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

Good morning. My name is Jeff Bernstein. I'm the restaurant and foodservice distribution analyst here at Barclays. Thrilled to introduce our next presenting company, BJ's Restaurants. With us this morning from Huntington Beach California, we have Greg Levin, President and CEO; and Tom Houdek, CFO. I feel like I'm pretty well versed on the name having just attended their 2023 Investor Day in Boston just a couple of weeks ago. By way of background, for those not familiar in the room and on the webcast, BJ's is a polished casual dining chain. They had 215 U.S. company-owned restaurants and actually are talking about accelerating new unit growth from the 2% range to closer to 5% over the next couple of years. Management is very confident in our long-term guidance for 425 U.S. company-operated units. So still room to effectively double their store count from where it is today. So I want to thank BJ's for joining us. I've got a handful of questions, but then I will open it up to the audience if there's anybody who'd like to chime in. But with that said, Greg. Pleasure

Nice to see you.

Tom, nice to see you. 2 weeks in a row. Happy holidays. I feel like starting these meetings and presentations with a little chat about the broader consumer. I know there's been surprising resilience from a consumer spending standpoint, especially in the restaurant world. Things did soften a little bit. We felt like from industry data in August and September, and there was really a debate of whether or not it's a slow in consumer with a variety of headwinds that we're all hearing about every day or maybe there was just a little bit of a return to seasonality that we hadn't seen in a while. And it does seem like from industry data and from others in casual dining that things have gotten better. You echoed that from September going into October that there was a little bit of an uptick. So I'm just wondering how you'd -- if you didn't have all this macro data at your fingertips and you're just looking at your business, how would you describe the health of the U.S. consumer today?

I think the health of the U.S. consumer is -- I don't know if they're the right to, probably in the middle, meaning they still got good balance sheets. They'd like to go out and do experiences, go out and from that side of things. And we've seen, at least in our restaurants, we haven't necessarily seen any check management. At the same time, then we start to look at it year-over-year, there are tended to be things that we just talked about that maybe see more seasonality based. We historically don't see an increase in sales, weekly sales average from July into August into September usually go the opposite way. And that's what we've turned this year. And September and October, weekly sales averages are very similar. So as we got in October and they normalized, we saw more of the seasonality return and saw comp sales move forward. So when we look at our business, we tend to look at it on the incidents. We tend to look at it versus a happy hour, we look at it versus lunch specials and other Daily brewhouse specials. We'll see if we're seeing any movement of our guests. And we really haven't seen much of that. We've talked in the past that we've seen them come off of a high alcohol incidence of a year ago, but it's still above 2019 levels. At the same time, and we've discussed this earlier in some of the meetings, I do think the consumer is looking for or want deflation, right? And that is they still remember 2019 prices and there even 2020 prices. So they're used to going out and getting a value meal in QSR under $10, and now it's in the teens or getting XYZ for a certain price, and it's now up. And I think they're still adjusting to that. And while overall, they've got a solid balance sheet and they're out there spending, I still think there's a little bit of like, I used to pay x for something. And I think what we're going to have to see in the industry is maybe over the next couple of years, more moderate pricing or less pricing per se, so the consumer catches up to where we are today.

I feel like that's often a joke and the restaurant is true and people say, well, maybe companies will lower prices. I presume you've been doing this for a long time, there's no lowering of prices or at least we haven't seen it. Is there a period that you can compare to this? Or I mean, how are you responding. I think it's quite incredible that you haven't seen any check management the way you define it, you would think that there would be lots of one less appetizer dessert, beverage or whatnot. So are you doing something differently to drive that incident that you're able to hold on to that mix shift or...

Yes. I think it's probably how BJ's plays being more polished casual. And I know you were at our Analyst Day and we talked about more of the -- what we call the WOW side of upgrading our food in the presentation and so forth. So that when you're coming to BJs you're coming for this more experiential dining. And therefore, you know you're going to get a drink. You know you're going to get an appetizer. So therefore, our attachment rates have held in there. What I saw back in -- again, doing this for a while, talk back in the great Recession, you did see check management. You saw people start to not order a soft drink and they went to water. We saw a movement from beer and liquor or from liquor and wine to beer because you got a 16-ounce poor. We haven't really seen much of that this time. And again, I think it's the consumer a little bit better and their [ pocketbook ] versus a recession, great Recession, meaning they've got jobs, they've got money. They're just -- when they're going out, they're being a little bit more discerning going, okay, I am going to go out, so I'm going to do XYZ from the spend.

