you can see here, the AI helps us get very accurate on our sales. And we launched it in mid-Q2 and now we're forecasting within 0.1% accuracy. Again, remind our sales forecast driver allocated hours for scheduling and prep production. So inaccuracy here costs us money, right? And over or under schedule number of team members, we lose money. Inaccurate prep production parts, and we either don't enough or we make too much, lost money. The increased accuracy from AI has improved our labor, reduced our food waste and really, you know what, it's given the GMs back some valuable time to do other things besides sit at a computer and try and figure out sales. Looking forward, as we continue to refine the AI forecasting capabilities, we'd like to get to a point where the AI tool can build team member scheduled templates. And in the kitchen, we're looking at ways that can help us with inventory management or ordering systems, and I'm sure there's a lot more there as well. It's a lot of good stuff. And our IT team has always got lots of great things in the pipeline. So we're really proud and happy to have them. But listen, as I said at the start, our goal this year was to ready the team for growth and we've made great strides. In Q3 of this year, our Hospitality Net Promotor Score is up 3 percentage points from 2019, our Pace score is up 5 percentage points from 2019, and our IPLH, which is items per labor hour, it's our internal efficiency metric. Let me give you a quick example of how that looks. Traditional, let's say, a 6-person cook line, and you can see that we have 4 items for kitchen IPLH on there. That means that our teams are producing 24 more items per hour than we were in 2019, huge wins there. We've had some great savings in labor from the initiatives I mentioned, and you can see it broken down here on the slide. From just these initiatives, we're seeing a 50 basis point improvement. So bottom line, the operations team, we're ready for growth. So I guess the only thing left here is to get Mr. Greg Lynds to come on up and speak to where we're going to grow and how that's all going to work. But we're going to take a 10-minute break first. So what time is it right now, everyone? Let's see. It's 15 after, how about we be back in our seats at 25 after, and we'll resume at that time. Thank you all for your attention. [Break]

I hope you all like the Grand Cru. Grand Cru is my favorite beer. So once a year. And it, I think, as Greg Levin mentioned, you can store it for a couple of years, and it's still a great beer. So do you think everybody is back? Should we get it going? Okay. Great. Good morning, everybody. Once again, my name is Greg Lynds. I've been with -- well, my voice today. I've been with BJ's since 2003, leading our construction, design and development teams. Today, I will first talk about our successful remodel program, and then review our new restaurant growth plans for 2024 and beyond. So let's jump into the remodels. The overarching goals of our remodels is to drive sales and deliver strong ROIs. At the same time, we wanted to make sure that we strengthened the key design elements -- thanks, Greg. The key design elements that our guests told us they loved: Our best-in-class bar statement; our handcrafted beer that we brew in our own breweries; our unique high-energy Brewhouse vibe and design; this uplifting social oasis with a Brewhouse soul. Our design teams prepared 3 different design plans based upon guest feedback. These plans can be accomplished together or separately. The stand-alone remodels included an entire new bar with our signature 130-inch video wall, our quartz countertops and relocating 39 beer tabs. The dining room remodels that we call engage the senses, include a new beer chalkboard, new lighting and music system, all ductwork painted to its natural galvanized state and new tables and chairs. The capacity additions is where we went into some restaurants and optimized the seating by adding tables. Our restaurants are designed with flexible seating so we can easily accommodate a party of 20 enjoying a birthday celebration, a party of 6, a party of 4 or 1 and 2 in the bar watching a game. Our remodels continue to perform very well. In 2023, we will have completed 36 remodels at an average cost of $365,000 and generating about a 20% return. More importantly, we learned what to focus on in our 2024 remodel plan. The bar refresh has an immediate impact and was a noticeable wow to our guests and team members. We learned that where we can add capacity and especially table counts, this is a win for our guests and delivers a solid sales lift. The new lighting and upgraded music systems continue to be a guest and team favorite. And all these key learnings will be incorporated into our 2024 plan. Rancho Cucamonga, this is one of our big boomer restaurants. It was built in 2005. In the before photo, you can see the older-looking bar with the dated dark wood and mica panel. That's our frame there. And on the other side, you can see a lighter, more contemporary bar statement, featuring our 39 beer taps under our signature 130-inch TV. You can probably notice these taps here, they kind of interfered with -- in the old model, interfered with the guests and our bartender interaction. So when we moved them back behind the TV, really made a big difference. Now this is our bar in Arlington, but it's the same one that you just saw in Rancho Cucamonga, it's the same prototype. And you can see the new white oak tables, you can see our new chalkboard. You can see the beer tanks in the back and our new 130-inch TV and then a close up of the new 39 beer taps. So high energy, really what we're trying to do here in our remodel, is a good example of it. So this next photo, we call this our barrel booth remodel. So I can -- this photo here, as you can see, we've demolished that room. And then we added -- to the right, we added 3 84-inch Pullman booths and actually, about 2 weeks after we finished the 3 model, I was up in this restaurant. It's in Bakersfield, California. And those booths were full with 2 youth soccer teams, and then the parents in 1 booth. And it's really a perfect use for those 3 booths and for that room. As you guys know, we are well known to be a large party restaurant. This is our Sacramento restaurant in Natomas, California. This really has our brand -- our new brand colors. And every time we remodel, we try to do something to the exterior, try to get an immediate pop. And this is a good example of what we did here. We have the contrasting brick accent and our BJ's brand colors that we added here. So this is the exterior of our Summerlin restaurant. This also has our new brand colors and our new paint on the silo. Through our guest focus group, we determined that the silo has the ability in the signature design elements going forward into our new restaurants. So we're going to add this, it's an iconic look for BJ's. We can really differentiate ourselves. We can add signage to it. And our class of 2024 and 2025, we're going to add this silo to the exterior of our restaurants. So our platform for growth is solid. Our marketing and brand awareness is growing. Our