BJ's Restaurants, Inc. Aktie

Good afternoon, and welcome to the BJ's Restaurants First Quarter 2026 Earnings Release Conference Call.  

[Operator Instructions]  

Please note this event is being recorded. I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to our fiscal year 2026 first quarter investor conference call and webcast.

After the market closed today, we released our financial results for our fiscal 2026 first quarter. You can view the full text of our earnings release on our website at www.bjsrestaurants.com.  

I will begin by reminding you that our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements.

These statements are based on management's current business and market expectations, and our actual results could differ materially from those projections in the forward-looking statements.  

We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events, or otherwise, unless required to do so by the securities laws.

Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission.  

We will start today's call with prepared remarks from Lyle Tick, our Chief Executive Officer and President, followed by Todd Wilson, our Chief Financial Officer, after which we will take your questions.

And with that, I will turn the call over to Lyle. Lyle?

Thank you, Rana. Good afternoon, everyone, and thank you for joining us to discuss our Q1 financial results, operating performance, and outlook.

Q1 was another strong quarter for BJ's. We delivered our seventh consecutive quarter of sales and traffic growth, along with our sixth consecutive quarter of profit dollar growth and EBITDA margin expansion.  

Same-store sales increased 2.4%, driven primarily by 2.2% traffic growth, continuing to outperform Black Box casual dining benchmarks by roughly 120 basis points on sales and close to 400 basis points on traffic. 

On the profit side, restaurant-level operating margins were 16%, and adjusted EBITDA margins reached 10.5%, up 30 basis points year-over-year.  

Our consistent performance continues to reflect the progress we're making across our 4 strategic priorities, focused on building a winning culture, improving our food, enhancing our atmosphere, and driving WOW hospitality and executional consistency.

A few notable Q1 highlights in context. Valentine's Day performance was exceptional. Approximately half of our restaurants set new daily sales records, while 14 set weekly records, reinforcing our strength in the social spoage occasion.  

We delivered Q1 results with roughly 20% lower media spend year-over-year as we continue to optimize how we deploy marketing dollars while ensuring we have sufficient resources to drive Q2, or what we call the celebration season.

This is a testament to the progress our marketing and culinary teams have made in refining our go-to-market strategy and how best to leverage our product news and media.

The quarter had its fair share of volatility, including approximately 70 basis points of weather-related headwinds year-on-year. Importantly, the teams managed this volatility effectively while growing sales and protecting margins.  

We are also encouraged by the results of some of our tests and recent programming we put into the market.

Overall, total beverage sales stabilized in Q1 behind growth in nonalcoholic beverages, our 22-ounce beer upgrade, and a successful seasonal beer offering in our waterfall beer, which was a collaboration with Sapporo Breweries, hitting on growing segment trends like lower ABV, sessionable drinks, and Japanese-style rice beer, which is one of the few growing segments in craft beer.  

Our chicken sandwich renovations have shown a clear positive impact in tests, improving the chicken sandwich and overall handheld performance, and we'll be rolling them out as we move into Q3.

Our premium Wagyu burger with a custom blend patty has garnered a lot of interest in trial and provides a top-of-the-barrel anchor in the burger category.

This has just moved into a full system, limited-time feature, and will become part of our menu burger lineup as we move into Q3 as well.  

Overall, I'm pleased with our Q1 results and encouraged by the positive momentum in the business as we head into Q2 and our growing outperformance versus black box casual dining benchmarks.  

18-plus months into my journey at BJ's, we have a clear road map, have made material progress in building stronger foundations, and we intend to continue to focus on bringing guests a better BJ's by investing in our food, our people, and our atmosphere, ensuring these elements continue to work in concert to drive performance. 

While there's still a significant amount of work and opportunity ahead, we have made tangible progress across several areas.  

We have seen significant improvement across our guest metrics since Q3 of 2024, with our Net Promoter Score improving roughly 10%. Our team member retention continues to be better than pre-pandemic levels and is trending positively.

Both hourly and management turnover are improving on a trailing 12-month average and tracking 12-plus percentage points below black box industry benchmarks as we continue to strive to make BJ's a better, easier, and more rewarding place for our team members.  

The work we're doing to upgrade our menu offerings, while still in its early stages, is reflected in improvement in our food scores, our momentum with younger guests, and our new product performance.

Since the launch of the all-American Smashburger in June of 2025, the burger category has been delivering roughly 30% more sales than prior to the launch.

Pizza has also performed well since its introduction, with category sales up about 20%, and we're beginning to see encouraging signs that the new pizza is improving repeat visits amongst guests who try it.  

Seasonal Pizookies continue to resonate, particularly with younger guests, contributing to both traffic and growth in dessert sales. Our value scores have materially improved behind the Pizookie meal deal and an improved overall experience, reinforcing our complete value proposition.

And our marketing strategy continues to evolve with greater emphasis on social and word of mouth to support our new products, complemented by selective use of broader media to deliver value messaging.  

At the same time, we've materially improved margins over the last 18 months while making significant investments in our restaurants and guest experience through our remodels and facilities programs. 

We are, however, still in the early innings, and the vast majority of our opportunities still lie ahead of us.  

The last 6 quarters of sales and traffic growth have been driven predominantly by traffic. We have brought a younger, hard-to-reach guest into our restaurants, lifted frequency, and meaningfully reset BJ's relevance in casual dining.

As we look ahead, we will continue to build on the drivers of success to date while moving to further balance the model where traffic, as well as average check and mix carry weight, over time.  

The Wagyu burger I mentioned earlier is an example of the category management work we're doing on the menu.

Sitting alongside the all-American Smashburger that remains a hero at the opening price point of the category, the Wagyu burger gives guests a premium trade-up option, building a clear, good, better, best strategy within a high-affinity category.  

In addition, we're moving into a test with a premium tier on the Pizookie meal deal, giving our most engaged guests a path to trade up while still reinforcing 2 core and ownable BJ's equities in variety and the Pizookie.

We continue to work across the menu, extending the structured approach to category renovation. I'll share more information in the coming quarters as we gain more learnings from our market tests.  

The progress to date, combined with the work ahead, will help us maintain momentum while continuing to allow us to improve flow-through over time.

I'm confident in our plans and our commitment to investing in our people, ensuring they have the tools and support needed to bring our brands to life every day, advancing operational excellence, making BJ's better and easier for both team members and guests, continuing to improve our food offerings and guest experience, and setting the foundation for future net unit growth. 

On net unit development, our prototype work is progressing at a pace. The two planned openings later this year are in Buckeye, Arizona, and Joliet, Illinois, and they will showcase a meaningfully improved guest experience.

These markets represent a mix of an established performance market in Buckeye, Arizona, and a development opportunity in Illinois, where we expect approximately restaurants to benefit from increased brand awareness and operational leverage. 

As we build the pipeline, we will stay focused on refining the prototype to continue to improve the consistency and financial returns of future openings.

Q1 delivered another strong quarter for BJ's and reflects our continued progress, sustained traffic-driven growth, and share gain.

While the environment remains dynamic, we enter Q2 with positive momentum, strong plans, and growing outperformance versus black box casual dining benchmarks, and a focus on continuing to build on the foundations we've laid across our strategic priorities. 

Before I close, I would like to thank all our BJ's team members from our restaurants through to the support center for their passion and commitment in bringing our promise to life every day for our guests.

Q1 was not without its volatility, navigating multiple severe weather episodes, and our teams took care of each other, our guests, and our restaurants, and adjusted in real time to deliver another strong result for BJ's.  

Thank you, and I will now turn it over to Todd for more color on our financial results and our outlook.

Thank you, Lyle, and good afternoon, everyone.

We delivered a strong first quarter with traffic-driven sales growth, generating an increase of $1.6 million in restaurant-level operating profit and a $2.4 million increase in adjusted EBITDA.

As Lyle noted, we achieved these gains while navigating sales volatility, including 70 basis points of winter weather headwinds.  

Total revenue for the quarter was $358.1 million, a 2.9% increase versus last year. Comparable restaurant sales increased 2.4%, led by a 2.2% traffic growth and a 0.2% increase in average check.

The traffic-led growth underscores the continued strength of our brand and our increasing guest frequency.  

Restaurant-level operating profit was $57.2 million, a $1.6 million increase versus last year. Margins were stable at 16%, reflecting strong operational execution in a shifting environment.

Cost of sales was 25.1%, a sequential improvement from 25.5% in the fourth quarter.  

While this is a 10 basis point increase versus last year, led by anticipated beef inflation, we mitigated much of the impact with operational improvements, including reduced food waste and continued progress in our gross-to-net initiative focused on simplifying the efforts of our team members and more consistent execution for guests.  

Our menu evolution has also brought upgraded and new items to our guests, like pizza and seasonal Pizookies that are delivering increasing incidents, great guest satisfaction, and carry a favorable cost structure.

Total labor expense was 36.3% of sales, a 20 basis point increase versus last year. Core labor expense, including hourly wages, management, and benefits, was unchanged from last year.  

Our operations were efficient while also delivering meaningful gains in guest satisfaction.

The reported increase was driven entirely by higher workers' compensation costs resulting from rising medical expenses despite our team's good work in reducing the number of claims. We expect this pressure to begin to normalize in the back half of the year.  

Occupancy and operating expense was 22.7% of sales, a 30 basis point reduction versus last year. This reflects a strategic decision to shift marketing dollars into the second quarter to support our high-volume celebration season.

It also reflects the good work our marketing team has done to optimize channel mix and drive better return on our investments with increased focus on social and digital channels.  

General and administrative costs are $22 million and 6.1% of sales, a 20 basis point reduction versus last year.

Depreciation expense increased 110 basis points compared to last year, largely due to a one-time catch-up entry. Excluding this, the underlying increase was 30 basis points, reflecting our ongoing remodel program and new unit investment.  

These component parts delivered an adjusted EBITDA increase to $37.7 million as compared to $35.4 million last year. This represents a 30 basis point increase to 10.5% of sales.

The strong business performance resulted in significant free cash flow that we deployed for three primary purposes. 

First, we invested $15.8 million in capital expenditures, primarily maintaining our restaurants and completing five remodels.

Second, we repurchased and retired approximately 151,000 common shares for $5.3 million. Third, we repaid $23 million of debt. We ended the first quarter with net funded debt of $39.3 million, a significant reduction compared to $61.2 million at the end of 2025.  

With my first 100 days at BJ's complete, I would like to share an update on my initial areas of focus and the opportunity I see in front of us. Initially, my priority was stabilizing, building my immediate team, and strengthening the foundational processes within our accounting and finance functions.  

We are fortunate to have many great team members in place, and I'm pleased to have bolstered the team in key areas, including the addition of Ashley Van as our accounting leader, whom we announced a few weeks ago.

With that groundwork in place, my focus has shifted to partnering more closely with Lyle and the broader leadership team to accelerate our growth initiatives.  

This includes our efforts to continue driving top-line sales growth through great operations, marketing efforts, and remodels, driving further margin gains in the middle of the P&L, and enhancing our unit economics to accelerate new restaurant growth.

While I was optimistic when I joined in December, I'm even more energized by what I see today. The BJ's brand clearly resonates with a broad and growing cross-section of consumers.

Our team is highly engaged, and we are continuing to build sales, traffic, and profitability. I am confident we have a significant runway ahead.  

Now turning to our 2026 financial outlook. We are reiterating all metrics in our 2026 full-year financial guidance. I will provide additional color for modeling purposes.

First, comparable restaurant sales and traffic trends to start the second quarter are off to a strong start and continue to beat the Black Box casual dining benchmark.  

Second, we expect the second quarter to be the peak for commodity inflation this year, which will likely result in a Q2 cost-of-sales percentage marginally higher than Q1.

In response, we are tracking towards a midyear menu update engineered to further optimize product mix. Combined with our planned pricing actions, we expect to fully offset the inflation impact in the second half of the year.  

Next, we expect occupancy and operating expenses to be approximately 23% of sales in Q2 as we reinvest the marketing favorability captured in Q1 to drive sales performance in our high-volume celebration season.

Lastly, construction is underway for our new restaurant in Joliet, and we are on track to break ground in Buckeye in the coming weeks. We expect to record nominal preopening expenses in Q2 and Q3, with approximately 80% concentrated in Q4 as these restaurants open.

As a reminder, we target roughly $700,000 in pre-opening costs per opening.  

Overall, our sales and traffic trends are strong, providing a solid foundation for the business. We are implementing targeted improvements across our menu, operations, and marketing tactics.

As inflationary pressures ease, we expect these actions to further enhance performance, positioning us for accelerating profit growth in the second half of the year.  

In closing, the first quarter was a strong start to the year, defined by healthy traffic growth and resilient margins. This performance is a direct result of the hard work and dedication shown by our restaurant teams, field operators, and everyone at the support center.

Thank you for your hard work and commitment. Looking ahead, we are confident that our strategic plan, combined with strong execution, will drive sustainable growth and create long-term value for our shareholders.  

With that, we'll turn the call over to the operator for questions.

[Operator Instructions] Our first question today is from Brian Bittner with Oppenheimer & Company.

Just want to ask about same-store sales. The seven consecutive quarters of traffic growth are very impressive, as is the outperformance against the benchmark. And it speaks for itself. 

So, I really want to ask about the average check side of the equation. It was flattish in the first quarter, which is definitely an improvement from where you were in 4Q.  

But I want to ask about the opportunity for the average check to become a bigger contributor to comp growth as the year unfolds? And perhaps what type of average check is embedded in your 2026 outlook for same-store sales growth of 1% to 3%.

Sure. Brian, this is Lyle. I'll start and turn it over to Todd. Yes. I mean, look, I'm really pleased with the consistent traffic growth and outperformance that we've been seeing and with the moderation of the check compression, which I think we signaled to be expected in Q4 of last year when we were talking about this year.

And so I think it's moving along very much the way that we expected it to, as we lap some of the performance from last year and then start to be able to layer in some of the other growth drivers.

So right, in Q4, I think we had a very strong seasonal Pizookie play, then towards the end, we started to be able to lay in pizza, building on that mix. And then, as you see us coming into this year, we continue to build on pizza.  

As I started to talk about in my comments, things like the Wagyu burger, the chicken sandwich refresh, the PMD tiering, and other menu work we're doing, we've got a planful approach as we go forward that we think will continue to moderate and allow both of those levers to work for us as we go forward. 

So, in terms of the exact price or check built into the model?

Yes, Brian, I'll jump in there. So relative to the guidance, what's embedded in our model is checked in a range of, call it, flat to plus 1%.

As Lyle alluded to, we think that progressively advances through the year, both as we lap different items and as some of these new initiatives come on board.

But we think Q1, marginally positive check in Q1. We think that's one side of the bookend. We think it could be as high as a plus 1% on the year, as some of these different initiatives take hold.

And my follow-up is just really zooming out here. Can you give us maybe a state of the union updated state of the union on your plans for accelerating unit growth?

How are you thinking about the near-term building blocks that are in place to accelerate unit expansion?

And just as it relates to the longer-term opportunity, have you had a chance now that you've been there for a while, to maybe create a road map on how you are thinking about what the proper growth algorithm for this company is over the next many, many years?

So yes, I'll answer both those questions. So first of all, I guess as we take a step back and we look at laying the foundations for unit growth as we go forward.

I mean, I think our first stage of it was looking and making the geographical decision about where we want to grow, which I think I've talked about in terms of growing out from where we already have a footprint versus going greenfield and the concentric circle approach.

The second part of that was getting to a new prototype design. Really, the first part of that job is getting to a prototype that we feel like our guests and our team members are going to love, and we feel great about what we've seen so far.

And so that's step 2, and that will be reflected in the next 2 openings.  

Then I think the second job after you've established that is, as you go forward, we want to make it commercially exciting for all of us to accelerate growth.

While the new units that we have to date have been a good use of capital, and that they've hurdled our weighted cost of capital. It's been a responsible use.

We have much higher ambitions for that as we go forward and look to tune in the prototype, both through actual engineering of the prototype, but also flexibility in the size of the box, as I've talked about, a mix of first and second-generation space.  