Got it. With only a month left in 2023, and you guys have talked a lot about your thoughts for 2024. Just wondering what would you say your most excited about in 2024? What you think will be the biggest positive to come out of your business 12 months from now?

Yes, I still love the remodels. I know we started on the remodels today, but continue to invest back into the remodels is something that continues to differentiate us, keeps us relevant and keep guests coming to our restaurants. So I'm excited about that aspect of it. It's only been half a year since we rolled out smaller menu, but I like the smaller menu that we've got right now, it's still 100 items but it's still a lot, but I like the food profile of us going forward. I mean we set up that slide at our Investor Day talking about the fact that we want to touch 50% of our menu items. I know it's over more of a 3-year time frame. But we've got a strategy for next year to upgrade the look in presentation of some of those items. And at the same time, I like the fact that we're going after the bottom 20 in regards to providing value. So I think as we start to end 2024, we're going to end up with. And then you more or less were to say, maybe a little bit smaller, but better presentation of certain items, maybe a little bit more value in certain other items on our menu.

Right. On the flip side, it seems like we're moving past a lot of the greatest concerns that at least we know about from a consumer uncertainty or from inflation and outsized pricing. But is there something as you look to '24 that perhaps is concerning for you besides the broader macros or anything that you're looking out for or watching for?

I'm not sure there's any comment as well that we're looking out for, except obviously the broader consumer part of our business and seeing where the consumer goes. I like the initiatives that we put in place here to continue to improve margins and drive our sales. I think some of the things we've done within the middle of the P&L have really helped us without taking away from the consumer. I know we've talked in the past things like the wings, which are better wings today or you got to experience some of the newer menu items or the different plating and the investment back in that to differentiate us. So I'm really excited about those continuations and how we're just moving the concept forward per se. But I think we always continue to look at the consumer and the broader picture of what's going on with them.

Yes. And really, if you rewind over the past few years, there's been -- everything -- obviously, COVID impacted top line and then it was hyperinflation after that. There's a lot more normalcy in the business, things you can plan around now than before. So we'll put that as the positive cap. And it really is the consumer back drop. If that changes, that will impact us all. But as we're planning the business now, we have to be winning in all different environments. So we got to make sure we were keeping the strong value proposition on the high end of the value, end of the equation as well as the low end. So things like daily Brewhouse specials, things like our lunch value. Even if we do menu innovation, we want to make sure we have craveable items across the value spectrum. So that's we're planning for next year, it's really planning for any environment. This was the year where even going into 2023, there was a question on the consumer at the beginning of the year, and we've seen it hold in well through the year, but we just have to be prepared for whatever next year brings.

And I feel like I don't -- I want to have a company with as great a California penetration as you guys. So as the experts on California, the Fast Act implications. It seems like a lot of companies are -- have a much more diversified national footprint, maybe you have to think about it is slightly different than you. But how do you think about it just actually speaking, what the implication would be or how much price you're constantly taking or whether you look at it just as a -- let the nation deal with it more broadly? Or whether you just focus on California? Like how do you think about the fast act because you have such outsized exposure?