culinary innovation and growth overlays are strong with great momentum. Chris just discussed our gracious hospitality focus, and we have successfully energized the ambience of our restaurants. This all equates to solid growth of the core. So now I'm going to take a little drink and then we're going to move on to our new restaurant growth. Our new restaurants are performing very well, and we're just started in terms of accelerating our new restaurant growth and further expanding our national footprint. Part of the power of the BJ's brand is how well we perform in diverse communities and trade areas. Back in 2003, prior to starting at BJ's, when I was performing my personal due diligence on the BJ's, I recall locking for successful high-volume restaurants, all with very different demographic and psychographic profiles. Knowing that BJ's was successful in all these differing trade areas, gave me great confidence back in 2003 that we've become a successful national brand. And now today with 217 restaurants averaging over $6 million in sales, I'm even more confident. Again, as you saw on Greg Levin's slide and presentation, with only 217 restaurants today, we have a tremendous growth opportunity in front of us. When I think about some of our peer group with 600 or 900 restaurants, there's no reason that our BJ's concept cannot reach that level over time. We have plenty of market share to take from older casual dining concepts, many operating with over 1,000 restaurants in trade areas that we can dominate. By the way, this 425, this was done a few years ago -- or 10 years ago, excuse me. And based on my experience, when we do -- when we prepare a new one, that will change quite a bit and grow quite a bit. As of today, we have a great national footprint and base of restaurants with 59 in California, 36 in Texas, 22 in Florida and 14 in Ohio. We're well positioned to continue growing from Florida to the Northeast, plenty of growth in the Midwest, the Ohio Valley, Texas and the West. Our development strategy has been consistent over the years. Our team is focused on acquiring AAA sites that will generate high sales volume where we can leverage our supply chain, supervision and brand awareness. We have a flexible real estate strategy so we can convert existing restaurants, build new prototypes. We can purchase land, we can ground lease, and we have a very successful sale-leaseback program as well. Over the years, we've been able to secure sizable landlord allowance dollars and we will continue this strategy going forward. This slide here emphasizes the power of our concept. We're a leader in guest traffic per square foot and AUVs. Partly because of this, we're a preferred tenant for the development community and for other tenants in the shopping centers. Our site selection team is proven. We're an experienced team. We have very successful restaurants in many diverse trade areas. And we'll be opening in our 31st state, the state of Wisconsin, early next year. We've proven that we can be successful and expand nationwide. We have strong sales in all 6 of these restaurants that you see, and they all have a very different demographic and psychographic profile. You can see if you know the Washington, D.C. area, in Gainesville, Virginia, higher income; Hagerstown, Maryland, not that far away, both restaurants performed really, really well. San Antonio, Texas, in The Rim, if you know The Rim, it's the north part. New Braunfels, is kind of a freeway oriented site, lower income. And then we just opened 1 in the south of San Antonio, again, very different demographic and psychographic makeup here. And then if you know the kind of our hometown, the L.A. area, Oxnard, California, freeway oriented site, more middle income, and then Westlake Village, higher-income area, both restaurants performed really well. Our new restaurants are generating close to $7 million on average with a check average of only $20. This is a big part of the reason we have remained a preferred tenant and why we get first shot at all new sites that become available in a development community. What's also so encouraging about our strong restaurant performance is that we know over the longer term, these restaurants will continue to improve in both sales and margins. As we talked about earlier, the new prototype format for the class of 2024 features our high-energy contemporary American Brewhouse design with our signature back bar statement, a 130-inch video wall, an impressive large entry feature of 30 feet, a signature exterior silo. We have an overhead keg art design feature in this restaurant. High ceilings, oversized windows and best-in-class lighting and AV. In addition, our design teams are working hard to take the best of what we've learned here and design our new proto 2025 for future growth. Simply put, our future prototypes and new restaurants will continually improve and elevate the guest experience and ambience, innovative food and gracious hospitality so we can further widen the moat from our peers. The class of 2024 and 2025 restaurants will be about 600 feet smaller than our existing prototype. Because we built this prototype footprint in the past, we know it will generate strong sales and margins at a lower investment costs. This new product footprint features our back bar design versus the island bar design in our current prototype. You saw the island bar design last night. This floor plan has proven to be more efficient in labor with better hospitality and speed metrics. And during peak periods, this prototype, we staffed 28 to 30 versus 32 to 34 in our existing prototype. It's important to reinforce that our prototype that we're building in 2024 and 2025 is a slightly modified [ proto 7 ] that we've built in the past. We're very experienced in operating and constructing this restaurant. With that in mind, this new prototype has proven to generate very similar top line sales to our slightly larger restaurants, and we are targeting about $7 million in sales and about 100 basis points in improved margin. We have seen margin improvement in both labor and operating expenses with this new footprint. As Greg Levin said earlier, our target is to reduce investment costs in 2024 by about $1 million over the 2023 [ RO ] investment. And based upon our past performance, we have a proven prototype that can achieve both the sales and ROI targets in 2024. Our target investment for 2024 is $6.1 million with a 20% target ROI. So in summary, we're in the early innings of our growth trajectory and our focus is to continue taking market share in casual dining. We will continue to cluster our restaurants so we can leverage supervision, supply chain and brand awareness. We have a robust, large, active real estate pipeline and a proven site selection team with best-in-class predictive tools to minimize risk. We have a broad menu and a concept that has proven to be successful in many diverse trade areas in all parts of the country. We are well on our way to accomplish our growth goals well into the future. Thanks a lot. And with that, I will bring up Tom Houdek or welcome Tom Houdek, and he's our CFO, as you guys know, and he'll bring us home.