Then, when I talk about the box also just challenging existing assumptions, right? There had been an assumption that BJ's was going to have something from 35 to 40 taps. So this is just one example.

But when you do the productivity analysis, we probably need 20, and those are mostly driven by our BJ's beers. And when you start to kind of look through the opportunities and follow the numbers, there are a lot of benefits to play off of something like that, everything from cost to build, to ongoing maintenance of the infrastructure, to OpEx costs.

So, just taking a holistic look at everything as we go forward.  

If I get my head up and look at the growth, we're looking to open a couple this year. I would say mid-single digits next year, moving towards double digits as we go into 2028 and beyond.

And I feel like we have significant headroom in filling out our existing markets prior to actually having to go greenfield. So, as we've done our analysis, we will share more about the long-term growth algorithm as we go forward.

But I feel very confident in the headroom that we have to grow BJ's units.

The next question is from Jeffrey Bernstein with Barclays.

My first question is just drilling down on the comp. I think you mentioned a growing outperformance versus the industry. 

I'm wondering if you could share maybe the sequential trends through the quarter and more specifics for April. And I recall last quarter, you saying you thought all 4 quarters would be within that 1% to 3% range.

So just looking for some context there. And just lastly, whether or not gas price volatility, I know you mentioned weather was a big impact. I didn't mention gas. I'm just wondering whether you saw any kind of pressure or things in a sequential trend, as there was a spike in gas.

Yes. I mean, thank you, Jeffrey, by the way, this is Lyle.  I can only speak for our consumer. But our consumer has remained very resilient.

When we look across Q1, we saw a very consistent performance across the periods in Q1 for our brand and our consumer. And as we've entered Q2, based on black box benchmarks, we have seen some of the delta between our performance and the category performance, our performance accelerates versus the category.

But at least to date, obviously, we're keeping a very close eye on our consumer and their behavior. We really have seen a resilient consumer and resilient behavior, at least with respect to BJ's.

Jeffrey, Todd here. I'll chip in on a few of those, just building on in kind of the word you asked. Relative to Black Box, Lyle may have said it in his prepared remarks, but we beat in Q1, we beat the benchmark by 3.3%.

Encouragingly, that was across every geography that we operate in. So it was a consistent outperformance for our business, which is good to see. I think you asked about as well the quarterly same-store sales cadence. We talked last time about an annual expectation of 1% to 3% growth.

We obviously reiterated that in terms of our full-year guidance. And I'd say we still feel good with that. We're able to deliver that growth consistently quarter after quarter. So I think that's consistent with what we would have shared in our last update.

And then my follow-up is just taking a step back, Lyle. I think on a couple of occasions in your prepared remarks, you said you think the brand is still in the early innings. 

Seemingly, you've had some strong momentum and a number of quarters of accelerating strength. So, just wondering what exactly early innings means?

What are you referring to in terms of where you see the greatest further opportunity, whether it's a long-term target that you're aspiring towards or whether there's a North Star or a player in the industry that you aspire to be like? 

Just wondering what exactly that means when you say early innings. What are you referring to?

Yes. Well, I mean, one, very broadly, I'm 18 months roughly or a little bit more than that into a journey of, I think, what I've talked about, which is creating a more durable, consistent, and sustainable performance platform for BJ's that we expect and want to deliver on into the future.

I think secondarily to that, a lot of the work that we've done in the first 18 months, what we'll continue to build off of, I would say, is foundational.

So we put a lot of work into foundationally improving what we called our table stakes operations. And we see that coming through in our scores and our retention. But that is a foundation for us to then continue to improve operations.

We solidified our value platform with the Pizookie meal deal. But as I alluded to in our comments, as you then get that platform solidified, the question is after that step 1, where are you going with step 2 and 3, and we talked about some of the tiering.  

Then, really, on the menu work, we're really early doors there. The first real category renovation that we did was pizza, and I think we solidified our seasonal program for Pizookie.

But we have a lot more ahead of us in continuing to do the menu work. And while I speak about all of those things individually, the idea is that as those things come together over time, they ultimately create a strong flywheel for BJ's working collectively together to deliver sustained performance. 

So when I look at where we're at, I would still say we are in the early innings of the journey with more opportunity ahead.

But I do think we've identified our strategic priorities, and they'll guide us as we go forward, but there's more room in all of them. And obviously, we haven't even touched on really starting to get development going again. That's clearly in its early stages.

The next question is from Alexander Slagle with Jefferies.

I wanted to follow up on the Puzzuki meal deal, just sort of how you're feeling about the progress there and the next steps you talked about to further refine the offering, maybe with more attachment and upgrade options and the tiering options that you're testing.

Yes, sure. So I mean, I feel really good about the Puzuki meal deal. It continues to resonate.

It continues to bring in traffic and do its job and importantly, bring new people into BJ's that based on our numbers, is providing an improved experience. 

So that is exciting because hopefully, a number of those people are going to have a good experience and come back to us. When I think about evolving the Pizookie meal deal, there's a couple of different things that I would point to.

One is, as I talked about some of the chicken sandwich work that we have done and how we've felt confident in what we've seen in testing and are going to roll those out as part of Q3 menu.  

We're taking an opportunity within PMD, for example, at the $13 level to retire one of our less-performing items on there, and we're going to bring in a core chicken sandwich.

The reason I mentioned that is because if you remember, the Smashburger, we introduced the Smashburger exclusively on PMD and, then it became very popular and people wanted it, and then it became a mainstay on the menu.

So we are going to be doing a couple of premium chicken sandwiches on the menu, but an entry chicken sandwich on PMD that I think potentially could play a similar role for chicken sandwiches as hopefully Smashburger did for burgers for us.  

Then there's the tiering, which is we have a lot of people who come and engage in PMD, and we wanted to give them an opportunity for our best and most frequent customers who are coming in and taking advantage of that deal to have trade-up opportunities.

And so we've developed a premium tier offering. It's just a few offerings where we're able to condense the 13 a little bit, open up a trade-up tier a little bit. And I'm excited to see how the test goes. It's going to start in the next couple of days here.

But we feel good about the products that we're putting into that tier. We think it will be a compelling partnership to the 13.

And then just on marketing spend, just remind us of the percentage of sales in the 1Q and what the 2Q outlook looks like? I know you gave some comments on that.

Yes. When I look at marketing spend, I guess the thing that I would point us back to is that when we look at it year-over-year in terms of the full year marketing spend, we're planning flat year-over-year.

I think it's 2.2%, if I'm not mistaken, reinvestment from a marketing spend percentage point of view. So we did make a strategic decision to move dollars out of Q1 to reinforce Q2.

As I said, we call it celebration season. It's kind of one of our most critical seasons. And that was because when you think about the natural shape of our year, and what the important quarters are.

And then Q1 is always a choppy time. You have weather, you've got January, and people eating and drinking differently and all those types of things.  

So we felt that with our evolved marketing strategy, we could get more adolescent in Q1 and reinforce Q2. And so the biggest shift is really between Q2 and Q1. But overall, the percentage of sales year-on-year will remain flat.

The next question is from Sharon Zackfia with William Blair.

Sorry if I missed this, but I'm curious what you learned from your first pizza LTO.

And then when you talk about the growth that you saw in pizza and burger, which is really quite amazing, what have you seen consumers shift away from? Kind of what did that come at the expense of?

Yes. So the LTO, the Mike's Hot Honey LTO, it performed really well. It was our third, I believe, highest performing pizza in our pizza lineup, which we felt pretty good about. 

It had really good scores. You may see it rear its head again sometime later in the year. So we felt really good about that. We've actually just moved into our next pizza LTO, it's a Barada pizza. 

So think of like a margarita pizza, but with Barad and cheese, which I'm pretty excited about. It's a nice premium offering, but also not a meat-based offering. So excited about that. You may actually try it soon, Sharon. 

In terms of, sorry, the second part of the question, with respect to the growth of burgers and the growth of pizza, I mean, we've seen the sales growth. 

We've seen units per store per day growth. And overall, we've seen trading into pizza and trading into burgers is margin accretive to the menu. 

So we feel good about any sort of incident movement there from a margin percentage point of view. Where we've seen probably a little bit of movement around the menu, is in some of our steaks and slow roast category and in some of our specialty entrees, we've seen some movement there, while we've seen a lot of growth in pizza and burgers.

The next question is from Nerses Setyan with Mizuho.

It was very helpful the cost commentary and the other OpEx commentary, but I didn't hear anything about labor.

Would you mind sharing what your thoughts are on Q2 labor and maybe for the full year? And then just the bigger picture, where do you think the opportunities around remaining cost cuts and efficiency initiatives are across the P&L?

Yes, Nerses, this is Todd. I'll start there. As we look at labor, if I look at last year in Q2, we ran a little over 35%, 35.4%.

Part of our commentary on Q1, navigating those weather ups and downs, is not easy for an ops team. And we were really pleased with the job our team did in Q1, both on the margin side and the guest experience side, but we certainly feel like there's an opportunity there as we go forward.

And so as we look at the balance of the year, we think there's an opportunity to improve our labor margins. Primarily, certainly, the traffic traction that we have leads that as traffic grows, we're able to leverage our fixed costs. And so that's a leading piece of it.  

But there are specific initiatives in place. We work with our operators on a daily and weekly basis to learn what best practices are and how to implement those across the system.

So as we look forward, we think there's an opportunity to improve that through the balance of the year.

The next question is from Jon Tower with Citi.

Maybe starting, obviously, moving to this premiumization test on the PMD is interesting. I'm just curious, is this something that's spawned by consumer behavior that you're already seeing, meaning someone's coming in, getting the $13.99, and then adding a few more things to the menu such that you feel comfortable with the idea of moving in this direction?

So it's less spurred by that, although we do see people coming in for the Pizookie Meal Deal and adding appetizers. Obviously, it doesn't include a drink.  

So the vast majority of Pizookie Meal Deals also have a drink attached to them. 

So those are opportunities. It's really just the idea of as we go forward, optimizing that $13 segment to the most high-performing products within the segment and then giving those people who are coming in looking for that kind of social splurge need state, but looking for kind of an entry point like the Pizookie Meal Deal to give them a place to go if they want to go for something more premium.  

And so that it's a hypothesis based on what we see in our business, is the way people navigate our broad menu. We see a lot of people come in at different entry points when they're going to that social squares occasion.

Then secondarily, obviously, observations in the market about how this tiering can work and work effectively for your business.

Maybe pivoting a little bit, but the World Cups are coming up, and it will be at the end of your fiscal second quarter.

Obviously, you talked about the idea of the celebration season as being something that's important. But I know in the past, certainly, when the World Cup has been more aligned with your time zones, there has been an impact on the business.

Curious how you're thinking through either marketing around it or building up any business around it, if anything at all?

Yes. I mean, when we are looking at it, I'm hopeful that the World Cup, when you think about it year-on-year, will provide some tailwinds.

In my previous life, which was much more sports bar-rooted with respect to the World Cup, you really saw material movement around U.S. games, Mexico games, and sometimes when there was like a really, really big matchup. 

So they were geographical and specific to matchups. And so we've looked at that in terms of our planning.  

We've also looked at where we have restaurants in proximity to stadiums and venues where games are going on to make sure we're doing the right things locally.

And then you may see some fun rifts on some of our iconic products that live into celebrating the World Cup, as well as an important year for the U.S., so we're playing around there.

So yes, on our radar, I hope it will provide some tailwinds, and we're going to have a little bit of fun with it from a marketing and engagement perspective.

The next question is from Brian Mullan with Piper Sandler.

This is Allison on for Brian. Just one more on labor. But on the activity-based labor model, what percent of stores have it today?

And any commentary you can share on learnings or data points you've noted through the scaling of this rollout would be great.

Yes, yes. We're still at about 1/3 of our stores that have the activity-based labor model. 

We're still targeting it to be deployed to the system over the course of this year. We probably won't do much of that in Q2 because of the importance of Q2. 

So the next rollout phase will probably be more focused in Q3. What we continue to see with it is that it suggests that we have what I would call some marginal savings from a labor perspective because our looseness around our shoulder hours is more loose than the incremental labor we need at our peak hours is what the model is suggesting.  

But the real KPIs that we continue to look at are in those restaurants, and are we seeing improvements across our guest metrics? And so we're pleased with that, and particularly where we're seeing, I think, most of the movement is in our speed metrics, which stands to logic as you get the right people in the right place at the right time.

So overall, very much a build on the same story that you've heard before, on where we are and where we're going with that.

The next question is from Todd Brooks with Benchmark StoneX.

First, I was wondering about visibility into the celebration season, either through some of the advanced reservation capabilities and people utilizing those and being more aware of them year-over-year, or we're in the middle of graduation season now. Just Lyle, what's your take on the front end of celebration season here?

I mean, as I mentioned, I think in my comments, Todd, is that we've been pleased with the performance as we've gone into Q2 and some of the accelerated outperformance we've seen against Black Box benchmarks.

And so we feel good about how Q2 has gotten out of the gates for us and hope that bodes well for the rest of the celebration season. I think we have pretty strong plans that are reinforcing our core equities that we've been building off of. 

So I feel really good about the plans we have in place and at least how the quarter has gotten started. So overall, feeling good right now.

And is this a period where it's so high volume that there's no opportunity to drive a lot more incremental traffic year-over-year? Is it more of a hold to hill? Or do you see opportunities to drive more traffic through the boxes this year?

I mean, look, when I look at our top, top performing restaurants and you look at the AUVs that they're driving, there's clearly headroom for most of the restaurants in our system to continue to service and move more people through our boxes. 

So I think it's a matter of us operating as efficiently as possible and really doing the fundamentals right. It's about having it staffed right. It's about full hands in and out of the kitchen. It's about busing and turning tables quickly. And we have our teams very, very focused on that.  

We've, over the past couple of years, been pushing towards getting more upfront reservations or at least as many as we can because it helps us be as planful as possible. 

But I think one of the things that we get credit for at BJ's from our guests is that we're a place where you can book ahead of time, but we're also a place that tends to be pretty flexible on accommodating people as they come through our doors. And I think that tends to be to our benefit. 

So I'm excited about the season.

Todd, I'd just quickly add, Lyle commented on it in his prepared remarks, but right, we had roughly half of our restaurants setting records on Valentine's Day.

And true for us, true for many in the restaurant business, that is typically one of, if not the highest volume days of the year. So seeing that many restaurants are able to raise the bar even further, I think, to me, very much says we have an opportunity to continue to grow even in the high season of Q2.

This concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.

Good afternoon, and welcome to the BJ's Restaurants Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to our fiscal year 2025 Fourth Quarter Investor Conference Call and Webcast. After the market closed today, we released our financial results for our fiscal 2025 fourth quarter. You can view the full text of our earnings release on our website at www.bjsrestaurants.com.

I will begin by reminding you that our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements.

These statements are based on management's current business and market expectations, and our actual results could differ materially from those projections in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission.

We will start today's call with prepared remarks from Lyle Tick, our Chief Executive Officer and President; followed by Todd Wilson, our Chief Financial Officer, after which we will take your questions.

And with that, I will turn the call over to Lyle Tick. Lyle?

Good afternoon, everyone, and thank you for joining us today. Q4 was another strong quarter for BJ's, delivering our sixth consecutive quarter of sales and traffic growth as well as our fifth consecutive quarter of profit and margin expansion. From a top line perspective, in Q4, we delivered 2.6% same-store sales growth, driven by 4.5% in traffic growth. On the profit side, we delivered 16.1% restaurant-level operating margins and 10% adjusted EBITDA margins, representing an improvement of 70 and 40 basis points, respectively, year-over-year.

Given the strong performance in Q4 2024, I'm particularly proud of how the team worked together to deliver a strong finish to 2025. Worth double-clicking on is the implied check compression between the comp sales and traffic in Q4. Our traffic momentum builds on the progress we have made throughout the year and underlines the continued improvements in operations, the resonance of the Pizookie Meal Deal and BJ's relevancy in the holiday and social splurge occasion. Two additional drivers in Q4 beyond these foundational elements are the buzz around our LTO Pizookies, which brought in a hard-to-reach younger demographic and drove an increase in the number of what we call Pizookie trial checks as well as our continued outperformance in late night.