Yes. So for those that aren't there at the fast Act probably everybody is. But California legislation decided that fast food restaurants have to pay a minimum of $20 starting April 1st. And that -- it's going to have ripple effects to all restaurants, it has ripple effects to retail in general. It's almost setting a new minimum wage out there for a lot of companies, both within restaurants, and as I said, in retail starting April 1st. Now for us, it's not going to impact the dining room because of tips and so forth from that standpoint. And obviously, it's not going to impact casual dining, but it does have amplifications towards our business. And we talked about this before in a couple of conference calls and that is, one, we have restaurants in areas like in our Huntington Beach area where a brand new in and out restaurant opened. And they had a sign outside that said starting at $22. We didn't lose people to that in and out. And I don't know where exactly what we're paying in that Huntington Beach restaurant there. But it's about building the culture in the restaurant. But generally speaking, even taking a step back or most of our kitchen team members are at 20% or above 20%. I think the entry-level positions around the Dish. And so you go from a dishwasher generally to a prep coke to a line cook. Dishwashers might be below that, so we'll have to look at that side of it and determine how much we want to increase or not increase our team members. The other side of it that we're looking at is how do we adjust tipping? Do you start to do more of a tip pool and tiptoe back house so they are now incentivized with the dining room to offset some of that wages. So we're looking at some of that as well. Taking that out of it, though, you are going to see restaurants take menu pricing. It's across the board. I've talked to a lot of friends that I know in the industry that run QSR restaurants. And they're all expecting to take some fairly large pricing come April 1. I think what that's going to end up doing for us is putting a better -- or narrow the gap between what our pricing is BJ's for a burger versus what you get in QSR. And I think that makes us actually in casual dining, be a little bit more competitive in that regard from like while I'm getting this burger sit down at the same price than getting at some other fast food restaurant. So from that aspect, I think it's a net benefit for us. And then as I said before, it's not going to impact our team members as much because a lot of them are already over $20. And then we have the ability to kind of look at how we want to adjust some of the staffing in there. But generally speaking, you'll see pricing in fast-food restaurants, you'll probably see it in fast casual restaurants. So do you think you'll see it in some captaining restaurants.

And also on the flip side, too, or at least on the demand side of the equation, this is de facto minimum wage increasing. So if you think of who spends their discretionary income, you're going to have a lot more people with some extra income. So there is that element too, where you have again, through the food industry and wherever it spills over to, there will be some extra discretionary spending in the state as well to be considered.

[ Glasses have full ]. I'm talking to your friends and the restaurant stream and to your anticipation that over time, the California Act is going to be the New York Act and the Florida Act. I mean, is that something that you see spreading to restaurants in other markets where there's just a big push for further significant wage increases or not as much in California is more unique from that regard?

California tends to set the tone for some of the other states that tend to have similar labor laws as California does. So I wouldn't be surprised if it comes to other states. Right now, I haven't paid attention honestly if other states are looking to adopt it or not. But I do think casual has a little bit or sit down, might have a little bit more of a benefit on that with the ability to look at how tips working, how tip is working, tips are working in the restaurant.

I know we talked about the -- well, I feel like from the Investor Day, there was a very clear message, which was drive comps, improved restaurant margins. And if those work, accelerate the unit growth. So I think we touched on the comp side of things from a margin standpoint. I know you talked about exiting the fourth quarter -- north of the full fourth quarter, which would be in the plus 14% range. How do you think about the margins as we look to 2024 as the precursor for the ability to accelerate the unit growth, which, again, you have to start planning in '24 to do for '24. So your confidence level on that accelerating margin opportunity in '24.

So I think taking a step back, if you look at our P&L, if you look at the cost of it, both cost of sales, labor and then operating occupancy. What we've seen is obviously inflation in all 3 of them. And that obviously delevered our margins. Going into -- even into Q3, I think going into Q4, but we're starting to see really a much more return to historical margins on what we call the prime cost in our business. And the prime costs in our business are labor and cost of sales. Those your prime input costs. Those are really pretty much normalized. Historically, we ran cross sales comes in the mid-25s. I think we finished Q3 at the 25.9% range or so. And I do think that some of the things that are rolling in here in Q4 will continue to move us down into that area. The adjustments we made within the middle of the P&L in regards to how we prep items, a little bit of a smaller menu using AI forecasting. Some of those tools have allowed us to start to move our labor closer to where it was historically in 2019 in the past, and that's getting into the 36% range. The biggest challenge for us right now has been the operating occupancy line. And some of it's a change in the structure of our business where pre-COVID, we did $10,000 or so in off-premise. We're now at 20,000, 21,000 or so in off-premise. And the lion's share of that is third-party delivery. So you've got those commissions as well as additional marketing funds that go to it to keep you relevant in the kind of portal out there or the carousels they call it. And we've added some, I think, somewhere in the 150 to 200 basis points in operating occupancy costs just for the third-party delivery part of our business. So as we exit this year, we've got some initiatives in place on the operating occupancy side that actually are starting in November worsened and other things going into next year. That's our biggest opportunity to start to move that number down a little bit, and that moves our margins back into the mid-teens. So that's kind of where our focus is going forward, and that starts to give us that better confidence in regards to the mid-teens. And then you said exactly right, and that is it's hitting 1 and 2, driving sales, improving margins, gives us the opportunity to invest into new restaurants. And we'll continue to keep that optionality as we go forward in our business.