Thank you, Greg, and good morning to everyone here with us in-person as well as joining us virtually. As Greg said, I'm Tom Houdek, I'm the Chief Financial Officer of BJ's. In the coming slides, I'll discuss our longer-term growth algorithm as well as our financial outlook taking into account both the current momentum in our business as well as the growth we have planned across the business, which my colleagues have just outlined. To start, let's set a foundation from where we are in 2023. First, BJ's has continued to be a market share leader. Year-to-date, our comp sales is 180 basis points higher than the industry as measured by Black Box, driven mainly by traffic gains. Discontinuation of the trend that Greg outlined at the start, shows our consistency delivering above-average comp sales growth. Second, after a strong 2-year run, inflation moderated this year. Cost of sales will be up about 2% year-over-year, hourly inflation will be about 4% to 5% up, which both compare very favorably to the last 2 years when these were up in the high single digits for each year. We did increase our menu prices this year to help mitigate past and current inflation. We've now taken about 19% of pricing since the start of 2020, which is less than many of our peers and about 400 basis points less than the Food Away from Home Index over that period, which we believe helped us sustain traffic and take market share. Next, a key area of focus for this year was and continues to be improving our margins. We have made material gains this year and continue to make progress through 2 key drivers: sales leverage and cost savings. You just heard from our leadership team about the framework and details of our strategy to continue to deliver above-industry sales growth. And higher sales drive higher margins as we leverage increased sales across the fixed elements of our costs. On cost savings, over the past year, we have worked collaboratively as a team to find meaningful cost savings across our business, which played a big role in improving our margins, which I'll cover more in detail shortly. And number four, we are very pleased with the investments that we've made recently. As you just heard from Greg Lynds, our investments in building new restaurants and remodeling restaurants are delivering strong returns while also keeping our assets up to date and doubling down on what matters most to our guests and what drives traffic to our restaurants. We also started to repurchase shares again in the third quarter, demonstrating our confidence in the growth plans outlined today, which we believe will generate considerable shareholder value. Now let's discuss the margin trends in more detail. Rewinding to 2019, our restaurant level margins were 16%. Take note of how it fluctuates through the year. it's highest in the first half of the year when sales are seasonally highest. It dips in the third quarter with our seasonal pattern and then it ends the year with Q4 margins at the same level as full year margins. You can see Q4 margins serve as a good proxy for the full year results. Switching to 2023, we've made great progress closing the gap to 2019 margins. We were within 160 basis points of our pre-COVID margins in the third quarter which was a considerable improvement from where we started the year. We are encouraged by the progress and we plan to continue closing the gap and bringing our margins back in line with historical levels by building sales, as you heard throughout our presentations today, and continuing to be creative and maniacal about finding and realizing additional cost savings. Our margin improvement initiative played a big role in the margin recovery story. We launched a program in the middle of 2022 with a target of realizing at least $25 million of cost savings through our restaurant P&L. We met as a cross-functional team weekly at the highest levels of our organization to drill down in all aspects of our restaurant costs. We tasked teams with finding meaningful and creative ways to save while not impacting the guest experience. As an example, we updated our chicken wings, as Putnam highlighted. We still serve a premium jumbo wing. But now we start with a raw product instead of a precooked product and then by putting them our slow-roast ovens to cook, which keeps them juicy and tender and then flash frying when ordered. Everyone in the room had the chance to try our wings last night, and I think they'd agree with me in saying there's not a better wing out there. Another example is optimizing our labor schedules. When we reduced our menu in June to simplify our operations, we were able to remove 20 prep hours per week per restaurant, which Chris outlined. As for the benefits, these examples I just gave added 20 basis points to our margins each. We met our original $25 million goal within a year, crossing that threshold in the second quarter. Then we announced another $5 million of savings getting to $30 million in the third quarter. Given what we are in the process of implementing, we expect to achieve an additional $5 million in the third quarter -- fourth quarter, taking us to the $35 million. We continue to identify new areas to save and expect to continue to add more savings in 2024. All right. Shifting to a longer-term view. Here is our long-term growth algorithm. We have a comprehensive strategy to grow sales. You heard Greg Levin outline today the strategy at the start of the day and each presenter provided details on the initiatives aiming to continue to outpace the industry in traffic and comp sales growth with strategies to grow BJ's core and win within culinary and menu innovation, gracious hospitality, greater awareness, restaurant ambience and growth overlays. With our strategies in place, along with pricing to offset ongoing inflation, we believe we can consistently increase our comp sales by low single digits to mid-single digits annually. Also, we intend to grow sales by accelerating restaurant openings. Our target is to add at least 5% to our restaurant base each year. At 217 restaurants today, that would mean more than 10 restaurant openings per year. We are confident that we can open that number of restaurants with both top-tier sites and best-in-class restaurant management teams. We are now building both our real estate and talent pipelines in preparation for more restaurant openings. As a reminder, in the decade between 2010 and 2020, we opened more than 10 restaurants per year on average. So we know what it takes to open restaurants at this pace and great restaurants. Next, we plan to continue improving our restaurant margins, as I just discussed. We show 2019 margins of 16% as a starting point, but there's no reason to stop there, and hence the plus. And we intend to continue building margins the right way. First, by building sales with our strategies outlined today and driving sales -- driving the greater sale leverages through our P&L. Also, we will find more efficiencies to cut waste and cost and continue to adjust our menu prices to offset inflation. Finally, we intend to return capital to our shareholders. Add it all up, and our EBITDA and EPS would consistently grow in the low to mid-teens each year. It is worth noting, we expect an even higher level of earnings growth in the next couple of years as our results will benefit from our recent and ongoing margin improvement progress. So where are we today and when do we expect our business to be on the trajectory laid out in the long-term growth algorithm? In terms of comp sales, we had a solid recovery through this year, and we expect to continue to build sales into 2024 and beyond with the strategies outlined today throughout the presentation. In terms of new restaurants, we opened 5 restaurants this year and expect to open a similar number next year before reaching the 5% restaurant growth by 2025. A note on 2024 restaurant openings, which -- the changing of the building plans to achieve the cost savings that Greg Lynds outlined, pushed back some construction start dates. We shifted some of our original openings that would have been slated for 2024 into 2025. As for margins, as I just discussed, we have momentum in building our restaurant level cash flow margins and plan to continue improving margins in the near term. In terms of returning capital, we restarted our share repurchase program in the third quarter, which we intend to continue going forward at a regular pace as part of our capital allocation strategy. Now let's move from the structure of our growth plan into what it means regarding to actual targets. So what level of sales can be generated with our growth algorithm? For a starting point, based on current consensus estimates, our 2023 sales should come in right around $1.34 billion. Next, we modeled our 3-year expectations with a bottoms-up build, including restaurant openings, reflecting our development pipeline and reaching 5% restaurant growth by 2025, and comp sales growth in the low to mid-single digits. The result is sales of $1.6 billion to $1.65 billion by 2026. That equates to around 20% of growth or more within 3 years, with about half coming from comp sales and half coming from new restaurants. The contribution from new restaurants is expected to increase in 2025 and 2026 as new restaurant growth ramps up. Turning to EBITDA. For a starting point, based on current consensus estimates, 2023 adjusted EBITDA is approximately $105 million. Next, we show the EBITDA band of $120 million to $125 million based on restaurant level cash flow margins in a range around 14.5% exit rate, which is consistent with our guidance last month that we expect Q4 margins in the low 14% as we continue to realize cost savings through the quarter. As a reminder, fourth quarter margins have been a good proxy for full year margins for our business. Then moving to 2026 expectations. We modeled the benefit sales growth that we expect using the midpoint of the prior slide, then netting out our expected G&A investments. The 2 scenarios shown are at 15% and 16% restaurant-level margins which equates to 2026 EBITDA in the $150 million to $165 million range or growth of more than 40% to nearly 60% from 2023 levels. This year, we expect to invest approximately $95 million in CapEx and repurchase a total of $10 million to $15 million of our shares. Looking ahead to 2024, on a preliminary basis, we expect to open about the same number of restaurants at a lower cost, but then also spending later in the year, preparing to ramp up our openings in 2025. Our other investments are expected to remain about flat. In summary, to summarize our expectations for 2024, we will generate more cash from operations and spend the same or less in terms of CapEx, allowing us to return more capital to our shareholders. Turning to our balance sheet. Our leverage remains very modest at 0.6x trailing EBITDA, plus we have strong liquidity with only $60 million drawn on our $215 million revolving credit facility at the end of the third quarter. Compared to other public restaurant casual dining companies, based on current consensus estimates, BJ's has one of the highest expected EBITDA growth rates from 2023 to 2025. That is driven in part by our sales growth potential and margin recovery story that I just outlined. Conversely, our forward valuation multiple is currently on the lower side of the industry, which we believe creates a fantastic opportunity as we execute on our near-term and longer-term growth plans discussed today as consistent above-industry growth and attractive margin profile tend to be rewarded with higher valuation multiples. All right. Returning to where we started the presentations today with our theme. These are the 4 key steps to unlocking shareholder value as we build momentum and unleash growth. Starting in the upper right of the flywheel, growing sales. A key goal of today was to convey the 2 sales growth drivers. First, comp sales growth, through the breadth of activities related to building guest traffic and check while taking market share for the competition. Second, new restaurant growth, through accelerating our openings to at least 5% by 2025, delivering solid financial returns. These together will meaningfully increase BJ's scale by about 20% or more within 3 years. Next on the flywheel is expanding margins. Strong margins are critical for profitable growth. We have a dual mandate of delivering margin expansion through sales leverage and cost savings. We will continue to be ruthless in eliminating efficiencies and costs with a high degree of creativity. Plus higher margins unlock additional new restaurant growth opportunities that meet our financial return requirements. Next is increasing EBITDA. The first 2 steps, growing sales and expanding margins, work as multipliers to generate higher dollar profit from our restaurants. Adding extra profit from our restaurants leverages more fixed elements of G&A, which boosts EBITDA growth. We expect to increase EBITDA by more than 40% to nearly 60% over the next 3 years. Higher EBITDA and the flow-through to operating cash flow unlocks opportunities to accelerate growth through reinvestments, which takes us to the final quadrant, reinvesting back into our business. Investments in new restaurants and remodels have delivered strong returns, and we expect to improve our new restaurant economics by growing sales, improving margins and lowering the investment cost. We plan to continue investing in our growth as well as ways to enhance our brand and what matters most to our guests as an elevated ambience drives repeat visits and stronger guest traffic. The excess cash flow will be returned to our shareholders. And that, in summary, is our plan that you can expect us to execute against. Thank you, and we will now move to the Q&A session. Give us a moment to arrange seating and we'll be on stage momentarily. Thank you. We're ready to go.