While both of these occasions carry a lower dollar check, they help us continue to introduce BJ's to new customers, give existing guests new reasons to come back and sustainably grow sales and profit dollars. For the full year 2025, on the sales side, we ended at 2% same-store sales growth, driven by 2.8% in traffic. And from a profit perspective, we landed at 15.5% restaurant-level operating margins and 9.6% adjusted EBITDA margins, representing an improvement of 110 and 100 basis points, respectively, year-over-year.

As I talked about previously, 2025 was a year of strengthening foundations and learning, guided by our 4 strategic priorities. We created alignment, understanding and shared ownership of our strategy. We built trust, improved accountability and showed resilience when encountering performance challenges. We added 3 strong new leadership team members who have integrated well and made a difference with Jen Jaffe, our Chief People Officer; Tom Kowalski, our Chief Supply Chain Officer; and most recently, Todd Wilson, our Chief Financial Officer. We clarified our growth drivers and continue to refine how to leverage them most effectively.

In Q4 specifically, the combination of better execution, value rooted in the Pizookie Meal Deal and compelling product news driven by seasonally relevant Pizookies and the renovated pizza platform allowed us to continue to deliver strong traffic-driven growth. We evolved our marketing strategy, leaning more heavily into social and word of mouth to support our product news, while leveraging broader paid channels to deliver value through the Pizookie Meal Deal messaging, further refining how we deploy media and message most effectively. Throughout Q4, consistent with 2025 overall, our key metrics continued to build confidence in our progress with improvements across our NPS scores, our team member retention, operational metrics and frequency across age and income cohorts.

Some key callouts with respect to Q4. On the team member experience side, we completed the rollout of our new manager and hourly team member training. On the menu front, we built on our seasonal Pizookie momentum with 2 successful LTOs with the return of the Monkey Bread Pizookie and the introduction of the Dubai Chocolate Pizookie, which also had an accompanying Martini. We launched the renovated pizza platform, which is resonating well with guests and performing consistently with what we saw in test markets with incidents up just under 10% and check-in margin in line with expectations. We ended 2025 with a net reduction of 6 menu items and 4 ingredient SKUs.

From a brand perspective, our marketing teams continue to do a great job optimizing how we deploy our media and messaging. In Q4, we leaned more heavily into word of mouth and social with relevant product news, which drove significant dialogue, interest and trial as reflected in our traffic numbers. Together, these launches generated a 4x increase in Pizookie impressions quarter-over-quarter, outperforming what had previously been our strongest social performance with Spooky Pizookie in Q3. It also drove overall organic social impressions up 12x year-over-year in Q4.

On the operations front, we continue to lean into our core initiatives to drive everyday table stakes improvements and made further progress across our key guest and team member metrics with NPS recommend scores up just under 10% in the fourth quarter, led by improvements in pace, value and food scores. We deployed our AI-based activity-based labor model to 30% of the system at the year-end and intend to deploy to the full system in 2026 and pilot a follow-on use case.

With respect to Keeping Our Atmosphere Fresh, in 2025, we completed 19 remodels, bringing the total to just shy of 50% of our pre-2016 fleet as of year-end. We also modernized our facilities program, tagging and tracking all of our equipment, moving from a more reactive to a more planful approach to ensuring that our team members have the tools they need to deliver on our high standards, and we can put our best foot forward with our guests.

As we enter 2026, we've continued to see positive momentum in the business. While calendar shifts and weather always create noise in Q1, I'm pleased with our performance so far in the quarter and our performance versus Black Box, which continues to outperform on both sales and traffic year-to-date. As I look ahead through 2026, I'm confident in our plans, and we remain focused on delivering consistent growth and improving shareholder value by putting the guest and team member at the center of everything we do.

Our 4 strategic priorities remain unchanged. We will continue to focus on Investing in our People, ensuring they have the tools and support needed to bring our brand to life every day. We will advance our operational excellence initiatives focused on making BJ's better and easier for both team members and guests. We will progress our menu renovation work and set the foundation for future net unit growth.

Our team members are the heart and soul of BJ's. In 2026, our key priorities with respect to the team member experience will be training, embedding the new manager and team member training, ensuring our teams have the right support to deliver for our guests, leadership development, refreshing our high-potential development programs as we continue to build restaurant and above-restaurant management pipeline to support future growth and culture, continuing to build engagement and alignment around our values and behaviors. With respect to Handcrafted Food and Beverage, we will progress our menu renovation work across our priority categories.

We kicked off the year building on 2025 momentum with the Butterfinger seasonal Pizookie, our first LTO pizza with Mike's Hot Honey, which quickly became our third most popular flavor out of 9 and a Korean Sticky Rib appetizer leveraging an existing wing sauce and ribs to create an easy and craveable new option. We also removed 2 lower-performing items that were heavy on single-use SKUs, which resulted in the removal of 5 single-use ingredient SKUs.

As we move forward in 2026, our culinary priorities will be to continue to drive buzz and engagement with seasonal Pizookies, and I'm excited about the pipeline we've built, continue to renovate our core categories, refresh strong sellers with clear NPS and executional opportunities, and continue to find opportunities to simplify while maintaining and protecting the turf coverage that allows us to win across so many occasions and consumer groups. We're currently in market in the early stages of testing refreshes to our burger category and chicken sandwiches. Our culinary team has been hard at work, and we have a pipeline of category and core item improvement tests that will follow suit. These refreshes are still in their early stages. And like we did with pizza, we will follow a structured approach to gain operational and guest feedback and make adjustments ahead of rollout. And also like with pizza, I will provide further updates as appropriate.

Our third priority is Delivering WOW Hospitality. Our focus in 2026 is to build off the foundations we've laid and continue to improve our guest satisfaction, throughput and efficiency. We'll continue to focus on great fundamentals and not seeding conceded ground by continuing to drive accountability through our directors of operations and GMs, having clear and consistent KPIs, lifting up our outliers and driving best practices. Our simplification team continues to work to remove unnecessary barriers and complications, things like integrating Apple Pay into pay at the table, simplifying split check procedures for our team members, simplifying Pizookie and cocktail ordering and ringing in processes and so on. As mentioned previously, we'll continue to advance our technology initiatives to help our GMs and managers have the right people in the right place at the right time.

2026 is an important year for our fourth strategic pillar, keeping our atmosphere fresh. We're going to continue to invest in our remodel program, which has shown strong results and pilot a refreshed BJ's prototype, setting the foundations to grow our restaurant portfolio. With the progress we're making on the core business, we're now laying the groundwork to reignite net unit growth. We're actively building a flexible pipeline as we target up to 2 new openings in the second half of '26 to pilot a refreshed prototype and set the foundation for further growth in 2027 and beyond. You will see this reflected in our capital allocation for 2026, which Todd will talk about in more detail.

Before I close, I would like to once again express my thanks to all our BJ's team members from our restaurants through the support center for their passion and commitment. I'm proud of the progress we made in 2025 and excited about the road ahead. I will now turn it over to Todd to provide further color on how we closed the year and our 2026 outlook.

Thank you, Lyle, and good afternoon, everyone. As Lyle has just outlined, the BJ's brand and business are healthy and thriving. In fiscal 2025, BJ's delivered growth across all key financial measures, sales, traffic, restaurant level profit, net income, EPS and adjusted EBITDA. Comparable restaurant sales increased 2%, restaurant-level profitability increased 110 basis points to 15.5% and adjusted EBITDA increased 14.5% to $134.1 million.

Turning now to the fourth quarter. In the fourth quarter, we generated total revenue of $355.4 million, a 3.2% increase versus last year. Comparable restaurant sales increased 2.6%, led by 4.5% traffic growth and a 1.9% lower average check led by the drivers Lyle outlined earlier. Restaurant-level operating profit increased from 15.4% last year to 16.1% this year, led by the leverage benefit of growing sales and continued efficiency gains captured by our operators. Cost of sales was 25.5%, 40 basis points favorable to last year.

The favorability was led by menu price increases and continued gains from our gross to net initiative focused on simplifying the efforts of our team members and more consistent execution for guests. This favorability outweighed food cost inflation led by beef costs of approximately 14% higher than last year and increases in produce costs, partially offset by favorable poultry prices.

Total labor expense is 35.8% of sales in the fourth quarter. While this result is unchanged versus last year, our restaurant teams continue to operate more efficiently while also delivering higher guest satisfaction. The efficiency gains are a credit to the great work of our operators and overall simplification efforts with contribution from the activity-based labor management tool that is rolled out to approximately 30% of the system at year-end. These efficiency benefits were offset by increased bonus costs for restaurant management as a result of the sales and profit growth, and we continue to see higher workers' compensation expense due to rising medical costs despite our progress in reducing the number of claims.

Occupancy and operating expenses, which include marketing, was 22.6% of sales in the fourth quarter, a 30 basis point improvement versus last year. Sales leverage more than outweighed inflationary pressure across the category. General and administrative costs are $25.1 million and 7.1% of sales, an increase of 20 basis points compared to last year.

The increase is a result of 2 primary factors. First, we determined that certain previously capitalized expenses no longer held future value and expensed them in the quarter. Second, we incurred costs related to different aspects of leadership transition, particularly in the finance function. Excluding these unusual expenses, our run rate for the quarter would have been approximately $22 million or 6.2% of sales, in line with expectations.

Depreciation expense increased 30 basis points compared to last year as a result of our investments in restaurant renovations and new restaurant openings. These components delivered growth across all profitability measures. Net income in the quarter increased to $12.6 million in 2025 as compared to a loss of $5.3 million in 2024. Adjusted EPS increased 40% to $0.66 per diluted share from $0.47 last year. And adjusted EBITDA increased to $35.6 million, a 7.4% increase compared to $33.1 million last year.

In the fourth quarter, we repurchased and retired approximately 167,000 common shares for $5.4 million. During fiscal 2025, we repurchased approximately 2 million shares at an average price of $33.80. With over $90 million of Board authorization to purchase additional shares remaining, we have significant capacity funded by the business' durable and growing cash generation to repurchase shares when the market price is at a meaningful discount to its intrinsic value. Importantly, our balance sheet remains healthy as we ended the fourth quarter with net funded debt of $61.2 million, comprised of a debt balance of $85 million and cash and cash equivalents of $23.8 million.

Now turning to 2026. Our financial guidance for 2026 is as follows. First, comparable restaurant sales growth from 1% to 3%. We expect continued traffic growth and a marginal increase in average check as we anniversary promotions that affected check in 2025 and implement prudent pricing action to address inflation. I would note, comp sales results to date in the first quarter, including the impact of Winter Storm Ben in late January are in line with this annual guidance. Second, restaurant-level operating profit of $221 million to $233 million. We expect sales gains and further efficiency from initiatives, including gross to net and cost of sales, activity-based labor management and multiple initiatives from our supply chain team to drive this growth versus 2025 and outweigh approximately 2% to 3% inflation in our commodity basket, labor rates and other costs.

Third, adjusted EBITDA of $140 million to $150 million. In addition to the restaurant level operating profit, we anticipate total G&A costs will normalize near $90 million or 6.2% of sales, a 30 basis point improvement versus 2025. This G&A estimate is inclusive of approximately $11 million in stock-based compensation expenses. Fourth, capital expenditures of $85 million to $95 million. This is an accelerated pace from 2025 and represents incremental investments in IT and a restart of our new restaurant opening pipeline. On the new restaurant front, we expect to open up to 2 restaurants in the second half of 2026 with additional restaurants under construction in 2026 slated for 2027 opening.

Fifth, we may repurchase up to $50 million of stock depending on market conditions. This is an important lever that demonstrates the cash-generating power of the business. We expect cash from operations to fund our CapEx, including an accelerated pace of new restaurant openings and have flexibility to return excess cash to shareholders through the share repurchase program or use it to further strengthen our balance sheet. As we demonstrated in 2025, we have the financial capacity and intent to put our capital to work, buying back stock when the market undervalues our shares.

Finally, as we model the quarterly shape of 2026, I would note 2 items. First, inflation accelerated in the second half of 2025, led by beef commodities, and we expect that elevated inflation to carry through the first half of 2026 before moderating in the second half. Second, we expect a more even spread of G&A across the quarters in 2026 than 2025, resulting in a G&A increase in the first half of the year and reduction in the second half. While we expect to increase our profitability in all quarters, as a result of these factors, we expect growth to be more measured in the first half of the year then accelerate in the second half.

In closing, 2025 was a tremendously successful year for the BJ's business. Financial results across all key measures increased significantly as the team executed across all aspects of the strategic plan. Congratulations, and thank you to our restaurant team members, field operators and everyone at the restaurant support center. As we look forward to 2026, we are confident in our strategic direction and our ability to continue to sustainably grow the business to create value for shareholders.

With that, we'll turn the call over to the operator for questions.

[Operator Instructions] The first question is from Jeffrey Bernstein with Barclays.

Great. I wanted to talk a little bit about the comp components. Clearly, the traffic is very strong and seems to be driven by a lot of compelling value. But on the flip side, I guess, you talked about how the mix shift seems to be down somewhat large in the fourth quarter. I'm just wondering how you think about your mix of sales on value, however you define it, what -- where that is now versus where it was a year ago? And if you're comfortable with the balance of value versus premium or whether the value mix might be too high? Just trying to think about the mix shift in general and what your expectation is as we look through '26.

Yes. Sure, Jeffrey. This is Lyle. I'll start off and Todd, you can build. I mean as you look at Q4, I wouldn't actually -- I mean personally, I wouldn't characterize it as value particularly in Q4, taking a larger role, right? Because it wasn't -- in Q4, it's not like the Pizookie Meal Deal suddenly took a much larger role, and that's what drove it. It's -- the Pizookie Meal Deal continues to resonate and have growth.

But actually, what drove some of that delta between sales and traffic, which is the implied check compression was the kind of resonance of the seasonal Pizookie that we had. And so we have people coming in. They're not buying the Pizookies on a discount per se. They're just coming in to try Pizookies. And you see what we see is a younger cohort coming in, which I'm pleased with, right? It's a hard group to get, and we have more of those folks coming in. You combine that with better operations, hopefully, more of those folks will then choose to potentially come back. But we are seeing more of those checks where it's them coming in and having a Pizookie or not everybody is having an entree or you're having a Pizookie in some drinks.

And so we saw a resonance and real movement there in mix. And then we continue to see the outperformance of late night in Q4. So the things that drove more check compression in Q4, I wouldn't necessarily think about as headwinds, right, so to speak, or like more from a discounting perspective. There's other small things in there like in our features for the holiday season. This year, we featured salmon over the ribeye given what was going on with the cost of steak. That carried with it a bit of a lower check but a better margin. So there's a number of little things in there, but I wouldn't say it was driven by a sudden jump in reliance on value in Q4 versus what we've been seeing.

I'll just quickly add 2 items of building on Lyle's point of the any "trade down in check or lower check", it's just a mathematical equation of we drove incremental traffic at a lower check average with those -- especially those seasonal Pizookies. The other piece I'd call out, and I think it was part of your -- where you're going, as we look forward to 2026, we do expect -- we continue to see PMD grow, and that's obviously a good thing for us as that value message resonates with guests. And so we do expect to see some continued check trade down, but not to the degree that we saw in 2026, meaning we do expect some expansion of net check. And that's just a matter of the pricing to cover off inflation.

Understood. And can you share the -- just on the inflation side, I think you called out a couple of particular commodities, but just wondering what the commodity and labor inflation was in the fourth quarter and what your outlook is for full year '26?

Yes, absolutely. So the total basket in the fourth quarter was about 2.5%. We called out beef. We called out produce as the big drivers of the commodity basket. Labor was a similar ballpark between 2% and 3% in Q4. We think the first half of the year, quite frankly, will be in the 3% to 4% range in terms of total inflation. Those same drivers really drive the start of the year, but then we see that moderating in the back half.

The next question is from Brian Bittner with Oppenheimer & Company.