And kind of back to the other point I was speaking to of what we can plan for. It does seem like even -- even we haven't set all of our contracts yet on the food cost side, but we still should be, call it, low single-digit inflation, maybe 2% or 3% and maybe some upside to that just from what we know now. On the labor side, maybe it's mid-single digits and a little bit more if there's some impact from the Fast Act. But those are more normal levels that we were used to seeing and we're planning for it in the business. We can take the pricing at regular intervals like we can. So as we think about managing margins, that's the right way to do it. This is something we can plan for and set the plan and the consumer backdrop has to be there. But as we look through next year, that's the plan is to kind of work through the -- getting both top line as well as some more efficiencies to keep improving and closing the gap to where we were pre-COVID.

That's if we were to see recognizing you're not fully contracted if it was only 2%, 3% food and mid-single-digit labor. I mean, right now, you're running 7%, 8%, I believe, menu pricing. Like what's your objective with menu pricing? Is it take what is necessary to achieve the margin? Or is it -- we have some companies to say, "You know what, I'm going to take less. I'm going to underprice my competition maybe with the hopes of driving traffic at the expense of some risk to the margin. Like what is the objective of price? Like how do we think about price going into '24 when obviously you have a lot less inflationary pressures?

Yes. I think -- well, the way we're looking at pricing is we wanted to catch up with inflation a little bit. We were behind the curve on that and then probably took more pricing this year to catch up for 2022 and so forth where we kind of held off on it. Going forward, I think you're going to see pricing that will be more normal going forward. Now if you look at 2024, because there's going to be the layover or the lag effect, it's still going to be seem like higher pricing, but we're not necessarily going to replace 2.5% pricing with 2.5% pricing at a time. It will probably be more in the 1%, 1.5%. So the exit rate coming out of 24 will probably be more in your 2% to 4% range or 2% to 3% range, which has been a little bit more of the historical pricing. Separate of that, though, we want to continue to go down to that good, better, best strategy, that strategy being something like we have now the surf and turf, you saw that with the play and the shrimp and then at the same time, go after the value side. So as you start to think about menu pricing going forward, it's going to be -- you do it or do we do it more on the polished items that set us apart and differentiate us that when guests want to splurge come to it and hold off on like our lunch specials, hold off on the happy hour, hold off on our daily Brewhouse specials that provide that value. And I think you got to continue down that good, better, best strategy. If we can get to your point though, as you said it, where it's low single digits inflation cost on commodities, labor outside of California, the $20 we'll have to look at that and determine how tip pooling might work for us. We've got some other things that we're looking at changing in the kitchen and the other areas as we continue to drive efficiencies there. Outside of that, if that continues to move itself down back into, let's call it, mid- to low single digits and operating occupancy start to flatten out a little bit, you get back to more normal historical inflationary pressures, which then comes down to 2% to 4% pricing is more than enough to offset it. Coming out of COVID, and we get hit with all 3 areas: cost of sales, labor and operating occupancy all went up in the 30-plus percent range versus 2019. So again, if we get back to more of a historical pattern, we tend to see much more historical pricing levels.

Greg, we were talking to another restaurant company earlier today that was talking about the promotional activity in the industry, not that anyone is lowering prices on the menu, but obviously, we're coming off of Thanksgiving and Black Friday and whatnot. So maybe this is not the best time to look at rational behavior, but have you seen any change? Like how would you characterize the current environment in your world of your polished or traditional casual dining and the behavior of your competitive study? Are you seeing anything unusual or surprising?