All right. So we're just going to -- are we good? All right. Let's go ahead and we're going to hand the remote -- so used to be in the home, right, hand the remote. My wife be like, that's all you do. We'll hand the mic point out to you, and can get you on the webcast as well.

For Greg Lynds, two questions. One on the remodel side. I think you're going to touch about 20% of the store base this year. I think the early estimates were 15% of the store base next year. What status does that leave the fleet in? How much more is there needs to be remodeled over time to get those existing fleet the way that you want. And then on new store development, you've talked about more of a clustering approach within some of the newer markets. What type of density do you really need in markets to start to see the efficiency from fuel level supervision and staffing start to grow for -- as you're filling in those markets now.

Right. So I'll tackle the first one on the remodels. So when you look at remodels, we look at the age of the restaurants coming number one, we look at also the sales generation how it's performing. And then we look at the lease to make sure we're on amination with our lease. And we also talked to landlords about contributing for the remodels. So we hit 36 this year. And deployment going through our planning right now. So we'll know the exact number. We're going to focus on next year, but probably somewhere in that same range that we did this year. And then we'll look -- I don't know -- I'm not sure of the exact number that will be -- that we'll still have to remodel. But there's still a fair amount. So we can definitely hit them, and we can continually upgrade them. So the short answer is, I don't have the exact number for you what we have to -- how many we're going to do over the next 3 years. We're planning that right now. But restaurants that are 8, 9, 10 years old for us may or may not need a remodel. So if we look at our base, pre -- that were built between say, 2003 and 2012, '13, those are the ones that we're going to be remodeling the first. And then on the new -- the -- so as kind of I mentioned, our strategy is where we can leverage supply chain, where we can leverage brand supervision or supervision and brand awareness. Those are the three things that we're trying to leverage as we get into a market. So we love markets like the Detroit, Michigan area, where we can go in and we've got 4 or 5 restaurants and we can go to Lansing, we can go to Kalamazoo, we can grow for the that we gain leverage in a market like that right away. And that's our focus is to continue developing kind of the Florida market the way the mid-Atlantic up into the Northeast and then continue to build out kind of Michigan. We still have plenty of growth in Texas, California and Arizona.

Todd, just to add on to that a couple of things. One is we have about 70 restaurants where we could actually expand capacity that have the service area that's no longer being used. Whether we'll do all 70 or not, we'll see. The other side of it is, as we talked today, when we started building what Gregory Lynds called the Proto 7 that we did for a few years there, that doesn't have the 130-inch TV. So even though it's a newer restaurant, it's actually got a lighter wood bar, but it would probably make sense to go into a few of those and actually add the 130 and adjust that bar statement. So we probably have somewhere in the neighborhood of over 100, probably in the 125-plus restaurants that we would maybe want to remodel over time. It depends on how we want to lay that out. I think after we get through this year, you'll see that capital go down just because we've really hit the bigger restaurants, a big booming restaurants and the bigger restaurants but also the restaurants are a little bit more aged. The other side of that, to your question as well, we want to get to somewhere close to 3 restaurants from a minimum clustering. One of the things that's unique to BJ's frankly, is we have to deliver beer into those restaurants. So when we get more restaurants in there, we get less what we call LTLs when we're sending beer at that. That reduces that beer cost for the most. Because we're with a national distributor, it's not as big a deal per se on just traditional food and beverage, but the beer helps come down. And then Chris will talk to this as well. Then you start to really get the supervision that really helps in an area where you can put a director in that area, build out, leverage that where the director is not flying in and save costs.

Jeff Bernstein from Barclays. Two questions as well. The first one, just it seems like the investment community is always focused on comps above all else. I know your guidance is for low to mid-single digit starting next year. It just seems like it's a very difficult hurdle. I mean, I look back for casual dining, it's been 15 years of negative traffic. And I think you said you're running 17%, 18% price since 2020. So just wondering, how do you think about the drivers of that comp over the next number of years. I mean looking back to BJ's itself, it seems like it's been probably 10-plus years, taking out the COVID years where you were able to consistently on a multiyear basis to achieve that level. So I just want to make sure in terms of your confidence in setting that bar to low to mid-single digits starting in 2024, is that something you think you can achieve? And then I had one follow-up.

Yes. Good question, Jeff. So I think when you look at that and where we would like to be and think about the amount of traffic that we drive into our restaurants today, the -- what I would call the minimum set up there would be flattish traffic. And then you gain from mix. We talked about the WOW! and the culinary strategy, and then you have some pricing. That's kind of the minimum bar that we would set for ourselves. Ultimately, we want to continue to drive traffic into our restaurants and focus in on maybe some of the dayparts that we win. How do we continue to win on late night that we play in there. As the guest continues to come out and look at us more from the social dining, how do we continue to improve on that dinner aspect of it. When -- overall, when you think about casual dining, that lunch has been probably a bigger challenge area. And I think it's fast casual QSR that's come in. And frankly, given a quality product at a more convenient experience, so to speak. So we know and I think Chris showed that on the speed side of it, we're not going to be a convenient play. We're going to be more experiential social play. But there's still ways that we can tap into that rating on the culinary side to get it a little bit different and then start to look into that mid-afternoon, dinner and late night and really target that and be more targeted in that area. So that's how we go after it.

And what's the macro assumption? I know a lot of people want to talk about the slowing macro. So as we think about 2024, at least, what's your built in assumption for the macro environment from a consumer perspective?

Yes. Our assumption is really a more normalized macro environment. So we're not putting in here thinking that we're going to go into a recession. I don't think you can necessarily build the business for the future going, there's going to be a recession. I think you have to take the assumption that consumers are going to come up. And how do we become and maintain the wide moats in our business, how do we become that competitive alternative compared to our others. So people want to come to us and we have that guest desirability. And that's where we're investing in. It's really about that differentiation. And as difficult as it is, and I get this from the investment community, reinvesting back into the business is not something people want to hear out here. They just don't want to hear it. And that's where you lose your relevancy, you lose your quality, you lose your differentiation. And you do over time go why am I struggling with negative comp sales every year. You've got to take that a little bit of that belief and the strategy that we're doing, or we had a belief in that strategy that you invest back in, make it a more desirable experience for somebody going, "Hey, you know what, I'm going to go to BJ's and I'm going to wait that 20 minutes. " One of the things that came out of our guest research and us talking around, talking through it is we always want to be faster, right? We want to get to the point in a restaurant like in a hotel where you say to yourself, I don't have to check out anymore. I can walk out the door. That's a convenience for the guest. We've got to think about our business that way, where do we -- how do we make it more convenient? Maybe there's a way that guests can just leave. You pay a table we can do that through mobile app, et cetera, but maybe just you tap your phone, and you get to leave. So you add that convenience that speeds it up. But we're not going to become a restaurant that says, you can have a 20-minute dining experience at BJ's and go. We want to offer that. But ultimately, we want guests to go, you know what, it's a 40-minute wait, and I'm going to wait at the BJ's because it's so damn good that I'm going to wait.

I'll follow up there just to add to what Greg said, too. When we think about our value strategy and pricing strategy, it really is looking through the cycle, thinking about how do you maintain strong dollar value, if you think of our daily brew specials, Happy Hour, lunch value. So if -- irrespective of the backdrop, if somebody wants to convert that strong dollar price point, we have it. And even when we go through menu pricing, we look at more known value items that will signal value. And there's areas in our menu, we can lean into a little bit more in terms of these decades, more unique type of Brewhouse fabulous offering. So that's another piece of it, too, to make sure that in any type of economic backdrop, we're going to have reasons to -- for people to come in to BJ's and come in for a great value.

And my follow-up, just curious the -- from the management's perspective and your Board and your largest shareholders if you were to take a step back. I know you seem to be encouraged by the opportunity to reaccelerate the unit growth being that you're halfway to maybe your destination or less than half way. How do you balance that with the idea of maybe you've said recently, maybe we don't do as much unit growth, which you've said always in recent years, quality over quantity. So maybe versus doing very little unit growth, getting those margin type up become more of a cash flow generating story and more of a return of cash story. Like how do you balance those two because I know it's hard to deliver both at the same time, and it seems like you've gotten into a groove of less unit growth of late and more about the margins and the cash return story. So I'm just wondering how as a management team, you think about that.