4% traffic growth in the fourth quarter, really impressive. I think it was your sixth straight quarter of positive traffic. And as you look to '26, your 1% to 3% same-store sales guidance, I think it clearly builds in a more balanced check and traffic, I think, and that's kind of what you just said to Jeff's question.

And just in your internal models, how are you anticipating the overall comp trends could be throughout the year? Do you expect them to be pretty steady throughout the year? Is there any interesting drivers we should be aware of that happened post first quarter?

I don't think there's anything we call out. There's obviously some movement in our internal models, but I don't think it's enough to call out. I go back to some of the comments we made in the call, Lyle commented on this, and I did as well that we're pleased with the start of the year. I pointed to our annual 1% to 3% guide and that our results to date are in line with that. And so that gives you a sense of what we're seeing at least so far in Q1.

I know there's been thought internally and externally about anniversarying PMD, which the company did successfully back in 2025. And so we're always looking ahead to make sure that we're planful in those things. I think you see that in the fourth quarter with the seasonal Pizookies that kept that momentum going. So we try to be very planful there. But ultimately, I wouldn't call out anything as big movements within the quarters. But to be clear, we are looking to grow comp sales and expect to grow comp sales and traffic in every quarter.

Okay. And just a follow-up on the restaurant profit guidance, I think it assumes kind of a 50-ish basis point expansion in restaurant level margins. If you can just kind of confirm that. And you've been on this really strong margin expansion path recently. What's going to keep the margins expanding as we look forward in '26? If that 50 basis points is the right kind of base case, where is that coming from?

Yes, I'll start, and Todd, you can jump in. The -- as we look at next year, I mean I think there's 3 components to it, right? One is delivering consistent sales growth, right, and having some leverage on the top line, which I think I've maybe been a little bit repetitive on is that we're really focused on delivering a more consistent and durable BJ's that delivers that kind of consistent growth. So that helps.

Number two would be the continued focus on the programs that I've talked about previously, which is we have a really strong core set of KPIs that we're driving accountability down through our teams. We're really focused on bringing up our outliers or kind of our bottom quartile of performance. So continuing to bring that bottom up. And so you see ideally everybody getting more efficient, but that bottom coming up and getting more efficient than the rest.

And then as you look at things like our gross to net, that is going to be a continued focus that we're pushing against with a particular focus on comp food and beverage, right? That is a continued area for us of real focus. Because for me, that is the best indication of when you're moving that, that suggests you're executing better, you have less bad conversations with guests, you can turn tables quicker. So none of that is totally wrung out.

I think also I've talked about previously, as we look at continuing to roll out the activity-based labor model, that's going to be rolled out over 2026. We're going to do that in a measured fashion because you kind of roll it out, you need to learn, get adoption from the GMs and keep going and you don't want to see conquered ground. So it may be more of a 2027 impact. But that -- as that rolls out, the [ ABLM ] is suggesting there are some hours that we can save. I think I've talked about this a little bit before on the shoulders and on our lower shifts and in the high times, we actually need more labor.

But the real focus for us on the [ ABLM ] has been consumer metrics, right? And are we seeing improvement across our pace, across our food quality, across hospitality. That's the real kind of, I think, focus on having the right people in the right place at the right time.

But I think as you observed on a lot of those initiatives, I think last year, we were able to get a lot of what was kind of more obvious, if you will. And that as we come into this year, you are seeing the level of expansion not be quite as big, right? And it's because as we come over that, while there's more to have there, each year we come over that, we expect to get more efficient and effective. But the degree of it is going to evolve over time.

Brian, just quickly confirming that the -- you mentioned the 50 basis points or so that we're thinking about it the same way, I'd say, in broad strokes, that's in the range of what we would expect. So your math aligns with ours.

The next question is from Sharon Zackfia with William Blair.

It's really interesting to continue to hear about the LTOs on the Pizookies bringing in younger demographics, and it sounds like it really accelerated for you in the fourth quarter. It may be too early, but what does engagement look like with those customers after they do come in for an LTO? Are you seeing kind of a tail of engagement with those cohorts?

You're right. I mean given average frequency of our business in full service, it's too short of a time for me to feel comfortable saying, I definitively am or not. So I want to get more time under our belt. I think big picture, as we looked across 2025, we did see increases in frequency across our age and income cohorts with a little bit more on the younger and a little bit more on the older and more actually on the lower income cohorts. And I think those dynamics to me show -- and this is, again, my inference. But you look at it and you look at the growth and you look at the mix are correlative to the resonance of PMD and the resonance of Pizookie. But it's too early for me, Sharon, yet to definitively tell you that, that is true.

That's completely fair. Are you doing something different in social media? Have you augmented your capabilities there? Or is that increase that you alluded to, is that just organic and coming from your consumers?

No, no, no. It's -- we've changed kind of the way we go to market. I mean we did bring on a new team member here who's doing a great job, who is far more socially conversant than anyone than Todd or I or Rana, anyone in this room in fairness. We also have looked at some of our agency resources.

But when you look at the shift, a lot of our social previously was what I would call kind of brand-produced top-down that we would then push out. And we've not only increased our investment as a percentage of our overall spend in social and influencer. But now that content is really influencer-produced versus brand-produced. So people speaking on behalf of us versus us just speaking on behalf of ourselves.

Great. And then last question. Now that we've kind of fully lapped the meal deal, how does the weekend traffic look versus weekday?

As we look through Q4, we saw growth through Q4 of all dayparts grew with the highest growth coming from late night. But yes, I'm looking at it right now. So as we look at all dayparts grew and late night was the biggest grower with mid-afternoon and dinner being quite similar and lunch growing, but not quite to the same amount. So that's what we saw from a daypart point of view in Q4.

The next question is from Brian Mullan with Piper Sandler.

This is Allison Arfstrom on for Brian Mullan. On the refreshes to the burger category in chicken sandwiches, curious if you could speak more about what led to the decision on these 2 platforms? And then what opportunity might be there and if we should expect a similar time line or stage gate process as the pizza relaunch?

Yes. I mean so working backwards, in terms of the process, yes, the process will be similar for most things that we take to market, right? We're going to identify opportunities through 2 things. One is, as we look at our menu satisfaction, intent to reorder, value perceptions, all of those things, that helps us identify areas of opportunity. We look at kind of what are driver categories, so what categories attached to a lot of checks. And then generally, upstream on the big categories, we'll do some screener work to get a sense of conceptually, are we in the right space from a consumer.

And then as we go to market, operations feedback, guest feedback. Just like with pizza, I would expect we'll have to do some tweaking when we get that and then go to market. So the process will be the same. I may have answered both questions there about kind of how we identify it. But we're too early in the -- it actually being in test market for me to have any material stuff to talk about.

The next question is from Todd Brooks with Benchmark StoneX.

First question, on the activity-based labor, I think you talked about a ratable rollout across the course of this year, 30% was in the barn last year. I mean by celebration season this year, you think you're kind of 50% penetrated with having it rolled out?

I don't know if we'll be all the way to 50%. I would say celebration season is probably the season where we are most cautious about creating disruption. So I think in the first half, we'll have some more rollout. I don't know if we'll get all the way to 50%. I think our windows for rolling something out that we have to kind of intake and get comfortable with.

Q1 is a pretty good window and Q3 are pretty good windows. So it's not that we won't advance it at all, but we want to be really judicious about any disruption that we might cause during celebration season as GMs get used to it because there is a getting used to it, right, when you go now to getting that labor schedule from the AI and kind of learning how to balance the GM's overlay with AI. There's a bit of a learning process, which we've seen in terms of getting comfortable with it. So we'll be judicious about how much of that happens over celebration season.

And just kind of looking at some of the earlier units that have implemented the platform, you talk about wanting to see a bend higher in certain scores. Can you start to put a framework around how much improvement you do see once the store is on that platform?

I mean I'm not going to be -- I won't give specific numbers at this point. But when I look at the shape where we're seeing improvement, we're seeing improvement pretty much when you look at the pre-post versus the control group across pretty much all of our metrics. The one that we're actually seeing move the most is pace, which is -- which I'm encouraged by because it's about getting the right people in the right place at the right time. So that's where I'd like to see the most movement. The others, we're seeing movement, but varying degrees of movement. But pace seems to be the one that's getting the most improvement, which would be, again, as you might imagine, a core metric for getting the right people in the right place at the right time.

Okay. Great. And the final one for me. Todd, you said earlier in Q&A that you continue to see the Pizookie Meal Deal grow. Can you talk to what mix looked like in the fourth quarter maybe versus what you were seeing in Q3 as far as percent of checks on PMD?

Yes, absolutely, Todd. When we look back at Q4, PMD grew almost 16% of checks in the fourth quarter. That was up almost 2% versus the fourth quarter a year ago and an increase versus Q3. So broadly, that platform continues to grow for us, which there's obviously been a lot of traffic associated with that over the last 5 or 6 quarters. So it's good to see that. That does come, Lyle hit on this. The check is just a little bit lower is what we see on the PMD checks. It's about 5% lower. So there's a little bit of a check trade-off there, but obviously, getting that traffic in is a big win for our business.

Yes. And the only other thing I would build on there, the percentage margin of those checks looks a lot like the percentage margin of our other checks. If you look at over the course of all of 2025, it's about 15.5% of checks and Q4 was a little bit higher than that. And when you look at it as kind of a percentage mix of sales, it's more like 6%. Now that's full week, Brian (sic) [ Todd ]. I know we've talked about in the past, which remains true that during the week, you're in kind of a -- Todd, sorry, you're in the low 20s, Todd, when you're looking at during the week.

The next question is from Jon Tower with Citi.

Maybe -- I'm curious to hear that you guys are seeing relatively strong late-night business. It's good to hear. I'm just curious, one, if you're doing anything special to drive it relative to what you've done in the past? And is that also inclusive of the off-premise business when you speak to the strength there?

Well, so the -- I mean all of late night is growing. I'll let Todd pick up on the channel mix because I don't have that answer at hand. Jon, I wish I could tell you that we were doing something super unique to drive the late-night business. I think we have a great environment. I think we have a good offer because our happy hour offer we offer at late night.

And I think I've talked about this before, I do think some of it is supply and demand. I think on balance, in the past several years, if anything, you've seen less people kind of either extend or go back to kind of full hours. And I think there's less late night supply. I think we probably have some demand coming back. And I think we are a great or better alternative to a lot of folks for late night. And I think that's helping us win. But we don't have like a specific marketing push or very specific unique like offer for late night that is uniquely driving it.

Jon, I'll tag in on -- Jon, just to give you -- it's Todd here. I'll give you some quick color on off-prem versus on. As we look at -- if you just split our business into on-prem versus off-prem, the dine-in business, the on-prem business is incredibly strong. Obviously, that's the majority of our business in the quarter. Traffic in dine-in was up almost 7%, a little over 7%. So just tremendously strong there.

The off-prem part of our business has seen declines. That wasn't new in Q4. That has been a headwind for us for the past few quarters. And so it's a matter of -- we've got folks dedicated to work to address that, but the strength of the dine-in business is particularly strong.

Okay. And just following up on the comment regarding late night. That anywhere near -- like if you guys were to recover, I guess, from an average weekly sales standpoint, back to peak, like how much more room do you have to go or better ask like how far has late night declined relative to your kind of peak times or peak windows or years?

I mean honestly, I don't have the number to hand of whether we're there or whether late night, if we look back, I assume we're talking like kind of pre-COVID like what the late night AUV was. I mean what I can say is as part of what we talked about in Q1, which is the continued momentum we're seeing in Q1, the shape of that continues to see particular strength in late night. So that has continued into this quarter. I don't know, Todd, if you have [indiscernible] in terms of specific AUV.

Jon, maybe we can tag those...

[Technical Difficulty]

Okay. Hopefully, you guys can still hear me. Just one last question that I had. Okay, great. Just you had mentioned, obviously, you're going to be opening new stores in the back half of this year. Can you just speak to what the new prototype might look like, high-level features that are different versus the baseline they could even just be square footage. But I would assume there's probably a little bit of a differential even off-premise access to the stores versus maybe some of the legacy asset base that you have today and even the cost to build?

Yes. So I mean as we look at it, right, I mean from a design perspective, I think what we're ultimately trying to achieve is a contemporized expression of our brand that is familiar to the people who know and love us, but also kind of exciting to new guests. And we leveraged our brand positioning to do that design work. And so I think it will feel familiar but contemporary. And we have, I think, some branding elements that we're bringing in that are evolved and new. I think how we're using some of the nods towards our craft beer heritage with the silos is going to be evolved and new. So there's a number of things, but it won't be -- it will be a familiar but contemporized version.

As we look at the footprint of it, I'm a big believer in right size, right cost, right place. Now the first couple that you build in my experience doing this are generally relatively prototyping. And then as you kind of go forward, and so as we look into the next couple as we move into 2027, I think we will be looking to look at building them not always at the same square footage, maybe in certain markets, it would be relevant to go smaller. I think we're looking at conversions in the appropriate markets. So we're not going to be dogmatic about every time it has to be just a prototype ground-up build. And so part of that influenced the design process, whereby what we're really coming out with is a clear set of brand standards for BJ's that we can apply to different sizes, different shapes, but it always looks and feels like a BJ's.

With that on a cost to build size, I mean, really, what we look at by each individual evaluation of a new unit is do we feel like it's delivering an attractive IRR so that we're being good stewards of the capital. But we are obviously conscious of what is going on with construction and inflation. And so as we built the new design, we are looking for opportunities with that kit of parts to be able to apply them flexibly and get the kind of cost to build to sales and profit and ultimately, IRR where we want it. But I think what you'll see going forward, Jon, is in certain markets, you're going to see something that looks quite like the size of a BJ's right now because it's appropriate for that market. And in another market, you might see something of a smaller footprint or a conversion that allows us to deliver the right return for the capital we put in.

Great. And have you shared those IRRs before that you're targeting?

I don't know that we've -- I think that we've shared it before. I mean in the past, I think we talked about like mid-teens IRR would obviously have us at a place where it exceeds our weighted cost of capital. But I think our ambition is far better than that.

This concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to BJ's Restaurants Third Quarter 2025 Earnings Release Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to our fiscal 2025 third quarter investor conference call and webcast. After the market closed today, we released our financial results for our fiscal 2025 third quarter. You can view the full text of our earnings release on our website at www.bjsrestaurants.com.

I will begin by reminding you that our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements.

These statements are based on management's current business and market expectations, and our actual results could differ materially from those projections in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission.

We will start today's call with prepared remarks from Lyle Tick, our Chief Executive Officer and President; followed by Brad Richmond, one of our Board Directors. We also have Daniel Duran, our Senior Vice President of Strategy and Financial Planning and Analysis, on hand for questions, which we will take after our prepared remarks.

And with that, I will turn the call over to Lyle Tick. Lyle?

Thank you, Rana. Good afternoon, everyone, and thank you for joining us today. I'm happy to report our fifth consecutive quarter of sales and traffic growth as well as our fourth consecutive quarter of profit expansion.

From a top line perspective, Q3 delivered 0.5% same-store sales growth, which included a slow start to the quarter, as we discussed on the last call, with the remainder of the quarter averaging roughly plus 1.5% comp growth for the final 2 months, which has accelerated into Q4.

On the profit side, we delivered 12.5% restaurant level operating margins and 6.4% EBITDA margins, representing an improvement of 80 and 70 basis points, respectively, year-over-year.

We have now lapped the launch of the Pizookie Meal Deal, and I'm pleased with the positive year-on-year momentum in the business that closed Q3 and has continued into Q4. In the last 6-plus weeks, our traffic is tracking at roughly plus 3.5% year-on-year, close to 9% on a 2-year basis and outperforming Black Box casual dining benchmarks again.

Our current performance trends, combined with a strong product calendar for the rest of Q4, anchored in our pizza refresh launching next week and 2 exciting seasonal Pizookies gives us confidence to reiterate full year top line guidance of approximately 2%.