Well, I think there's -- I think there's 2 parts to that question. One is your first point of lowering menu prices. Rarely do you see that what ends up happening is you discount it or you promote it back and you kind of move from there. And I think that's what will end up happening as people continue to seek out value, whether it's this fourth quarter or going into next year and always the consumer concern versus purely taking a lower menu price. If you do take a lower menu price, and we've done this at BJ's historically, it would be more like a newer menu item versus a historical menu either might be creating new lunch specials, might be looking at daily bread, specials and things like that, that play into it. As far as the second part, we're definitely seeing more marketing activity overall. Some have tried to stay out of just the pure discounting and promotion talk about from a branding standpoint, but I think you're starting to see people come back and adding more of a discount back into their business. I don't think it's been irrational. I think the businesses have tried to be very thoughtful about it. Maybe they've done something that used to be at $20 get x off, maybe now they've done at $25 get x off -- $30 and get x off. But you are starting to see people shift back towards more normalized marketing cadence to drive traffic in there. And it's a combination of brand building as well as the value play.

To Greg's point, if you think of menu design and strategy, we launched a pretzel this year. It's a soft pretzel bit with beer cheese with it and the spicy mustard. We can do that and still get the right dollar profit on at $10. And we actually saw it in test. We added incidents in the app categories. We didn't see trade down. It actually grew the category. Similarly, when we looked across our menu and saw we had a lot of nice higher-end items in the 25-plus area. We launched Brewhouse Chicken that has kind of the lemon butter sauce over. It's a great dish, very craveable, but you can sell it at $20 and still make the right dollar profit on it. So there's many design elements, too, where you can drive the good price point value, but it's still the right items for us to be offering when we think about the menu mix or how people trade between items. So when we look at going into next year, I think that's going to be some more things we focus on, just to make sure we're doing the right things for the business, but giving the guests what they want.

Greg, I feel like the sell-side community and investors are all rooting for the first 2 things to be achieved in terms of the consistent comp sales growth and then the improvement in the margin to allow the unlock for the accelerated unit growth, which for a company of 200-plus units on a pace to 4 and change, it would seem like that is a big opportunity. We've covered you for a long time back in the day, the unit growth was 5% or 10%, and now it's come down to 4%, 5% units a year on 200, which will get you to 2%-ish or so. I think the message coming out from a couple of weeks ago was used '24 as kind of a testing ground because it takes a while to open up a new store, but if things progress the way you'd like by '25, you'd be at 5% unit growth, which would be a pretty significant uptick. And I know you mentioned that, that would, in your view, drive top line and therefore, drive valuation. So because it does take such a long time to set up new units to open, like what are you looking for through '24 that would really allow you to unleash that accelerated unit growth?

Yes. It really is those first 2, and that is the consistent comp sales and then really truly the movement of the margins up and consistent. I think when we get those 2 in there, it tells you that the base continues to do really well, we'll always evaluate our new restaurants and how they're returning. And if we see a change in ESA for those that moderated our investor decks out there, our new restaurants are performing well. They're doing great margins better than the base margins from that standpoint. So we'll continue to evaluate those restaurants as well. But it really comes down to those first 2 coming through there for us to build that pipeline. And then we'll always, as I said, keep that optionality in the business. So therefore, if we have to pull back or push out restaurants, we can. But based on what -- the plan that we laid out, the things that we're working on in regards to executing both from a menu strategy and the culinary side of it, what we're doing in regards to increasing some marketing and some awareness. We've got that ability with something like 9 million guests that are within 10 miles of BJ never even heard of us because we're not a large marketing company, but we know that there's ways for us to reach them through connected TV in social and digital that gives us something to go after those guests and drive that aspect of it. And frankly, the things we've done in the middle of the P&L have really moved us that much closer to where we want to be. And we've got some other things there that we're going to be tackling here right now actually in November and December, but going into next year, really around that operating occupancy line.