Yes. So on that initial slide that I showed with the three key messages. We don't get to number three, which was accelerating restaurant growth if we don't do number one and two. Plain and simple. We've got to grow comp sales and we've got to grow margins. That provides the opportunity, the option to invest back into new restaurants. So that's the way we blind it out and the way we look at it in our business. So coming out of here, we want to get back to that 5% that long-term growth algorithm. But it's based on generating comp sales and high restaurant-level margins that free up even more cash flow that give us that opportunity to build new restaurants.

Andrew Wolf from CL King. I just want to ask you about your pricing strategy, which you mentioned was you passed on less price -- less cost inflation, I should say, than some of your peers. And judging from results partially, at least part of that strategy must be the reason for the outperformance in the guest traffic. How do you measure that internally, where you should price beat others on price to drive traffic? Are you satisfied with sort of the gas to elasticity or how you think about that? And what does that mean for the future pricing?

Yes. I'll touch on that. Tom will probably add to it. And Tom alluded to it a little bit, and that is -- and even Putnam did during his strategy session around the culinary. We want to have and maintain this good, better, best pricing. At the end of the day, there are certain items that we call them KVIs, known value items. And on known value items, you've got to be very competitive. We can have just a cheeseburger on our menu starting at $18. Even if we said it's half pound and look at the price per pound is better than somebody else's, there was a restaurant concept that I won't name. It's no longer public that had a pound burger. And their comment to the investment community was, look, per pound, it's a great price. Well, still, somebody looks at it and said, wow, I'm paying x for that burger. So we've got to continue to have this good, better, best. So today, we have like our smokehouse burger. It's one of our lower priced burgers. Believe it or not, onion straws cost less than cheese and barbecue sauce cost less than putting the tomato on there. So it's actually a really great burger, but it's our entry-level burger that's actually differentiated, but it's in our good strategy and our good, better, best. Then as you saw last night and Putnam went through the culinary strategy, we want to have those Wow items that allow people to buy up. And I think what you see in the BJ's restaurant is we have so many different dayparts and reasons to come to us. The person that's celebrating and socializing and is using us as the entertainment for the week or the escape. They will spend up on that, and that's where we want to go with that and have that differentiation. Now from a more practical standpoint, whenever we take pricing, you start to look at the elasticity of it, there's certain things move from one to the other. Do we move it in the right way. And we tend to look at that individually at certain items to see how their relevancy, let's call it -- or in our case, we call the incidents per 100 or as every 100 guest comes in, how many do they order that pre and post the menu pricing. So we'll continue to look at that and look at different areas to adjust. Lately, coming out of COVID, it was pretty inelastic. I know there's been a lot of concerns around where the consumer is right now. We've mentioned that we've seen alcoholic beverages slow down versus last year when I think there was this really big -- I've heard the term revenge eating, revenge dining, going on. But when we look at it versus 2019, we still see those incident rates higher. We also, from an elasticity standpoint, we'll look at our daily Brewhouse specials, we'll look at Happy Hour, we'll look at other areas that people tend to use our menu to try and manage a check. We haven't quite seen that yet, but we'll continue to evaluate both that from a guest standpoint, and then every time we take menu pricing where things may or may not drop off from elasticity of demand.

Yes. So just exactly what Greg said, after we take the pricing around, what you see immediately is any shifts in the menu. So what's ordered when a guest is sitting in front of that menu. What -- if you look at appetizers, especially the attachment rates of things like appetizers and Pizookies, they're managing check, you might see a little bit less of that ordered. That's what we measure immediately after. And to Greg's point, we haven't seen any shifts there. You also look at what's getting used. And if people are trading from a stake to a burger, same incidence rates but lower check. And to the same point, we haven't seen any shift in that mix. We also look more on a longer -- you have to wait a little bit longer to see if there's any traffic impact. We can check our restaurants versus Black Box to see if there's been any deceleration. So that's, in general, how we track the success of a pricing round to see the flow-through there. But the other end of the equation, too, at these pricing levels for us in the industry, it just gets back to the importance of everything else we're doing. The food has to be great. The service has to be amazing. The ambiance has to be there. The guests are paying more than ever and maybe they have less visits to go out. So when they come to BJ's, we want to make sure that it is that level of the total experience that they feel like it was just a fantastic experience even for these higher prices.

Separate question, but more pointed, hopefully. It's for the other Greg. I just did the math, it looks like you're looking for AUV about 3% higher in 2024 from the new stores.

Yes, that's about right.

Could you just discuss what's embedded in that?

Well, I think a lot of it is just the fact that we've been -- we've operated this prototype for quite a while. I think the first one we built was in 2015. So we can look at our past performance of that. But I actually think we -- I don't know if that 3% is right. I think it's about the same. So we're projecting about $7 million, right, for the private 2024 that we're building, the new one, which is about what our new restaurants are generating. So it's about the same. I don't know, Greg, if you want to...

That's fine.

Guys, I'm trying to understand why are we opening sort of units at all at this point? I know we're talking about the 17% restaurant level cash flow margins. I mean the blended average for the company is really like 13. So if your new ones are doing this well and imply you could probably get a lot doing 10 or 11. I think about margin expansion, as you called out, if you get 100 basis points of margin expansion, it's $14 million roughly of EBIT. And that's just -- there's no capital involved. It's just execution to get there. To get $14 million of EBIT on these new units, you got to open 11 of them. That cost you like $65 million, $70 million. You're going to spend like 10% of your market cap, you get the same EBIT you get from 100 bps of margin. So why -- look, I'm all excited about the margin and driving that over time, but in light of the fact that the margins are depressed from historical norms. And why don't we take a complete hiatus instead of just kind of continuing to deploy capital in light of the kind of profitability slide we've had over the last few years.

Yes. It's a fair and balanced question from that standpoint. And I think we look at it under that kind of a dual mandate that we'll get those numbers up, and that's part of that plan there. And as we have the ability to add new restaurants, that generates significant EBITDA as well, that gives us a little bit more of a forward and future valuation coming into the company. But as you mentioned, as we continue to look at that, it's based on getting sales and getting EBITDA up and having that optionality because if our new restaurants can continue to do what they're doing, you get the existing restaurants up from a margin standpoint. It does become a growth multiplier. So from an investor standpoint, it ends up increasing the overall value of the company. And -- but it's got to be done thoughtfully. It's -- we have never been a company that gets out there and says, we're going to grow 20% a year no matter what. And see margins going this way or going a different way and continue to open it, probably been one of the only companies early on that basically say, hey, we're pulling back on different things to do it the right way, and we'll continue to have that balanced approach. We believe, sitting here today, what we're putting together is going to allow us to do that first on that one and two, grow sales, drive margins up. That, as I said for gives that optionality. And really, we're thinking about it from a 3-year strategic plan. I think if you looked at it and said for a year plan, I totally understand where you're getting at.

First, I wanted to just say excellent presentation. Very happy that you chose to do in our Investor Day. So thank you for that. I guess, follow-up questions on Jeff and Frank. I guess, first, just could you drill down a little bit more on the CapEx, in the slide, you say for 2024? This year, about $95 million, and you have up there flat to lower. And let's assume you open up 5 restaurants at $60 million of POP, and you do another 36 remodels and you put up an average of like $342,000, that's gets you $40 million, $50 million, there's maintenance, but I have a hard time getting to $95 million. So I'd like to think that it will be lower than $95 million, but just wondering if you can be a little bit more granular. And obviously, that would lead to additional free cash flow, which we could use to do what -- it's my favorite activity at the share prices and share buyback -- a larger share buyback, I should say.