As I reflect on my first year with BJ's, I could not be more proud of the teams, and I remain very pleased with our progress to date and energized about what we can achieve going forward. 2025 has been a year of building the foundations of a stronger and more consistent BJ's guided by our strategic priorities. We are better positioned today to leverage an incremental dollar of sales and win a return visit and the improvement we're seeing across our guest, operational and team member metrics give me confidence in the durability of the progress we're making.

Our restaurants are operating more effectively and efficiently, focusing on being great at what we call the table stakes and both our guest satisfaction scores and team member retention metrics are at multiyear highs.

Our ongoing simplification efforts and focus on gross to net have resulted in sustained double-digit improvements in comp food and beverage incidents, improving the guest and team member experience while removing over 0.5 million unnecessary POS clicks for our team members and counting.

Our outlier program and drive for accountability has improved overall effectiveness and efficiency as reflected in our restaurant level cash flow. We continue to build the Pizookie Meal Deal into an everyday value platform, resulting in continued improvements in our value scores and traffic, and we're beginning to see these improvements reflected with positive movement in our guest frequency metrics as we now begin to roll out product and experience improvements with our pizza refresh next week.

Speaking specifically to Q3, we further embedded our Pizookie Meal Deal as a core value platform our guests can count on, leaned into the power of social media and seasonal Pizookies to drive brand momentum and continued the journey of improvement on table stakes operations.

Our strong year-on-year momentum since the Pizookie Meal Deal lap began can, I believe, be attributed to a combination of the foundational work I've talked about, as well as the continued refinement of our marketing strategies and tactics that are helping us codify how to most effectively drive the business.

In Q3, we continued to shift our marketing focus towards social influencer and word of mouth. Given it's not our strategy to win a share of voice battle, our effort is increasingly focused on driving social dialogue and relevancy. I want to give a shout out to the marketing team for the great progress they're making.

Our earned media impressions are up over 300% year-on-year. The Pizookie Meal Deal continues to resonate with guests, providing a great value and accessible everyday splurge opportunity, driving increased traffic, recruiting new guests and driving frequency with existing ones.

We leaned into our All-American Smash Burger as a new feature on the Pizookie Meal Deal and garnered over 2 billion impressions on National Cheeseburger Day alone. On September 17, we also rolled our latest menu update and the Spooky Pizookie has been a social phenomenon. Again, the team has taken a more proactive approach to social and influencer engagement, driving a 350% increase in overall engagement and doubling overall impressions year-over-year, further codifying the role of seasonal Pizookies as both a buzz and traffic driver.

In addition to the traction of the Spooky Pizookie, our other menu optimizations are resonating with our guests. The 22-ounce beer pour offering is seeing about a 23% pickup rate and helping to improve checks with beer attached. And the Brewhouse Sampler is a top 3 appetizer, resonating with guests while driving a premium trade-up.

In Q3 and through October, our growth has continued to be traffic-driven with broadly flat to slightly down average check. Underlying this performance is an increase in frequency that is more than making up for any check compression.

Double-clicking on check, there are 3 factors at play. Primarily, it's the increased traffic and number of checks driven by the growth of the Pizookie Meal Deal, which has continued into Q4. Additionally, the outsized growth we continue to see in late night, which carries a lower check and continued pressure on alcohol beverage attachment are also contributing factors.

On the margin side, our operators continue to do an excellent job making progress on the foundations of great operations and hospitality. Despite some choppiness in sales early in the quarter, they delivered another strong quarter of restaurant margin expansion by continuing to focus on the fundamentals.

I want to thank all our teams from the restaurants through to the support center for the continued energy, passion and commitment they show every day.

As I look ahead through the rest of the year and into 2026, we remain focused on continuing to make progress across our 4 strategic priorities, and I'm excited about what is yet to come. Starting with the team member experience.

Our team members are the heart and soul of BJ's. Our job is to make things easier and better for them and the guests and the rest follows suit. I come into this call having just hosted our GM Conference in Dallas 2 weeks ago, and the excitement and engagement was energizing and infectious.

We spent 3 days together building alignment and ownership of our brand strategy, learning together and sharing best practices. We rolled out our new company values, which were informed by our engagement survey, co-developed by a cross-functional team and will guide us in how we deliver on our brand promise every day.

Our people and training teams led learning sessions that empower our directors of operations and general managers to bring these values back to their restaurants and bring them to life across the system. Maybe most importantly, we began the rollout of a comprehensive refresh to our manager and team member training that will be fully implemented across the system in Q1 2026. This new training establishes one best way for BJ's while also empowering general managers and team members to deliver Wow Hospitality.

I think what resonated most with this training was it was created in partnership with our operations, people and training teams and was authored by people who came up through the restaurants.

With respect to handcrafted food and beverage, we continue to progress development across our priority categories, identify areas for simplification and are now on the cusp of launching our first major renovation. On November 6, we'll be introducing the refreshed pizza platform across the system. The entire BJ's system is locked and loaded and can't wait to share the new product with our guests.

Our team members love the product. And as Chris Pinsak, our Chief Operating Officer and our senior operation leaders remind me, that is the foundation of creating excitement with our guests. We will ramp up the pizza refresh through the end of the year and through Q1, introducing our first LTO pizza product in over 5 years in Q1, continuing to drive engagement and excitement.

We also have 2 exciting seasonal Pizookies launching in November with the Monkey Bread Pizookie coming back after much prodding from fans on social media and a Dubai Chocolate Pizookie and dessert martini taking advantage of this current trending flavor.

As we head into 2026, our culinary priorities will be to continue to renovate our core categories, to refresh strong sellers with clear NPS and executional opportunities, and to continue work on simplification.

In 2025, we have had net reduction in menu items of 6. And in the January menu update, we will be removing 2 more items, eliminating 5 additional single-use SKUs. And then additional simplification will be primarily connected to the category refresh work throughout 2026.

Our third priority is delivering Wow Hospitality. Our focus in 2026 is to build off the foundations we have laid and continue to improve guest satisfaction, throughput and efficiency. We will continue to focus on great fundamentals and not ceding conquered ground by continuing to drive accountability through our directors of operations and general managers focused on lifting up our outliers and sharing best practices.

As I mentioned earlier in our team member section, the new manager and hourly training is driving a one best way approach to the system, ensuring we're all pulling in the same direction and can deliver a consistent BJ's experience to our guests. Our simplification team continues to work day in and day out to remove unnecessary barriers, and this will be a continued process.

Finally, we will advance our technology initiatives to help ensure we have the right people in the right place at the right time with our AI-driven activity-based labor model. This will be rolled out to 30% of our system by the start of 2026, and we're beginning to lay the groundwork for future use cases.

In 2026, we will also continue to invest in our remodel program, which consistently has shown strong results and pilot a refreshed BJ's prototype, setting the foundations to grow our restaurant portfolio in support of our fourth strategic pillar, keeping our atmosphere fresh.

In 2025, we will complete 20 remodels, bringing the total to 72 over the past 3 years, impacting 50% of our pre-2016 fleet and are pleased with the value-accretive results we continue to see. In 2026, we will continue the program and are refining our 2026 remodel targets now.

With the progress we're making on the core business, we're now laying the groundwork of reigniting new unit growth and have signed 2 leases with a number of deals in late-stage development. We're actively building a flexible pipeline as we target up to 2 new openings in the second half of '26 to pilot the refresh prototype and set the foundations for further growth in 2027 and beyond.

As we drive towards a strong finish to 2025, we've made great progress in building the foundations of a stronger and more consistent BJ's and now are on the cusp of beginning to introduce product and experience improvements.

I will wrap by reiterating what I believe are the 3 key themes coming out of Q3 and looking ahead. The first is continued progress. Q3 marks our fifth consecutive quarter of sales and traffic growth, along with our fourth consecutive quarter of profit expansion.

The second is stronger foundations. All of our financial, consumer, and team member metrics continue to indicate that we're building a stronger and more durable BJ's. We are better positioned today to leverage an incremental dollar of sales and win a return visit. And the third is momentum.

Since the lap of the Pizookie Meal Deal, we have seen increasing momentum and strong traffic-driven growth year-on-year. This momentum, combined with the strong product lineup through the end of the year with the pizza refresh and 2 seasonal Pizookies, gives us confidence in maintaining strong performance.

Before I turn it over to Brad to take us through more detail on our Q3 financial performance and outlook, I'm excited to share that we have finalized an agreement with our next CFO, who brings deep restaurant industry experience and will be starting at BJ's in mid-December. You can expect more details in a public announcement next week.

Given that, I also wanted to take a moment to thank Brad and the entire Board for their continued support, partnership and guidance. It has and will continue to provide great value to me and the entire management team. Brad?

Thanks, Lyle, and good afternoon, everyone. As Lyle has just outlined, BJ's brand is healthy, thriving.

During the third quarter, we achieved record sales and profitability levels we have not seen in over 6 years. The cash flow of the business is durable and growing to support our growth drivers with ample excess cash to repurchase shares when the market price is a meaningful discount to its intrinsic value.

To the latter point, we repurchased and retired 996,000 common shares for $33.2 million during the third quarter. And for a year-to-date total of 1,838,000 common shares for $62.4 million. With the Board's authorization today for an additional $75 million in share repurchases, we have updated our 2025 annual share repurchase expectations from $45 million to $55 million to $65 million to $80 million.

Importantly, our balance sheet remains healthy as we ended the third quarter with a net funded debt of $64.1 million, comprised of a debt balance of $89.5 million with cash and equivalents of $25.4 million.

In the third quarter, we generated sales of $330 million, a 1.4% increase versus last year. On a comparable basis, Q3 sales increased by 0.5 percentage point, all driven by traffic growth. This quarter included a little over 2% of year-over-year pricing. The compression in check is driven by 3 factors: the outsized growth we continue to see in the late-night daypart and the Pizookie Meal Deal, both which carry a lower check. These comprised about half of the check compression. Continued pressure on alcohol beverage sales comprised the other half.

However, to put the check conversation in a larger context, I would highlight that gross margin, that's check less food and beverage is up 90 basis points and margin after direct labor is up 130 basis points this year over last year. This is a testament to our menu and marketing team's management of the menu and our operations team's delivery of the menu.

We achieved meaningful increases in our restaurant level operating profit, adjusted EBITDA and EPS. Lyle highlighted what I call the 4 drivers of this margin improvement.

But to briefly recap, it's our focused efforts on table stakes, simplification, restaurant outliers and the Pizookie Meal Deal platform. This has driven our restaurant-level operating returns to 12.5% in Q3, which represents an 80 basis point improvement year-over-year with our restaurant level operating profit increasing 8.8% to $41.3 million.

This included approximately 40 basis points year-over-year headwind on this line as we wrote down certain asset valuations this year that's included in the operating and other expense line.

Our adjusted EBITDA margins reached 6.4% in Q3, which represents a 70 basis points improvement year-over-year with our adjusted EBITDA increasing 14.1% to $21.1 million. On a line item basis, our cost of sales was 25.7% in the quarter, which was 90 basis points favorable to a year ago. Food cost inflation was approximately 2% on a year-over-year basis, driven broadly by higher beef and seafood costs, partially offset by lower cost for bone-in chicken.

Cost of sales also benefits from our 4 margin drivers. Labor and benefit expenses were 37.1% of sales in the quarter, which was flat to last year. Our restaurant teams continue to operate at a heightened level from better guest count forecasting, enabling better labor scheduling and then managing to that schedule.

We leveraged hourly and management labor by approximately 50 basis points, but this progress was largely offset by accruals for higher anticipated medical cost inflation related to workers' compensation despite the progress in reducing the number and severity of claims.

Occupancy and operating expenses, which includes marketing, was 24.7% of sales in the quarter, which was flat to the third quarter last year. Marketing costs increased by 10 basis points and sales leveraging offset the approximately 40 basis points of year-over-year headwind on the write-down of certain assets I mentioned earlier.

General and administrative costs increased 40 basis points year-over-year, largely driven by investments in our strategy and a negative 20 basis points impact of mark-to-market accounting, which is fully offset below EBITDA and other income.

Preopening costs declined 30 basis points from fewer new restaurant opening activities this year. Depreciation expense increased 20 basis points compared to last year, reflecting the remodel investment in our restaurants.

And as Lyle has already mentioned, we reiterated our 2025 comp sales guidance of approximately plus 2%, restaurant-level operating profit of $211 million to $219 million, adjusted EBITDA of $132 million to $140 million and capital expenditures of $65 million to $75 million.

And as I mentioned earlier, we increased our expected share repurchases to $65 million to $80 million, depending on market conditions. Our earnings assumptions include an overall inflation increase from approximately 2% in the third quarter to the mid-2% in the fourth quarter.

And with that, we'll take your questions. Operator?

[Operator Instructions] The first question comes from Alex Slagle with Jefferies.

I wanted to ask about the drivers of the acceleration in traffic. And it looks like the back half of September and into October, just kind of runs opposite of what some others have seen in the benchmarks show. So just maybe you could expand on that a little bit more on what drove that acceleration.

Yes. Sure, Alex. Thank you. It's Lyle. As we're looking at it year-on-year, there's a couple of things that I would point to. I think there's kind of a combination of factors that go into it. Some of it, I believe, is some of the foundational stuff that I've talked about on the past several calls. We're seeing improvement in guest metrics, improvement in satisfaction, improvement in value. And eventually, you expect to see that starting to come through in frequency, and we're starting to see those frequency numbers improve across income cohorts and age cohorts. So that kind of works together.

Pizookie Meal Deal has continued to grow. So as we came into the lap, the numbers that we were seeing coming into the lap that I think we alluded to probably last quarter is that PMD continued to grow. We continue to see more people coming into it and more frequency. So it made us -- gave us confidence going into that.

And then I mentioned the marketing and the lean in on the social side. I wouldn't underestimate that increase in social dialogue and buzz and influencer engagement. I'd say the 2 kind of main platforms for that were the Pizookie Meal Deal and the Smash Burger. But really, the Spooky Pizookie was really a phenomenon this year and the team leaned in, and it really gained a lot of traction on social. And I think that resonated. And we saw it coming through, obviously, in traffic, but we also see that in the rise in Spooky Pizookie incidents. So we kind of can see that correlation there that helps us point to that.

Interesting. And I guess you've been here a year and I guess, started the CEO role in June, but kind of curious if there's anything in the business that's surprising you now or just shaking out a little bit different than you expected coming in?

I don't know if there's anything that is particularly surprising. I mean, look, I'll tell you, I'm pleased with the performance we're seeing and the level of acceleration we're seeing in the business recently. I think the team came together, did the hard work on the strategy and the priorities, and we're remaining kind of guided by that and trying to keep ourselves focused on what matters and continue to build a stronger business, right, over time. And so I'm pleased with the progress we've made. I'm pleased with the progress the team has made, and I'm excited about where we're going with the business right now.

The next question comes from Brian Bittner with Oppenheimer.

Congratulations on solid results. You clearly have reiterated the guidance for full year same-store sales. And you also said that the 1.5% comps you were seeing towards the end of the third quarter accelerated into the fourth quarter. And getting to that kind of 2% range for the full year would suggest something in the fourth quarter that is closer to like the 3% range. So I'm just trying to level set because there's a lot of outcomes for 4Q to get roughly 2%. Is kind of the 3% range the right way to think about the fourth quarter?

Thank you, Brian. As we're looking at our models and kind of where we're at today as we speak and how we're rolling things forward, we're looking at about 2% to 2.5% growth, and that will land us right around that 2% for the year.

And that's still incredibly impressive, the acceleration, given what we're seeing. And just elaborating on Alex's question. I'm just trying to understand what's going on. Are you guys just not seeing any pullback in consumer behavior? Are you not seeing in your data and insights any changes in frequency or anything like that, that basically everyone else is talking about?

Yes. So I mean, I'll tell you what we're seeing. We're actually seeing an increase in frequency beginning to emerge across all of our age cohorts as well as all of our income cohorts. That frequency is resulting in also an increase in total average spend per customer across those cohorts. Now across all of those cohorts, whether you look at it from an age or an income perspective, we are also seeing a bit of check compression, right? But the frequency is more than making up for that.