I would add one more thing we need to see before the acceleration. This coming up year in 2024 will be the first year, we'll be opening a new prototype. So we took $1 million out of our build. So what we'll be opening now is actually looking a lot like what we opened a number of years back, which is a lot simpler of a build, a rectangle has a back bar instead of an island bar, but that back bar lets us put in basically what we're doing in our remodels now, the 130-inch TV. It's more efficient for staffing with it. It gives us a big kind of wow centerpiece for the restaurant. Some less seating, not a lot less, but it is a smaller footprint. More space for off-premise, just given the mix. So there's a lot of things that we like about this new prototype, but we need to build them. We need to make sure they're operating like we're expecting them to. Great confidence that they're going to be successful, but that's another piece that this year we'll be measuring to make sure we're seeing the right one, the build cost into the right type of demand that we can drive into these restaurants. Plus, we're looking at even more efficiencies going into 2025. So this was the right first step to do to take this cost out, but we're looking at things back in the kitchen. We're looking at other ways to gain more efficiencies that might give us even a bigger improvement going into 2025. But that's the -- I would say the other element that we need to make sure is fine-tuned before we step on the accelerator on the new builds.

Anything? Tom hit upon that exactly right, with the new prototype. We feel highly confident on it -- because confident in it because it's what we used to build. And we know the volume that it can do and the margins that it can do on that at their build there. And then being able to do that and then take what we learned from when we did all the guest-focused research of the 130-inch TV that Tom talked about, having a little bit more of the Brewhouse theater in there allows it to still have that polished feel but it's $1 million less and should be significantly more efficient. But to Tom's precision point on that. We want to make sure that, that executes at the level that we expected to execute at, given that gives us another arrow in the quiver, so to speak, in regards to accelerating growth.

And the fact that we're pretty much wrapping up '23 right now. And you'd be presumably 12 to 18 months out lead time to open up a new store at this point, you feel the confidence to start that rolling and presumably, it would be a pullback. You weren't seeing it, but you've already kind of started the development team going on the premise that this is going to play out the way you think and therefore '25, should see that accelerating growth?

That's correct. Now as we built that pipeline though, it doesn't necessarily mean that we have a bunch of leases signed, that were more in letter of intent or nonbinding contracts on certain ones. So we haven't necessarily locked in '25 yet in that regard, but we're building that pipeline and working with different landlords in different areas.

Yes, it's definitely optionality. So when you think about the real estate pipeline as well as the talent pipeline, we will able to make sure we have the restaurant managers, the restaurant leaders ready to go as well. So we feel good about both of those. If we are in the place where we want to accelerate 2025, we'll have that option.

And I feel like it's historically being a growth company, when you slow down that growth, it's obviously keen to reaccelerate when you think the time is right. And then there are some investors that say, maybe step into more of a maturity mode if not the ideal time, why not use that cash and returns to shareholders or buy back stock or whatnot. So how do you contemplate that? Because it does feel like you have some optionality there. But it seems like you guys are keen to get back to the unit growth side of things rather than stepping into the more return of cash maturation curve?

Yes. Well, I think it's a little bit of an understatement, so -- and we've been lined this up a little bit at the Investor Day. And that is, it's not, hey, we're going to go out and build restaurants and not return share -- not return capital to shareholders. Ultimately, in our view, it's -- we can do both from that side because building at 5 restaurants still generate a lot of free cash flow for us. And that free cash flow, we would like to return to shareholders or find other ways for capital allocation to continue growing the business. So it's an and statement as we look at it. And that's the way we're kind of approaching it going forward is under that and statement. If we're not moving forward on 1 and 2, and we talked about -- then, we would continue to slow down the growth, continue to work ourself forward from that standpoint and use the excess cash for either back into more remodels which I think are really important in doing well for us or as a capital allocation to shareholders.

I've got a handful more questions, but recognizing we have about 5 minutes left. I just want to see if there's any questions from the audience. I will keep going. I mean you talked about the remodels, it seems that is a -- I think you said you're getting 35 units next year. You're getting like a $150,000 sales lift, which pretty strong. I think it's a 20-plus percent cash on cash return. So what -- if those are accurate, like how many more stores can you do in '24 and '25 and what we keep you from just accelerating that in the short term if those of the returns you're going to be getting?