Yes. I think what sometimes gets missed is as we grow our restaurants, we're going to have a certain amount of CapEx for new restaurants for 2025. And they don't -- we don't pull that trigger until later in the year. So again, it provides a little bit of that optionality, as I was saying, we need to do one and two, first and foremost, right? And when we do one and two, that allows us to continue to pull that lever for the second part. So we start to think about where that CapEx is. There's a little bit, yes, less in the sense of each restaurant to 1 million to build less. But if we think that we're doing 5 and we're in a good position to go to 9 or 10 next year, there's going to be a certain amount of that CapEx going into next year. So that's an additional part of it that plays in there. And then we're still kind of going through the remodel CapEx right now and where that will come down. Ultimately, our goal is to have that lower. And I think when you look at that number for this year, we want to get that number lower, and we're being pretty judicious on it when we sit around and talk about what's the right restaurant to remodel and so forth there and what are some of the other initiatives plans that make sense for us that allow the guests to have a better dining experience or are important for us for maintaining relevancy.

Great. And I guess just one other comment and just really adding on Frank and Jeff, as you just do the math, new restaurant, approximately $6 million, where your stock is trading, it's valuing each of your restaurants at approximately $3 million. So you got a nice arbitrage here to obviously lean in more towards, obviously, the remodeling, absolutely agree. You got to keep reinvesting unit business. And I may be a little bit different than Frank, I do think you should open some new restaurants. I think you have to grow. You have to show that you are a viable concept. So I don't want you to completely stop growing, but I think you remain highly disciplined and focus mostly, I think, long-term investors, free cash flow. Free cash flow at the end of the day is everything, even more so than positive comp sales, even though we obviously want that, the cash flow is king.

Thanks. I'm not sure there was a question in that regard. But we do -- like I said, we take this balanced approach. The strategy that we lunged up, the one, two, three and gross sales and industrial margins or improve the margins and accelerate new restaurant growth. We don't get to three without one and two, which shows off more cash flow and ultimately allows us to make those decisions as to use -- as how we want to use our cash flow.

Mike Tamas at Oppenheimer. Tom, you put a run rate, 14.5% margins exiting this year, going to 16% plus as we get to 26%. Besides growing sales, what are the building blocks to getting there? You talked about lagging inflation by, I think, about 400 basis points on your menu pricing. You obviously have cost savings. That makes up about half of that so far. So what are the other missing pieces that kind of bridge us from 14.5% to say, 16% plus? I have just one follow-up after that.

Sure. So the 14.5% being the -- still the approximate exit rate as we think of the next -- we showed this over the 3-year window, it really is everything. It is sales leverage that comes from what we outlined. It is more cost savings, that $14.5 million has all the savings that we're -- we will expect to realize this year, but there's still more things that are being vetted, ideas brought in, things that we're working through the system. So this was a great initiative to really get the whole organization thinking about ways to bring down costs in a creative way. There's still some areas of our business that we know there's more opportunities in. So this is the piece outside of just pricing that lets us keep the value and fix and remove efficiencies in the system. Chris outlined these great savings or these great wins we're finding with AI to find ways to increase efficiencies there. We haven't seen all that flow through yet to the P&L to see the schedules all adjust. And when we keep finding ways to make it more granular and find ways to bring that out to doing more in the restaurants. There's a benefit there, too. So it really is the dual mandate. It has to be on the sales line, but it also has to come from the cost side. We're not saying we're doing this with extra pricing. I think we did the right thing by taking less price and looking at where we sit, we like our competitive position. So I wouldn't say that we're saying we're going to lean any more into pricing. We will take our fair share to maintain, but it really is the top line and cutting costs.

Yes, real quick to that. We've got -- I mean, we will continue to find other ways. It's an ongoing journey that frankly just never ends in that regard. And putting the team together this year and working through that has been really impactful. The area has been the stickiest for us, and you see it on the P&L, frankly, has been operating occupancy costs. Some of that is a change in the business to third-party delivery. In that aspect of the business that we didn't have x amount of years ago. But the other side of it is coming out of COVID, janitors cost more, electrician cost more, plumbers cost more, all of those things have kind of played in there. So what we're doing when we started here in the fourth quarter, and that's, I think, a little bit to Tom's point about the exit rate and where we're going is we're really starting to drill down into the operating occupancy. Some of it, frankly, is how can we use AI in that. We have all of our facilities people when they come and do something. They take notes. Think about like going to the doctor and they're writing all the notes down. Well, in the past, you still -- you just generally get an invoice and you put the invoice in, say, plumbing, maybe have some notes there, we actually put our AI tool and read all those notes. And when you start to read all those notes, if you -- for those that have played around with AI, it can be really powerful because you keep drilling and drilling into it. And you start to realize is there something that's systemically wrong with maybe the way you built restaurants. Maybe we end up, and we're talking about this the other day, we have traps on our drains that are screws. And we want to clean those drains because it eliminates fruit flies and everything to keep facilities clean. Well, guess what, team members take the screws off, they take the gray off. They don't want to put that back on. That's extra time. Well, why can't we put a clip on that goes on and off? Like you start to realize those things through your business. They're actually simple, but they're very powerful and they get missed. So we're going after those little things like that, that over time, will help us in that area. But that's been the stickiest one for us. Labor is pretty much back to where it is. In fact, from productivity, it's even better, and we'll continue to work as we work the menu and Chris and Putnam work at different ways to operationalize that. Cost of sales have normalized. Some of it's pricing. Some is we've gotten better at the way we've done smart sourcing, frankly. It's going after that operating occupancy cost is that next lever that is of high demand for us.

And then on the unit growth, you're targeting going to 5% plus starting in '25. What's going to give you the green light to actually do that versus what might hold you back from accelerating from, say, 5 units for 10 units?

So there's two things. One is, first and foremost, the governor to all growth is people, right? Plain and simple, I think we're building a bench strength. But when we look at really good restaurants, I have to say great restaurants a better way of saying it. it's because of that management team. It's the culture within that restaurant that comes from the general manager and the executive kitchen manager working together. So we've got to continue to cultivate that -- those people and train those people differently. Chris and our Chief People Officer, [indiscernible] we brought in earlier this year. They're working through to teach more leadership skills. Generally, in the restaurant to become a general manager in the past is because you're really good at your traits. You're really good line cook. You really good in the front of the room looking at schedules, and we have to start teaching how to be leaders. And leadership is very different than going, wow, that person is great on the line. Once you're at EKM, you're not on the line. you're needing to teach the people to be on that. So there's a subtle movement that we're going through there, looking for the right quality of individuals that can actually lead people versus being the best person as a line cook or somewhere in the dinning room. That's the first and foremost. Now to you out there, that's not sexy. You want to hear about a financial quantitative number for it. I get that. It's ultimately what we talked about earlier today, and that is we need to see one and two coming in that direction and that we're making that progress. One of the things that Greg Lynds has always done is he gives us optionality in our leases. We are -- I can't say this over the webcast because other people will probably look for it. But we have this option, how we sign leases that gives us a certain amount of time to get out of leases. We go in and say, look, the feasibility didn't come, don't really have to say why might be a permitting issue, other things that come in that allow us to walk through it. So we line up that optionality in our leases, kind of like lining up all the planes to land if they don't make sense, we redirect it or we cancel it. But really, we've got to continue to move down that path of one and two to move us into number three.