If you kind of break that out at the lower end, we're actually seeing higher frequency gains and a little bit more compression. And at the higher end, we're seeing less frequency gains and less check compression, but there's not like big, big glaring differences between them. And on the age cohort side, we're seeing actually the older and the younger consumer kind of be a little bit more on frequency and a little bit more on compression. And that kind of between the 2, we're seeing again increased frequency to a lesser extent and a little less check.

I think what it might suggest, right, is we've seen the PMD growing in the cohorts where we're seeing the more -- the higher level of frequency and a little more check, that's a higher engagement rate with PMD. But when you look at the frequency resulting in the average spend, it suggests it's also driving an incremental occasion. So that's kind of the way I'm looking at it and dissecting it. And so I'm pretty happy with what we're seeing, but that's kind of the mechanics of it.

No, it certainly suggests the foundational work you've been doing on the brand is working.

Our next question comes from Jeffrey Bernstein with Barclays.

A couple of things you touched on from the unit side of things. The first one was on the remodels. It sounds like you're still on track for the 20 in '25. And I think you said that's 50% of your class of units opened prior to 2016. I'm wondering if you can give us an update in terms of the cost of these remodels, maybe the sales lift and how many you think you might do in 2026 as you move towards presumably 100% of those stores opened more than 9 years ago? And then I have one follow-up.

Yes. I mean what I'll tell you is on the remodels, we continue to see a return that we're pleased with, which gives us confidence that it is a good use of our capital to continue to invest in the remodel program. As I look into 2026, we're definitely going to continue the program. I'd say it might be at somewhat of a moderated pace next year as we start to also get the refreshed prototype out there and then apply those elements to the remodel. And then as we gain a little bit of experience with that, I think returning to that pace of, like we're doing this year, 20 to 25-plus remodel units as we work through the rest of them. So I feel really good about the program. I want to do a little bit of learning with the new prototype and then accelerate again. But we're going to continue it next year.

And then I think you mentioned from a new unit perspective, the reacceleration in growth. I think you said you have 2 potentially that could open in the back half of '26. And then I thought you mentioned something about accelerate from there. So I was wondering how you think about -- obviously, there's no shortage of opportunity across the U.S. for the concept. So what's -- how do you think about what that ramp looks like in '27 and beyond? I mean is it just -- like what's the constraint to that? Seemingly you have lots of opportunity, but whether it's people or real estate or just operations. I mean how do you think about when kind of the sky is the limit what you do in '27 and beyond?

Yes. I think -- look, I mean, I think part of it is building the pipeline, obviously, which we're doing now. Another part of it is gaining the confidence in the prototype and the return on the spend, which we'll be doing. And so I would think of it as kind of 2026, end of 2026. We'll take a step in 2027. And then in 2028, really starting to see that full run rate come back.

When you think of it from a geographical point of view and what's kind of -- how we're going to attack that and what are enablers, we're going to focus on where we already have a footprint, right? So the way we've talked about it is kind of think of it as concentric circles.

So we're going to look at markets where we already have restaurants and we either need to fill out that density to get kind of that alchemy on awareness and consideration and also leverage on multiunit management or we feel like we have room to fill in where we already have a decent amount of restaurants, because that gives us a head start, gets us out of the gate quicker. We have the leverage on management, we have the leverage on supply chain infrastructure. And so we'll get to new markets, but building out in kind of concentric circles versus kind of putting one-offs out, because we actually have, frankly, a lot of markets that what I would call our kind of between clubs on multiunit management, where we have just a couple of restaurants.

So I think what you'll see, you'll see some of those leases in places like in Arizona, where we're filling in and building out, and you'll see some in places like Pennsylvania or in Illinois, right? So there'll be those types of things, but it will be building out from where we have an existing footprint to a certain extent.

The next question comes from Sharon Zackfia with William Blair.

As we think about those 2 new locations and 2 new prototypes for next year, are there any key changes that we should be looking for either in the size of the box or the features of the box that you're really keen to explore?

I think the -- as we look at the box, the first thing that we talked about was as we did the positioning work, does the environment and atmosphere itself really live and breathe our positioning and our DNA? Does it feel like it would be familiar to existing guests, but excite new guests and bring us into kind of the next generation kind of contemporized BJ's.

I do think there's an opportunity to probably lighten things up a little bit with BJ's that we know we're taking an opportunity to do with the prototype. I am a big believer in right kind of size, right cost, right place. So you're going to see a prototype that has very clear indicators of that you'll see consistently across BJ's, like what are those design elements that make a BJ's a BJ's, which you see everywhere. But we'll see that applied in different markets to different sizes and different costs. In some markets, we'll look to test conversion versus a ground up. So I think we're trying to get really clear on what makes a BJ's a BJ's and then apply it flexibly to get the right return on the investment.

And then can I ask a follow-up on the revamped pizza launch? I mean as you launch that, I mean how do we think about that and the impact to check? I mean, I don't know kind of -- I mean, you already have pizzas, so I don't know how you're expecting the attach of pizza or the incident rate to kind of increase. And I'm assuming that's going to be more value for the consumer than necessarily ordering, everyone ordering entrees for themselves. So I'm curious on how you expect that to play out. And also if you're going to lean into that as another kind of value offering in addition to the PMD.

Yes, sure. I think pizza inherently does provide a value and fills kind of a different occasion for people, which is really nice. And so I think it's historically played that role. But I think as the pizza kind of quality and satisfaction eroded, it did that less effectively. And so part of what we're doing is refreshing the pizza to help it play the role it's supposed to play in our menu more effectively going forward.

I think when you look at kind of the way I think about pizza, it's a core product improvement that I would expect to kind of build over time as we drive trial. And I think of it as just another layer in building a stronger, more sustainable BJ's and kind of working in combination with the other improvements we talked about. So what I don't expect is like a short-term inflection point in short-term performance, but rather another layer in building kind of sustainable growth over time.

And this is Daniel. I'll expand on that just a little bit here. In terms of the check, what we've seen in the test locations is we've actually seen a little bit of an uptick in our average check in those locations versus control. Part of that is, I think we mentioned previously that we're seeing about a 10% uplift in our pizza incidence overall. So just kind of wanted to add a little color so you get a little more clear answer there around kind of what we're anticipating to happen with our check there.

The next question comes from Todd Brooks with Benchmark.

First question, Lyle, you highlighted the fact you've been here for a year, and you highlighted the foundational improvements that the team has made in that time frame. We're seeing -- when you talk about unit growth, we're seeing it some maybe on the culinary side. But with a year of foundation building behind you, what's the brand better positioned to play offense on now as we go into '26? Other areas that we should see you guys really start to put your stamp on the business and be a little more front-footed in how you're running it versus stabilizing it?

Yes. Look, I think -- I mean, one, I guess, I would say I'm pretty pleased with the momentum that we have and the work that we've done. I do call it foundational, but ultimately, it's building a better, more sustainable, more compelling BJ's. I think as you think about getting more on our front foot, it's kind of what I referenced when I talk about like product and experience improvements. And so the 2 kind of probably main drivers of that are going to be the continued work on the menu renovations next year as we start to focus more on kind of the post pizza categories.

And then the other one would be obviously the new prototype that we're working on. And so I think those things allow us to -- having the foundation stronger allow us to push a little bit harder on new stuff in the restaurants and the teams will be capable of taking that in and executing it really well.

I think probably the other thing that is maybe a little harder to just put your thumb on is, as we get stronger with the foundations and we're running more efficiently, it does give our GMs and our team members the opportunity to do more of the added value hospitality, right. As we're making things kind of more systematic for them, it kind of frees them up to deliver that hospitality more effectively, which, in my view, in our business can't be underestimated.

And my final question. You spoke on the last call about the Pizookie Meal Deal evolving the platform to have some add-on and kind of check builder type of capabilities for customers that are accessing there. Just wondering, A, success that you've seen with that, any other iterations that you're looking at with the program? And how are the teams doing from a front-of-house standpoint kind of selling that ability to build a higher check on that platform?

Yes. So I mean, overall PMD, so as I said, it's growing. It's not only growing in frequency and attachment, but the check is actually growing a bit on PMD. So that's good. Now would I say that we've kind of nailed that yet, the answer would be no. The PMD -- I'm sorry, the Pizookie, full-size Pizookie trade-up has been an easier sell for our team members at dinner, not much at lunch. The other add-ons we've had so far have not had much traction. The Smash Burger brought a lot of kind of momentum and news to the Pizookie Meal Deal, which we're excited about. And so we're still working through kind of what is the next iteration of add-ons and check building and menu refresh for PMD. And so that will be things that we test and roll in 2026. But I'd say we're still at the beginning of that journey, seeing a bit of traction, but I wouldn't pat ourselves on the back yet about that.

The next question comes from Brian Mullan with Piper Sandler.

Just wanted to come back to the pizza launch. In those test locations you referenced in the prior answer, were you doing anything to proactively drive awareness? Or were those really -- those lifts really just happened purely organically? And related to that, just talk about the plan to drive awareness once that does launch next week, whether that's social or inside the restaurant, anything you could offer?

Yes, sure. I mean in the test market, it was really organic. I mean, we obviously have -- geographically, we understand our loyalty customers that are most frequent at restaurants. So there was a communication that went out to loyalty members that are associated with those restaurants, but there was no really other proactive marketing on pizza outside of in-restaurant merchandising. And I think I mentioned this in my talk, but Chris keeps mentioning to me how much the team members love it and then if they love it, that's when you're going to see them selling it and people picking up on it.

So I mean, I think all of those elements obviously continue as we roll out broadly. Then the plan that we're putting in place, we are going to do external marketing about it. It is going to be heavily driven by social PR and influencer. So word of mouth, getting the product in people's mouth, getting people to talk about it and drive it. We'll be doing sampling at a restaurant level, again, to make sure we're driving trial. But yes, we'll be doing marketing, but it will be very much in the spirit of what I was talking about, a bit more of a center of gravity in the social influencer word-of-mouth world.

And then just a question on the share repurchase activity, notable step-up here in the third quarter. As you evaluate whether or not you want to continue with that moving forward, is there a leverage target we should keep in mind, whether it could be a turn of debt, maybe it's something different? Just any color on the philosophy or the parameters from here?

This is Brad. I would say, no. I mean, if you look at our balance sheet, you look at our debt levels, we have plenty of capacity. So if the situation presents itself, we'll continue to buy at a heavy rate. But also, we will keep some dry powder, if you will, because we're on the cusp of ramping up new unit growth. We'll get back to brisk pace on remodel. So we want to keep some powder for that. But even with that said, there's a lot of capacity to do that. And so we'll gauge that as each day goes by, but we don't feel constrained at this point.

The last question comes from Jon Tower with Citi.

Maybe just a few quick ones, if I may. First, obviously, you had mentioned that you're seeing a bit of check pressure, particularly from the higher mix of PMD rolling through the business today. But I'm just curious from another perspective, how are you thinking about that informing your pricing power going forward? And frankly, how you're thinking about pricing over the next 12 months and the broader menu?

Yes. I mean as I think about -- I mean, as we think about pricing going forward, I guess I would take maybe one step back, Jon, and this is Lyle, by the way. The way we're attacking the business is really trying to put that value equation at the center of everything, right? And is our product and experience worth the price and are we delivering kind of a worth it experience in that social splurge occasion. And I think price plays a role in that, but it's not solely about price, certainly.

I think that what I like right now is that we're seeing our value score goes up, we're seeing our guest metrics go up, and we're seeing that traffic-driven growth. So clearly, we're hitting a good kind of intersection with that right now.

Now I think the other thing is as you see guest satisfaction and value scores go up, as long as you're continuing to deliver on that, I think we will be able to find opportunities for pricing, particularly having kind of those entry points of the Pizookie Meal Deal and Daily Brewhouse Specials, right? Because what we're able to do is give certain consumers an entry point into social splurge with PMD and the Daily Brewhouse Special and other consumers an entry point into it with pizza or a steak for that matter. And so just having all of that work collectively.

Another thing that I'm looking at as we go into next year, particularly as we look at category refreshes is how we think about like category and revenue management in the category in order to create opportunities for trade-up for folks and opportunities to drive mix. And so there's really a lot of levers that I think about using as we kind of go forward and drive check. Pricing will be one of them, but we're going to be thoughtful about pricing as we go forward and continue to keep an eye on those guests and value metrics.

So yes, do we think we have some pricing power? Yes, we think we do. But we want to be judicious about that and make sure we continue to see the traffic, see the scores go in the right direction. And as long as we're able to lever that in the P&L, which we have been able to do pretty consistently, I feel good about it.

Maybe another question on -- just on your digital and off-premise business. I know that had been an area that you'd spoke to in the past in terms of seeing opportunity to improve the presentation to the guests online. And I'm just curious where you guys are in that process.

Yes. That is one of -- or will be one of our priorities for 2026. And I think it's really an end-to-end piece of work to improve our off-premise, right? Because it starts with some work that you guys -- it's not as visible to you guys right now, but we're already working on, which is how we attack missing and incorrect. And again, some of the kind of foundational stuff we've talked about.

So we've been tweaking things about like our KDS and how the products show up in the restaurants for our off-premise teams and our cooks, and we're seeing improvements in our M&I. So that's encouraging. And as we start to do that, we can then start to have that stronger foundation and then work on the consumer-facing stuff.

I think the consumer-facing stuff has to do with eliminating friction in our kind of digital consumer flow, which -- part of that is actually improving the flow from a technological point of view. But part of it is improving merchandising, making sure the things that are relevant for off-premise are presented to people first, not offering our full menu on off-premise because it's not all relevant.

So there's a lot of kind of those opportunities for us to improve, and we're going to be attacking them next year, but they just had to be sequenced in the priority this year. And so it's really a 2026 is when we're really going to start to see movement against some of that stuff.

And then just last one, bookkeeping. Fourth quarter, obviously, you gave some commentary on where you think comps might shake out. But is that accounting for some of the calendar shifts? I know Halloween hits this Friday versus, I think it was a Thursday last year. And then I think New Year's Eve falls out of the fourth quarter for you guys this year.

Yes. Jon, this is Daniel. That's correct. Our guidance there accounts for all the holiday shifts that you just called out. So you can take kind of the full quarter adjusted for those holiday shifts.

This concludes the question-and-answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.

Thank you, everyone.

Good day, and welcome to the BJ's Restaurants, Inc. Second Quarter 2025 Earnings Release and Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead, ma'am.

Thank you, operator. Good afternoon, everyone, and welcome to our fiscal 2025 second quarter investor conference call and webcast. After the market closed today, we released our financial results for our fiscal 2025 second quarter. You can view the full text of our earnings release on our website at www.bjsrestaurants.com.

I will begin by reminding you that our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projections in the forward-looking statements.

We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission.

We will start the call today with prepared remarks from Lyle Tick, our Chief Executive Officer and President; followed by Brad Richmond, our Adviser to the Chief Executive Officer. We also have Daniel Doran, our Senior Vice President of Strategy and Financial Planning and Analysis, on hand for questions, which we will take after our prepared remarks.

And with that, I will turn the call over to Lyle Tick. Lyle?

Thank you, Rana. Good afternoon, everyone, and thank you for joining us today.

Q2 was another strong quarter for the business with continued top line growth and improved profitability. Importantly, our progress is successfully balancing our short and long-term strategic initiatives. Underpinning all of our work is an unwavering focus on the guest and team member experience. Specifically, we delivered 2.9% comparable sales growth, driven by 3.3% in traffic growth, which underlines the continued resonance of the brand, particularly during our critical celebration season.

Restaurant-level cash flow margins of 17% and adjusted EBITDA margins of 11.5% represent year-on-year improvements of 150 basis points and 120 basis points, respectively, reinforcing the continued progress we're making building the foundations of sustainable and profitable growth.

As I reflect on our progress and where we are in our journey, my first 9 months have been about solidifying the foundations of the business and setting the stage as we begin to implement and drive our longer-term strategic initiatives in the back half of 2025 and into 2026.