Yes. So. First of all, when we look at that, we had to go through in really 3 different remodel phases, 1 with the back bar, 1 with just the dining room and the other what we call the expand capacity and get some learnings out of those. And what we've come back to is we know the backbar makes a big difference. Sit-down restaurants, you need to see the energy within there. And as we put together our plan for next year, it will include more of the back bar, more of the outside painting, let guests that are driving by know that something is different has gone into the restaurant. And to that point, depending on what we spend ends up having the commensurate return. So back bar is going to cost a little bit more with the dining room but it's going to have a higher weekly sales average. And it's something that we consider to be really important for us to going forward. We probably have somewheres -- how many restaurants you think we can remodel. I think it's about 70% of our restaurants, about 140 or so.

Could still use a remodel?

Well, could use some element of a remodel, especially on the 130-inch TV going there into that back bar. I think that's about right. I think there's 70 that we can expand capacity on over time. But you have to think about before we started building the current prototype with the island bar, which we probably have about 40 to 50 of those or so. You can go back into those other ones and do some type of remodel in there. And again, there's going to be -- some are going to have higher returns than others from that standpoint. So we want to be judicious in how we spend our money. All of them always want to be upgraded but not all of them necessarily are going to need the full back bar expand capacity and ambience enhancement that we would do in some of our bigger booming restaurants.

When we go into it, we're sizing the scope of the remodel with what we're expecting to see is the sales lift. So when we go into Cerritos, for example, in California, one of our old big restaurants, it made sense to spend the most is possible to do the whole bar and reconfigure the dining room to get more capacity in there and paint the outside. And it was the full potential of everything we could do in that restaurant. And we saw sales shoot up accordingly. If we're going to a more of a mid-tier restaurant, we wouldn't do all of those elements. So we're testing now, boiling it down to the most critical that we think drive traffic and really impact the guest and we talked about it, it's really that bar statement. And it is taking off the dark wood that is more ornate and looks a little older generation to do more of this lighter wood, cleaner lines, but it gives space for that 130-inch TV there, and that alone, plus some outside paint cost a lot less than some of these bigger remodels we've been doing. But it has the elements that matter the most to the consumer that we've heard from them. So those, as we think about going forward, we're going to see some more of those decisions we need to make on the right scope for these remodels. So the number of remodels and the amount spent might look a little different in complexion in the next couple of years as we size them accordingly but I still think there's some great opportunities there. It might not be the exact sales lift you mentioned because we're going to spend a little less per restaurant, but we'll do it so we get the right returns.

And I feel like it's appropriate to end with -- having just spent time with investors and getting feedback over the past couple of weeks. So it seems like you guys are very well versed in what you might believe. What was the question you got most or what do you think is most misunderstood as you think about the BJ stories looking into 2024?

I still think it comes down to consistently driving comp sales and getting the margins up. And I think on top of that, the fact that there is so much white space for us to go after. And so it really is on those 3 key things. What gets misunderstood, I think, is more the long term of what we're trying to do. Everybody in this business, and I get it as a public company, we look quarter-to-quarter versus what we're trying to do long term. And sometimes people want to know why the menu has it can't be adjusted tomorrow. We'd rather take the time to make sure that we are measuring twice having one, so to speak, to know that when we rolled out the smaller menu, what would it do to average check. We want to spend the time understanding our guests to make sure that we're putting the right things on for our guests. We want to spend the time -- and Tom talked about even going into next year to make sure that the remodels work and what's the right aspect of the remodels. And that sometimes I think is harder for consumers to understand that it's going to take more than 1 quarter to find some of these things out and move it forward. And as we look at this year and going into next year, a lot of that's been things that we have uncovered feel very confident in regards to the remodel plan going forward, actually feel confident on the newer prototype because we're able to look at the prototypes come through, but we still want to watch it. And if all those things come through it does allow us to have this really nice pathway going forward but it's us building it back.

Understood. Well, we have exhausted our time, but we want to thank BJ's restaurants and Greg and Tom for joining us. And hopefully, you have a good day of meetings. And thank you guys all for joining us.

Thank you, everyone. Appreciate it.

Thank you.