Nick Setyan, Wedbush. I think a lot of questions around free cash flow and share buybacks are really coming from the fact that it's very difficult to have a very short-term visibility in this environment, let alone look out to 2025, 2026. And so when I kind of look at you guys and when I look at the presentation, I see 14.5% margin exit rate in Q4. I think there's a lot of investors that would love that type of unit level margin exit rate in Q4, but we're still not sure how much visibility there is into that 14.5% exit rate out of Q4, right? And what that kind of comp that implies just given what happened in Q3, given the fact that you had to say low single-digit comp in Q4 as opposed to actual number, which you've done in the past, you've always talked about a number in terms of guidance instead of a range. And now we're talking about sort of to low to mid -- low single digit, mid-single digit comps for multiple years, right? And so maybe the first thing you do is to address how confident you are in terms of your Q4 expectations if there's any update there. And maybe put some numbers around 2024, I think that would be very helpful, if you could.

No, it's a good question, Nick. Q4, much like I would say Q2 is made during the holiday season and how the holiday season plays through. The initiatives that we're putting in place continue to drive margins in the right direction. Even in Q3, as we saw the choppiness coming out of July and October, the margin improvement year-over-year put us in the right direction of things we're doing. And we continue to see that with all the way we're seeing operations efficiency here in Q4. But ultimately, it doesn't kick in until really the last 3 to 4 weeks of Q4. So right now, we're on plan with where we think we're going to be, and we'll see where the next -- I guess, next 1.5 months play out from that perspective. But within the four walls that we can control, we're doing a really good job in regards to that. As far as 2024 goes, we're putting together our plan right now, we presented to our Board in early December based on all the things from a bottoms-up perspective. We did some of that obviously coming into today's presentation. But we like the plan that we're out there and that we put out there and where we want to go. As I said, I think the prime costs in our business are pretty much back in line with cost of sales and labor. Could they be better? Absolutely, it can be a little bit better, but they're going in the right direction. We've got to tackle this operating occupancy side of it. And I think we've got some good initiatives against that to continue moving that in the right direction to bring that margin up. But ultimately, it does a little bit to your point, you kind of alluded to it, you have to continue driving comp sales. You do in this business. You -- there's always going to be inflationary pressure, whether it's just a 2% or 3% increase in wages here or there, supply wants to increase, et cetera, you need to be able to drive that comp sales and leverage the fixed cost of the business. And that's why our plan has to be really on the core has to be a twofold plan. Guided drive sales. And then we got to be ruthless as Tom mentioned, in regards to the margin aspect.

That was an important question. There's a couple of more questions around just some data points that I'd like to know. What's the alcohol mix now, the value mix now and then the pizza mix now?

I'll do my best. I don't know if I know them all off the top of my head. Alcohol is somewhere in the 17% to 18% range. And it used to be into 2021, but that was pre-COVID when we were doing 10,000 off-premise. So in the dining room, I got to imagine it's higher. I don't know the exact number. We started having to look at our business that way, how it plays out. The incident rate is higher than it was in '19. So I got to imagine it's still up there. Pizza continues to be around 10% or 11%. It's actually a pretty steady number for us on there. And I do think we've got an opportunity to enhance pizza. And I know for those that have followed BJ's for a long time, they always come back to this pizza roots -- the pizza roots. And it's important because it's a differentiator for us. But we're also not going to do $6-plus million to $7 million AUVs as a pizza concept. Even when I joined in 2005, it was how do we add these other really unique differentiated indulgent items to kind of create experiences for guests for all different types of occasions. So it's a little bit between those two, but there's an opportunity, and we don't talk about it enough to go after pizza and figure out how we want to reposition pizza. It's a shareable item. So it's a social item, which is great. And it hasn't been as emphasized, I think, over the last couple of years as to where we want to go with it. It's actually something we're currently working in the test kitchen and thinking about how we want to change that both from maybe a presentation to our guests and how we want to romance it a little bit differently. By the way, to that point, we spent a lot of time talking about the Pizookie and everything we do on the Pizookie and it's -- and we have people on $5 Pizookie Tuesday, we have tailgates outside our restaurants for all the teenagers coming to high school and they eat it in the parking lot, tailgating. It's like -- it's a social phenomenon in a lot of our restaurants. But guess what? It still doesn't have the awareness outside of California or some of our western states that it does in California. So that's a brand differentiator for us that we need to lean into. And it's something that Heidi talked about in regards to how do we continue making Pizookie a household name. That's our local marketing domination. Let's go after that aspect with younger kids on Pizookie Tuesday. So I think there's something in all of those areas that we can continue to lean into that drive our own unique attributes to BJ's.

A quick one for Heidi, if I can, or a couple. I never asked just one. You talked about the north of $9 million of your type of customers that are within a 10-mile radius of the existing restaurants. What are your thoughts on why they haven't tried BJ's as of yet, if it matches so well with the demographic that the brand seems to resonate with and how do you stimulate that trial? And finally, if we look at density in a geography, is that opportunity greater in your newer markets and part of it is time and scale to unlock it? Or is there something in this 20% bump in the marketing spend that allows us to go and drive frequency with those customers.

Yes, great question. I think it goes back to the unaided awareness slide that I showed today about 12%, right? So across the board, outside of California, we have an opportunity to gain back our share through awareness. And when we do spend, we see a return, but it's also limited in terms of a certain percentage in the system. So as we talk about, hey, we're going to invest 20% more into the media plan that gives us longer flight dates, and that gives us more flexibility to go in and choose additional markets. So I'm looking forward to getting back into the game in terms of that connected TV and that digital video because the media consumption is going that way. So someone with our market scale can be much more efficient and effective with how we buy media. So I think that was question one. Question two, I just -- I kind of want to like talk about local domination for a moment because I think it gets back to where you're headed. And that was a lot of kind of the pilot testing that we did this year around new restaurants as well as existing restaurants that didn't fall within that digital TV, Connected TV market group. We've got some work to do when it comes to, hey, giving our operators the tools to go out and build relationships within the community. And so that will continue to play a role. We'll have monthly focus opportunities for that as we look to the year ahead. But there's always opportunity for growth, 12% is not a big number. But again, it kind of goes back to the $9 million, where, hey, there's a lot of opportunity here.

This is Tyler Prause at Stephens. My question was on closures. And it appears the pre-COVID rate was about 0 to 1% a year. And then in '22 as 2%. And then this year, we're looking at 4%. I was going to see if you could talk more about these recent closures and kind of what should we expect going forward?

Yes. Tyler, look, I think it was -- choosing my words widely here. BJ's had a view that we're not going to close restaurants, we're going to operate it and we're going to make it work, I think, just from a DNA perspective, not that we never closed restaurants. But as I took over, frankly, and got with the team here, they're a restaurant that some that -- and just a few, by the way, that we've been operating for a while that just didn't make economic sense. And they had opened and we're operating long enough to see that they were never going to grow into that where they want to make sense. So that played a path in a couple of them. The other ones, frankly, that we opened this year were the smaller restaurants. So it was in like Oregon. It was one of them. Chandler, Arizona, we relocated back of the mall as trade areas changed. So some of that played into it. I don't think -- and we've always said this about BJ's and I've kind of emphasized it in our presentation. We have never been a company that said we're going to grow 20% a year, so let's get out 20 restaurants. And then three years later go, oh, guess what, we're closing 30 of them or we're closing 40 of them. We've got high-quality sites. Greg Lynds and the team have done a really great job from that perspective. But there are a couple where the trade areas change. So we made that decision on a couple of them. Going forward, it's onesies and twosies, so to speak. I would never say there's not going to be any some leases are coming up. They moved in different areas if we can relocate them, we will. But we don't have this, hey, we've been around for x years, and we opened 50 of them and we want to close 30. So one or two will go forward. To me, coming out of COVID, we want to see a little bit of trade area may have changed. It really didn't for us on those restaurants. Great restaurants, pre-COVID great restaurants today. And as a result, we made the decision to close a couple. Most of them, though, were a change in trade area or they were the smaller one, like I said, up in Jantzen Beach Oregon, so for.