We've clarified our brand positioning and established our 4 strategic priorities focused on the team member experience, our handcrafted food and beverages, delivering WOW hospitality and keeping BJ's atmosphere fresh. This strategic focus has helped us prioritize the key opportunities that matter most for BJ's.

We've built momentum with the compelling value of the Pizookie Meal Deal and kept our brand relevant in the cultural dialogue with the Pizookie Platter, the Snickers Pizookie, Fryckles and more. Most importantly, our gold standard of operational excellence has been the engine behind it all, allowing us to wow more guests than ever during the all-important celebration season in Q2. We're operating more efficiently and effectively across all of our restaurants, setting the foundation for profitable future growth.

As I look at the results and drivers, my confidence continues to grow in the resilience of our progress. Looking at the first half of 2025, a few things jump out. First, our traffic growth has been seen throughout the business regardless of how you slice it. Second, our sales and traffic growth has been very consistent outside of clear macro factors such as the impact of weather earlier in the year.

Third, our margin expansion has been broad-based and driven by operating our restaurants more effectively and efficiently as reflected in our NPS scores, which continue to be at multi-year highs, while our comped meals are simultaneously down significantly. Finally, our manager and team member retention continues to improve significantly year-over-year and be ahead of industry norms and ahead of our own 2019 levels.

Specifically in Q2, the 2.9% comparable sales growth was driven by strong performance throughout the quarter, including a record-breaking Mother's Day and week, where the company broke 82 sales records, followed on by a strong Father's Day. The Pizookie Meal Deal continues to resonate with guests, providing a great value and accessible everyday splurge opportunity, driving increased traffic, recruiting new guests and driving frequency with existing ones.

The marketing team has done a nice job leveraging the power of the Pizookie driving traffic and engagement. Our limited time Snickers Pizookie was a standout success, ranking among our top 3 selling seasonal Pizookies of all time. It also became a major PR win, generating 5.8 billion earned impressions and strong engagement across social and traditional media.

Lastly, our continued focus on in-restaurant large parties aligned with our social splurge occasion focus drove a 42% increase in seated reservations compared to Q2 last year. On the margin side, our operations teams have made great progress and are focused on improving what we call the table stakes, which are the foundations of great operations and hospitality. We continue to focus on helping our team members be more effective and efficient to enable better execution and higher guest satisfaction.

As I mentioned earlier, we've seen the benefits of these efforts in our growing NPS and reduced comp meals. A few areas of operational progress I would call out for the last quarter. First, we continue to push forward with practical improvements to our POS and KDS systems, removing unneeded force modifiers, which reduce overall clicks and minimize the opportunity for errors.

These changes are some of the drivers of the double-digit reduction in our comped food and beverage year-over-year and flow directly to cost of sales. Second, we completed the integration of DineTime in our event portal, removing the need for managers to manually input reservations into DineTime. This has made managing reservations and walk-in parties much easier for hosts and guests alike.

Third, we rolled Ferry Express Pay earned wage access, giving our team members access to wages daily if needed. This may seem small, but showcases our team member-first mentality, driving significantly improved team member retention. Lastly, the continued outlier management work has brought more focus to the fundamentals and is lifting all ships. I want to thank our teams from the restaurants through to the support center without whom our results to date would not be possible. The energy, dedication and commitment they show every day give me great confidence in what is yet to come.

Looking ahead, I'm confident in what we have planned for the second half of the year to continue the momentum we have built in the business as we lap strong top line performance in the fourth quarter of 2024. While July got off to a noisy start for the category with July 4 on Friday and record travel, performance has since returned to expectations, much like it did in February and has performed in line with our initial expectations, reinforcing my confidence in the progress we've been seeing in the business and that we are focused on the right things.

We continue to make progress across all 4 of our strategic priorities, and we'll begin to roll out some of our longer-term strategic initiatives as we move through the second half of 2025. Starting with the team member experience. As we look ahead to the second half, there's really 2 main areas of focus. First, the continued journey of making it easier and more enjoyable to work at BJ's for our team members.

As I mentioned before, this will be an ongoing journey led by listening to our restaurant managers and team members. Over time, this will be supported by our menu work as we focus on our core categories and drive greater quality and consistency of execution.

The second pillar here is training. Our team members bring our brand promise to life every day and ensuring they have the training tools and support to do that is a top priority. Our new Chief People Officer, Jen Jaffe, has been partnering closely with our Chief Operating Officer, Chris Pinsak, and our field training team to refine our hourly training systems and relaunch our manager training program at our GM conference in October.

With respect to our menu and handcrafted food and beverage, we continue to make substantial progress. Our menu focus is on our core platforms and brand icons, including pizza, Pizookies, craft beverages and shareables. As part of these efforts, in the fourth quarter, we will roll out a revamp of our iconic pizza platform company-wide. Pizza is part of BJ's DNA, and we believe this is the best version we've ever had, recapturing much of what made BJ's pizza so beloved.

The dough is Detroit style inspired, yet served in a familiar round format using unbleached flower, no preservatives and New York Water, which has the perfect combination of iron and minerals to make a great dough. It's crispy, it's light and it honors the original BJ's inspiration. The sauce is bright, made from 100% vin ripe tomatoes along with oregano, Italian herbs, garlic and extra virgin olive oil. The whole milk mozzarella is rich and creamy. This is a foundational upgrade to a core platform and the consumer feedback thus far has been excellent.

In addition to the pizza launch, other core platform upgrades include a new tall 22-ounce pour reinforcing our craft beer authority, a new premium shareable Brewhouse Sampler for football season that brings together BJ's favorite bar food hits and the return of our cult favorite Monkey Bread Pizookie.

Our third priority is delivering WOW hospitality. Our ongoing work on great fundamentals has been the driver of our success to date and is the foundation that will underpin our efforts going forward. To complement that, we continue to progress our activity with our activity-based labor model test supported by our AI forecasting model.

Our ABLM test is in roughly 22 restaurants, mainly in Texas and California and continues to outperform control restaurants on labor hours. But more importantly, we've seen significant movement across pace, value, recommend and hospitality scores. We expect to have the ABLM expanded to 20% of our restaurants in Q4.

Our fourth priority, keeping our atmosphere fresh. We've completed 13 remodels so far this year with another 7 to 10 planned for the remainder of the year. Our remodeled restaurants continue to perform as expected with improved performance versus control. Building from the current remodel program and the brand positioning work, we're making good progress on our prototype design to ensure that our atmosphere continues to be the most powerful manifestation of our brand DNA and brand promise.

I would expect the evolve design work to be piloted in market through remodels and NROs in 2026. Our capital expenditure in 2025 related to new restaurant openings continues to be driven by the pace of our pipeline development, ensuring that new locations align with our refined criteria. As we look ahead through the second half of the year, we continue to feel confident in our earnings expectations and comparable restaurant sales growth of approximately 2%.

Thank you. And now I'm going to turn it over to Brad to provide more details on our second quarter.

Thanks, Lyle, and good morning, everybody. In the second quarter, we generated $366 million of sales, a 4.5% increase versus last year. On a comparable restaurant basis, Q2 sales increased by 2.9%, driven by a 3.3% traffic growth. This quarter includes 2.4% of year-over-year pricing. So the compression in check is really driven equally by the Pizookie Meal Deal and the higher growth rates in dayparts and channels, principally delivery and takeout, along with late night that have a lower check average.

The 160 basis points of higher total sales growth compared to comp sales growth is from the elevated sales level from new restaurants not yet in the comp base until they have 18 months of operations. On restaurant level cash flow margins of 17% in Q2, which represents 150 basis points year-over-year of improvement as we effectively leveraged our sales growth and improved our operational execution. This was achieved while investing in approximately $2.5 million of incremental marketing relative to last year.

Our restaurant-level operating profit increased to 15% to $62.1 million, marking our most profitable quarter ever. And as Lyle alluded to earlier, the overriding theme around our margin improvement is focused on efforts on what we call table stakes, beginning with improvements in our guest count forecast. The more accurate forecast enables labor scheduling to more closely match guest count flows, thus lowering direct labor as a percent of sales while also enabling better product planning to reduce food waste. Combined, this leads to a better in-restaurant execution and higher guest service as reflected in our P&L with lower cost of sales and lower hourly labor as a percent of sales and all this while achieving record guest satisfaction scores.

Another key component is what we call gross to net. This initiative attacks the sales deductions from gross sales to net sales. A key component of this initiative centered on comp meals. We determined the root causes of our unusually high comped meals and have addressed them. The result has been a 16% reduction in comp incidents. The net result is guests win with a better experience, the servers win with ease of execution and higher server engagement and the P&L benefits from 100% flow-through to earnings from the avoided comps.

There are other similar initiatives at various stages currently underway that mimic this type of approach to our business. On a line item basis, our cost of sales was 24.8% in the quarter, which was 90 basis points favorable as compared to a year ago. Food cost inflation was approximately 2% year-over-year, and that's down from about 3% in Q1, driven by lower sequential costs for bone-in wings, partially offset by higher beef and seafood impacts.

Cost of sales also benefited from our gross to net initiative. Labor and benefit expenses were 35.4% of sales in the quarter, which was 70 basis points favorable to last year. Our restaurant teams continue to operate at a heightened level from better labor scheduling and managing to the schedule plus the gross to net initiative I mentioned earlier.

Occupancy and operating expenses were 22.8% of sales in the quarter, which was 10 basis points unfavorable compared to the second quarter of last year. The difference versus last year was due to investing approximately $2.5 million in marketing, half in media to -- for additional markets to aid traffic growth and the other half in additional agency brand work that's underway.

Excluding these investments, occupancy and operating expenses were 60 basis points favorable to last year. We reported net income of $22.2 million and diluted net earnings per share of $0.97 on a GAAP basis for the quarter. Diluted net income per share increased by 35% compared to the 72% -- $0.72 per share last year. During the quarter, we repurchased and retired approximately 438,000 shares of common stock at a cost of $15.1 million. At the end of Q2, we had approximately $57 million available under our share repurchase authorization.

Turning to the balance sheet. We ended the second quarter with net debt of $34.5 million, comprised of a debt balance of $60.5 million with cash and equivalents of $26 million. This was a reduction in net debt from the beginning of the year of $5.9 million, which reflects our strong cash flow to support our share repurchases and investments in new remodels as well as reducing debt sum.

And on guidance, we expect annual comp sales of approximately 2%, which represents the realized impact of July 4 noise to our initial forecast and greater visibility into the timing of initiatives for the remainder of the year. Outside of these impacts, the business is operating in line with our initial expectations, and we are pleased with the normalization of our comp trends post the July 4 holiday.

We expect our profitability improvement initiatives to continue to improve margins in the second half of the year and accordingly, have raised the low end of our earnings expectations by $1 million. We now expect restaurant level operating profit of $211 million to $219 million and adjusted EBITDA of $132 million to $140 million.

We maintain our capital expense -- expenditures of $65 million to $75 million, our share repurchase range of $45 million to $55 million, of which we've repurchased 842,000 shares at a cost of $29.2 million through the end of Q2. And post the quarter through today, we have purchased an additional 92,000 shares at about $3.6 million.

And finally, the tariff situation remains fluid, but given the nature of our cost basket, we continue to estimate about 30 basis points of headwind in the second half of the year. The remainder of our purchase basket continues to normalize with overall inflation in the 2% range. Beef costs are well above that, but moderated by bone-in wings and produce costs. These impacts, along with our operating efficiencies are incorporated into our improving margins and absolute earnings growth expectations.

Thank you for your time today, and let me turn it back to Lyle for a final comment before we take your questions.

Thank you, Brad. I'm proud of our teams and the progress to date. We've made substantial improvements to our profitability, continue to learn and refine our top line growth drivers and are in a position to begin to roll out our longer-term strategic initiatives and drive continued growth in 2026 and beyond.

We're building for sustainable growth, and we'll continue to get a better understanding of the full potential of our programs and initiatives as they roll into market. While the path will likely not be linear, the energy, engagement and alignment behind our strategic initiatives has allowed us to create early momentum and lay the foundations for an exciting and ambitious agenda that lies ahead. We're right on track with where I would expect to be at this stage, if not a bit ahead on the foundational work.

Thank you very much, and now I'll turn it back for questions.

[Operator Instructions] And your first question today will come from Alex Slagle with Jefferies.

I wanted to ask a question on just value proposition and sort of next steps in refining the everyday value proposition. Maybe you could talk to the success you've seen with the meal deal and some of the other platforms, the Daily Specials and Happy Hour and just kind of where the opportunity is and how that -- you see that evolving as you move forward?

Yes, sure. Thank you, Alex. This is Lyle. I think the overriding theme here is we're looking to build platforms versus trying to go from LTO to LTO. So probably the single biggest opportunity is the continued evolution of PMD and the continued growth of that Pizookie Meal Deal platform. It continues to resonate with guests. It's driving new and repeat visits. It has a healthy check and those guests that engage in it continue to come back more often.

So we believe that, that platform is something that we can build on and evolve. Two examples of this are actually this -- going into the third quarter, we just introduced upgrade opportunities, allowing guests to add soup and salad for an upgrade appetizer to the meal or to turn their mini Pizookie into a full-size Pizookie for $4. And we're seeing encouraging pickup on those upgrades in the early days. We think this is a big opportunity. We're still learning here and plan to continue to test, learn and scale the right trade-ups to continue to build the Pizookie Meal Deal platform. But given its resonance, we see it as a big opportunity.

The other part of that is looking to keep that menu itself fresh. So we actually just introduced a new Smash Burger and introduced it only on the PMD menu, and it's quickly become one of our top performers on that menu and so much so that people are actually requesting it and buying it at full price on the weekend.

The other thing that might not seem maybe as linear with respect to value, but I would point us to is the relaunch of our pizza platform. Pizza complements kind of our value platform in a number of ways. I think, firstly, it allows us to reinforce what I would call the value equation by pointing towards quality and craft as we've upgraded the pizza foundationally, as I mentioned. As an iconic platform for the brand, it also helps reinforce kind of the core of our brand at the beginning of our menu work.

But importantly, because of the shareable nature of pizza, it delivers on the brand, it delivers on quality, and it actually delivers a great value. So being able to lean into the pizza platform under kind of pins, I think, the strong value proposition that we have, plus pizza hits a different and complementary occasion to some of our other entrees. So I think it's both about building on those core platforms and then seeing how the other work that's coming out complements it.

And I had a follow-up on just the training improvements and efforts to drive better service and guest experience. I mean what's the progress look like here? I know it's early and you have some changes kind of coming up and if you could offer some context there.

Yes. I mean, look, the progress on that side has been -- I've been so impressed with it. The -- our operators have made such incredible progress. And it's reflected in the NPS scores being at those multi-year highs. But as Brad said, as we continue to look at ways to make things easier for our team members in the restaurant and things like comp food comes down, it becomes a better experience for the guest, a better experience for our team member and obviously better for the P&L. So I think we've been making substantial progress and more progress ahead there.

On the training side, the key is to make sure that we have one BJ's way that everyone knows and everyone lives every day. And that starts with the managers' role modeling and being champions of that. And so we need to make sure whether it's somebody that is internal and has come through our system or somebody that is external and coming out that we're preparing them to deliver the BJ's way.

So we have a redesign program that we're launching in October. It's streamlined. It is very role specific, and it's a blend of really BJ's cultural immersion and operational excellence tailored to both those internal and external candidates. So to me, the tools and training that we can provide our team members to make sure they're delivering our brand promise every day, that is fundamental to the future of this business.

So I think we've made a lot of progress in that foundational stuff that's making it easier and more enjoyable to work at BJ's and therefore, deliver a better experience. And now we've got to follow on by kind of reinforcing the systems and the tools we're providing and training to allow that to be sustainable and for our team members and our managers to take that hospitality to the next level.

Congrats on the CEO role.

[Operator Instructions] And your next question today will come from Jon Tower with Citigroup.

Maybe just following up to the question around value. Just in general, I know Pizookie Meal Deal relatively new for the brand in general. But as a percentage of mix today, where does that sit maybe as a percent of sales? And then just as incidence, where does it sit today? I'm just broadly trying to think about how a consumer comes to your stores when they walk in there, they might get drawn in by the meal deal, but how many are coming in because of that and then trading up when they come in because they see something else on the menu that they're attracted to once they get in the door?