Question for Tom. If I just kind of look at the midpoint of your 2026 revenue guidance, you said $1.6 billion, $1.65 billion. I think the midpoint of that $1.625 and we do 16% cash flow margins, that implies $260 million of restaurant cash flow. And on that number, you guided to $165 million of EBITDA. So basically, that would imply $95 million of G&A, if I look in the out years. And you're going to do $80 million this year. So just in light of a little lower growth and we're trying to drive margins higher. It just seems like to go from $80 million to $95 million in 3 years, it seems like that would be a big G&A ramp for a company that feels like $80 million is -- it's probably a big number for corporate overhead. I mean, would you anticipate in 2026 G&A growing that $5 million a year from '23 to '26 and being $95 million or can we keep that closer to where we are today?

I think the base assumptions there were to give enough of a window to say that this is some type of inflation that will happen there to -- especially to support the growth that's expected. But yes, it might be something under that too. So we don't have it planned out by year. We're setting our plan for 2024 right now. And we'll set -- we'll fine-tune what the next couple of years looks like after that. But as a team, we want to make sure that we're as efficient as we should be. All of the -- there's not excess spending happening at the G&A side. We want to make sure that the extra investment that happens on G&A is truly that, that it drives growth. So it's number that we've used for the walk and for the assumptions, but if there's ways to save and not spend that much, we will certainly do that.

I think the other side of that one, Frank also comes down, we talked about this before, that G&A always is in these three buckets. It's us sitting up here, and we should always get leverage out of that. Then you get the field operations side of it, and that's going to grow as we add restaurants going in, we're hitting this plan and adding restaurants. You get leverage out of it because a new director of operations doesn't need to come on so they get 7, 8 restaurants -- 6 to 8 restaurants, I would say. But you get leverage out of that aspect. The bigger chunk of that one really comes down to your manager and training or what we call our AMP program. So you start thinking about your G&A growing, it's not really going to be because we're adding a lot of people at the RFC. It's about the managers and training coming into your G&A until they go to a restaurant. So you start to think about where growth may or may not happen. If growth comes down a little bit. G&A comes down naturally because you're just not going to have your manager and training program. That's usually a bigger chunk of that growth. That's kind of go stair step of new restaurants. One more question?

I'm going to do a two part. Sorry.

[indiscernible] . Come on.

The 20% increase in media spend, is that within the existing marketing budget? Or is that a 20% increase in the marketing budget. And then related to that, the 12% unaided awareness, how meaningful can that be as that stair step higher in terms of bringing in new customers and what that ultimately means for sales?

So we're still working through the 20% increase. It could be a combination of both. So new incremental spend. And then there are some things that we won't have to do this year that we can we allocate some of those dollars to so [indiscernible] TV spot, which can be very expensive. So we're kind of looking at those things as we continue to finalize our budget. Your second question was the 12%. So that number is not going to jump from 12% to 20%, right? Usually that like broadly clients with the several years, right? They used to be in single digits, and it's taken 4 to 5 years to get us in the doubles. But I think that media [indiscernible] with the incremental spend, we'll help move those numbers. And we're also looking at then very much by market, right? So there's a lot of differences between California, Texas and Florida and Ohio. So we continue to monitor it. But the media spend and the incrementality that will help with that unaided awareness.

We'll go ahead and do one more. Is everyone -- anyone want to hand over to mic real quick. Do we take it away. Go ahead.

So I didn't hear much today and sort of expected to on the catering opportunity. Was that left off for a particular reason? Or is that something that's maybe being deemphasized or you're still fleshing that one out? It looks like a big opportunity potentially. So I assume you might have discussed it a little bit today.

Yes. We -- it was in the growth overlays in our business because it's still very small. I think it's around 1% or so of sales and continues to grow at a double digit, almost 50% range or so. And we think we have a huge opportunity there. But really, I think today was emphasizing some of the things that are more about our core. But as Putnam touched upon, we think there's some unique attributes to BJ's that give us ancillary sales growth opportunities, whether it's how we want to use the beer club, how we want to maybe pulse and Pizookie pass, unique things to us. Catering plays into it. We continue to refine our catering menu and continue to grow that aspect of our business. And as we mentioned, we've got kind of a plan to increase the loyalty, I think loyalty, everybody talks about it and nobody has cracked the code on loyalty in casual dining. But we think we've got opportunities to figure out how we go after that to bring our guests to get them to come in that fourth time. And then that becomes part of the dining rotation. And that allows us that personalization with them. It allows them to be in our database. And one of the things that we saw this year as we've gone through this is we can break people cycle. So if somebody is coming in every 2 months, there's ways that we can get offers out there and go, you're coming every 2 months. We now got you to come in after 5 weeks. And that drives that frequency in our business allows us to reach out to them. So we're continuing to work through that. That's going to be a multiyear. I think Putnam mentioned that, like I think we're around 17% or 18% of sales right now in loyalty sales. Over time, we want to continue to build that up over the years and try some different things to get people into it, and we'll be updating our program with a couple of different things over the next year as we test things. But there's this huge opportunity. But you step back, casual dining is one of those -- ones where people are still trying to figure it out because our frequency is not the same as a Starbucks frequency or a QSR frequency. So there's different ways to do it. We're at this point now where we want to widen the funnel. We want to get more people in because we know if we get them in there, we can drive that sales. Some of the other programs are more about how they optimize. We're a little bit widen the final, bring people in and optimize. It's a little bit of anti statement for us. All right, everyone. Thank you. Let me convey our thanks from the entire management team. We have appreciate everyone coming out today to hear about the BJ's concept, our strategy, what we're doing over the next several years. But as you leave here today, I hope you remember that slide that had kind of the three takeaways. We've really got a clear plan on how we're going to grow sales, and that continues to be about how we widen the moat. We remain a differentiated, better alternative in casual dining talked about on the awareness, the culinary, the ambience, reinvesting back into our business, again, dirty word reinvesting back in, but it's something that drives sales and is very important for us. We're improving margins. We continue to improve margins. Tom talked about that, how it's gone up each quarter. We've got other initiatives in place to continue to drive that aspect of it. Those two, that allows us to move into three and three is accelerating that restaurant growth. But casual dining, it's $200 billion industry. It's a big industry, and it's right to take market share. And that's what we want to do out there is we want to continue to take market share from both the independents that might not have the ability to invest into their business. But we've got enough scale to do that and we want to take it from the other casual dining restaurants that frankly came to maturation, so to speak, in the '90s and 2000s, and they don't want to reinvest back into their business. They want to simplify and optimize and reduce the quality and the differentiation. And I know that sounds really exciting sometimes when you're a financial analyst to talk about reducing and reducing and reducing, but it only gets you to a certain point. You got to build top line sales, you got to differentiate, you've got to invest back in. And I said those two things, allow us to generate a lot of free cash flow and build new restaurants, return to shareholders, and I think, over time, really drive meaningful shareholder value. So again, thank you, everyone. We appreciate you coming out here for us from California, braving the cold weather. We had to find jackets. I don't think any of us own. But I hope everybody learned something from BJ's today. Thank you.