Yes. So it's about 15% when you look at the week -- when you look at the total week and about 22% when you look specifically at the week. Interestingly, when you look at those checks, the checks remain really healthy. They're kind of in the high 40s. And so what you see on a Pizookie Meal Deal check is not just everyone coming in and getting a Pizookie Meal Deal, but either people getting the meal deal and hanging stuff off of that or some people at the table getting the Pizookie Meal Deal and some people at the table getting other things.

The thing that we've really liked about what we're seeing is that these guests have shown that they're coming back more often. So the Pizookie Meal Deal is bringing in new people. But once those people come in, we're seeing them return at a higher rate than folks who previously came in.

And those folks that are coming back, are they just going back to the Pizookie Meal Deal? Or are they coming back and then trading around the menu when they're coming back?

No, it's really interesting. We are seeing them trade around the menu. We're seeing them during the week and not the week. And interestingly, a high percentage of them are becoming omnichannel customers. So we're seeing them on and off. And actually, our omnichannel customers tend to be our highest value customers. So we're seeing a big percent of those customers become omnichannel customers, which we're encouraged by.

That's great. Okay. And then maybe just going back, Lyle, you talked a little bit earlier about the activity-based labor test that you've done in 22 stores and you're expanding it to about 20% of the system by the fourth quarter. Can you just talk about what you expect to get from that? It sounds like hospitality pace value, but from a high level, how should we expect it manifesting itself from an economic standpoint in the model?

Yes. Look, I mean, I think the core driver of this model is about getting the right people at the right place at the right time to get a better experience and drive sales. So our core metrics that we are looking for are around pace, recommend, hospitality scores and ultimately, as leading indicators seeing that in sales, which, of course, takes more time given our frequency.

We are seeing some benefit from a labor hours point of view, mainly around efficiency in the shoulder hours, where sometimes in our kind of peak hours, it's actually suggesting we need more labor. But net-net, it has provided some efficiency. But I would say the bigger get on the ABLM is going to be the improvement in our hospitality, our pace, our recommend, our throughput and ultimately, its impact on sales over time.

Okay. Cool. And maybe just lastly, broadly on the industry, curious specifically in your markets heavy in Texas, California. When thinking about the competitive backdrop, have you seen much by way of changes specifically on the independent side? Or you could speak to chains as well, but any changes in the landscape? We can see at high level that it seems to have gotten more promotional, but are you actually seeing any changes by way of door closures or frankly, even doors opening up more than in the past 24 months?

You know what, Jon, I haven't personally seen a precipitous change in closures or a precipitous change in openings. What I can tell you is that our consumer and what we're seeing has been really, really consistent outside of, as I mentioned, the February weather and that very beginning of July with the travel that were a couple of macro things. Outside of that, we've seen a lot of consistency from our consumers. So that's -- I mean, maybe not a direct answer, but kind of the best I have.

And your next question today will come from Jeffrey Bernstein with Barclays.

Great. And again, congrats, Lyle, on the formal title. Curious to start with the mix shift. I think you mentioned it was down, I guess, 280 basis points seemingly with the greater value focus on the meal deal. I'm wondering how long you think something like that lasts, maybe what your expectations are for the back half of the year, whether you think something like that should moderate or whether you're comfortable with that if it's driving the traffic?

Yes. Well, so I mean, on balance, when I look at our growth and the shape of what we're doing right now, I mean, I am comfortable having traffic-driven growth with less check and our value scores continuing to improve because that, to me, is a strong foundation that gives you more levers to pull from.

Having said that, when you look at that mix, I think Brad mentioned about half of it is from PMD. The other half of it is from growth we've been seeing in the late-night daypart and in off-premise, which has a bit of a smaller check. But when I kind of dig in specifically to PMD, I think I would draw back to 2 things. One is, as we look at building the platform and some of the things I talked about earlier, I actually think there's an opportunity for us to continue to build check around PMD and manage some of that mix impact. I feel really good about the foundation that it's built and the amount of attachment that it has because it gives us a platform that we can start building off of.

Having said that, if you look at the shape of this year, it's playing out as we expected it to, and we would expect in the second half, the traffic and check mix level to level off a bit as we lap PMD in Q4.

Got it. And then just -- I think you mentioned the tough compare in the fourth quarter as you lead the brand. I'm just wondering, does that impact your marketing plans? I mean, is it some internal metrics or focus on sustaining positive comps? Or do you just kind of -- like you said, you don't necessarily want to get into the LTO business? Because I know you mentioned the new pizza. I guess that's the fourth quarter. And then I thought you made mention to the new pour, the new Sampler, the Monkey Bread Pizookie. I don't know if those were all the fourth quarter, and that's kind of in an effort to respond to that. How do you think about the outlook as you get into that fourth quarter?

Yes. I think a couple of things. I mean, one, we will continue to build the Pizookie Meal Deal, and we are making sure that we feel comfortable with our plans to lap kind of the media around that and the marketing around that and drive that PMD lap. But -- and I think you're right, like you're not going to see a bunch of LTOs, but I do think some strategic things like the 22-ounce pour that you talked about, which reinforces our craft beer authority, but also allows for a trade-up there.

The add-ons to the Pizookie Meal Deal, the Monkey Bread Pizookie, the Smash Burger coming on to the Pizookie Meal Deal. All of those things are about making sure that we reinforce the fourth quarter, but do it in a way that continues to build on our strategic initiatives versus kind of take us in a different direction.

And then, of course, as we roll pizza in November, that's another layer there. I would expect with pizza for that to build over time versus being kind of a onetime huge hit. That is a kind of reinvention of a core platform, and we've been seeing great response in our test markets. And I would expect as it gets in more people's mouth that, that has a kind of ongoing flywheel effect, and we'll continue to drive pizza into 2026.

Your very detailed description of it made me hungry ahead of dinner time. And just lastly, I think you said new units as you look for new units and whatnot, there's a refined criteria. I think investors are always looking to see a reacceleration in the new unit growth. I know this year was more about the remodels. As we think about '26, the balance of how many more remodels versus, I guess, the refined criteria, whether you think that you have enough time to kind of really ramp up the new units in '26? Or are we looking years out from there?

Yes, sure. So we've been actively looking at kind of building our pipeline, as I mentioned, but being pretty judicious about sites to make sure that they meet kind of the new criteria. And I think what we talked about previously, which is making sure that we're building concentric circles from where we have performance and awareness and consideration because we think we have room to grow there, and it helps us with performance.

Realistically, given the timing of new units, as I'm sure you're aware as you build pipeline, we're talking about the end of next year being kind of the first ones and then into 2027 and beyond. But we would say that new units are absolutely part of the thesis going forward. And we'll continue to work on the remodels. I'm excited about the prototype work I've been seeing from an agency that we're working with. And so we'll continue to refine what a BJ's looks like going forward and how that applies to remodels and NROs. You'll probably see it start to get applied to a remodel earlier in the year and then the NRO would be later in the year, just given the timing of that platform.

And your next question today will come from Todd Brooks with The Benchmark Company.

First one, Lyle, it sounds like you're far along in testing of the new pizza platform. Can you level set maybe where pizza was mixing under the old platform, kind of what you're seeing in test? Just trying to dimensionalize how big of a needle mover that this can be for the brand once you get the product where you want it and you roll it out system-wide in November.

Yes. I mean pizza, and Daniel, keep me honest here, but pizza was mixing around like 5% to 10%, depending on where you were in the country, California on the higher end, outside of California on the lower end. What we've seen in our test markets in the restaurants that we're testing in, we've seen sales up, we've seen traffic up and we've seen profitability up in those restaurants overall. Underpinning that, we've seen a significant movement in pizza incidents and improvement in NPS overall.

So I'm encouraged about the role it can play, both in energizing kind of a core market like California, where we've heard from a lot of existing guests that it reminds them of what they loved about BJ's Pizza always, but also had pizza play maybe a little bit of a larger and different role outside of California where it hasn't gotten its footing quite yet.

And is the early testing showing that this is an easy check add-on for groups that are out celebrating that you're actually building check by having the enhanced pizza available? Or is it replacing other individual appetizers and people are opting for pizza as a way to kind of get scratch everybody's appetizer at the table at once?

Well, no, it's actually -- the pizza check looks a little different. Again, keep be honest here, Daniel. But as we're looking at the pizza check, the interesting thing about it was it's not like replacing appetizers. The pizza is its own kind of unique occasion, and the checks are really healthy, but they're comprised a little bit differently because on a pizza check, people are actually hanging more drinks and more appetizers and more [indiscernible] off of their pizza.

So the checks are healthy because they're sharing a pizza, but doing more appetizers and doing more drinks than you might do if you sat down and nailed the Rib-Eye or a Prime Rib, for example.

Yes, that's right. Todd, this is Daniel Doran. I appreciate the question. I'll add a little bit of color. The initial tests, we've seen very little cannibalization to Lyle's point, if anything, it's neutral to slightly positive check. What's really nice is that we've seen the uplift like you mentioned, of about 10% to 15% on our pizza incidents, and that's really the check driver there. On top of that, we've seen a little bit of traffic benefit over time. I mean it's early in the test results, but again, very encouraging in terms of that frequency and that return guest.

Super helpful. And then the other question I had was, you obviously came through a pretty powerful celebration season. You talked about the Mother's Day week and the number of records that you were sent. But -- as you're looking at operations as a team, what were you able to learn across that type of high-volume period that's maybe -- it was kind of a stress test for where things stand now. Any opportunities that you saw that came out of it or anything that you felt like, okay, we were better engaged and capable of handling more customers at this peak period than we were this time last year?

Yes. I mean there's always opportunities. What I would say came out of it was I just think with the heightened focus on the fundamentals, the outlier work, forecasting and preparation. When I talk to Chris, our COO, I think he would say and the VPOs would say, it was about being prepared. And so the teams were just really dialed in, very prepared, working very efficiently and effectively together. And the result of that is you get more people through.

I think the reservations, of course, help because they help with a planning perspective. But to be honest, I think we're still at the beginning of that journey with reservations even with the growth that we've seen. But I think if you talk to the operators, they would just tell you that they're feeling more dialed in and more on top of the fundamentals and that, that dialing in is really helping them operate the restaurants better at this point.

Okay. Great. Just one final quick one. I don't know the timing of a new menu drop. But as you're looking at the second half, where do you see menu pricing running relative to where you ran in the first half?

Yes. I think we're looking at -- I think it's low 2% or 2%. Is that...

Todd, this is Daniel again. We should be seeing carried pricing of about 2.5% in the back half of the year. We're going to be lapping about 90 basis points around in September, and we're going to be taking about the equivalent this year. So neutral impact in the back half.

And your next question today will come from Brian Mullan with Piper Sandler.

A question on the off-premise business. I think you said it's something you'd take a look at later this year. But just can you talk about what you'll be evaluating and maybe any early hunches or suspicions of what you might find or where there might be some opportunities to improve this at the company over time?

Yes, sure. I mean -- so we've just brought in a new Director of off-premise, who's just kind of getting his feet under him and analyzing all that. But when I look at off-premise, there's a couple of big areas that jump out for me. I think -- I mean, maybe 3. One is just overall friction. There's too much friction in our off-premise journey from ordering through fulfillment. And we need to put a shoulder up against making that easier for guests and frankly, easier for some of our third-party partners.

I think -- the other one is -- which is not unique to us, is kind of the missing and accuracy, those items. That's something I experienced in my last world. I think it's probably the biggest thing that everyone wrestles with. And so putting a shoulder up against that in a previous life, for example, we saw a lot of missing and incorrect, and we actually found it was a lot of like drinks and side items. And we found that the way the chip was printing out was creating a problem.

And so we were able to reorganize that and get after it. So I think some of that. And then the last one is if you go and you go online and you order from us, you essentially have the entire dine-in menu laid out for you. So it's not optimized towards the items that are best for off-premise, the occasions, whether I'm ordering as a single person, ordering as a group.

So I think there's a real opportunity for kind of merchandising and menu focus and organization to just get a little bit more oriented towards off-premise. We are -- I think we -- the group made great progress through COVID in growing that business. But I would say we're kind of version 1.0, which is putting our physical business online, and now we've got to optimize that for the off-premise occasion journey.

Okay. And then on the Pizookie Meal Deal, you talked about that platform continuing to evolve from here, things you can do with it along those lines. I'm curious, is there any consideration towards eventually offering some form of this on the weekend? Could that work for the business? Would it not work? What are the pros and cons if you thought about that?

Yes. I mean, broadly, if I take a step back and I think about a program like that, you tend to want to put an external motivator on folks when you have capacity, right? So in other words, I have free capacity, so I'm willing to invest a little bit to fill that capacity. On those times when I have less capacity and people are intrinsically motivated to come to me, I'm probably less inclined to put an extrinsic motivator in there because the net benefit of it won't be as high.

So I feel comfortable with Pizookie Meal Deal doing its job during the week right now. So I think I won't say never as it evolves. But right now, I think it's doing the job it's supposed to do pretty well.

Brian, again, this is Daniel. I'm going to add a little color to that, too, just to kind of piggyback on the commentary from Lyle. He mentioned earlier kind of the strength of the meal deal and sort of the repeat visits. One of the notable kind of findings in that guest is that we're seeing strength in traffic and growth on the weekends as well without the meal deal, but we find again that there's a halo effect to this. And as these folks become more repeat guests, they're coming back on weekends as well. So kind of echoing what Lyle was saying around the need for this program to be really weekday driven, but there's certainly a positive impact on the weekends as well.

And your next question today will come from Sharon Zackfia with William Blair.

I don't think this was addressed, but can you talk about kind of how your alcohol mix is trending? It does feel like there's been more innovation and more emphasis on certainly the core beer platform, but also you've got the hard root beer and some innovation with the margaritas going on. So I'm just curious on kind of what you're seeing there? And if there's any opportunity with that Beer Club that you have in California to replicate it, what might be working there and what isn't?

Yes. Well, first of all, I love how plugged in you are to what we got cooking, which is awesome.

If it's alcohol, I plugged in.

So thank you. I mean, look, alcohol incidents overall, not just beer, have been declining a bit for a number of years. So that has not changed. I will tell you that some of the items that you mentioned, like the hard root beer has gotten off to a super strong start for us. And so I'm really pleased with what that's doing as you start to think about like that beyond beer platform and again, kind of a low ABV platform.

And the individual margaritas that we do in future as well as our margarita platform overall does very, very well for us. And then I think the other thing that we're focused on or as I work with the team and my challenge to the team is don't just think about the alcohol platform. Think about total beverage. Nothing is changing with social drinking. People still want to come together and engage over food and drink and drink is still a crucial part of that.

The way they're doing that is evolving. And so the team has been doing some good job with mocktails and some non-alc bev, but we need to take kind of a long-term view at how we grow overall beverage, which is obviously inclusive of alcohol beverage.

And then the Beer Club?

The Beer Club. So the Beer Club in California is steady and does very well. We are evaluating that. So I don't have an answer for you on that right now. I find the Beer Club to be a very interesting proposition, and we're evaluating what that looks like potentially outside of California. But I don't have in the list of priorities and sequencing, it's on there, but I don't have an answer for you on that today.

Okay. And then as we think about kind of ramping up unit development again late next year, are there any particular regions you're interested in kind of filling out? Or are you just kind of looking for best shot on goal, best site?

I think it's -- like we said, it's about building concentric circles from where we already have some infrastructure, some awareness and some performance, some leverage on supply, some leverage on management. And when I look at our markets, there's no market, including California, where there's not some headroom to grow. So we're really looking at kind of our core driver markets and how we build out from there. Obviously, if an amazing opportunity comes up that is unique potentially in a greenfield, but really, we're looking to build out from our core markets.

And then last question. There is kind of noise as we think about the back half, right? You had the soft start around July 4, but then you've got this really tough comparison in the fourth quarter. How are you thinking about comps in the back half? Are you thinking about it relatively steady between quarters? Or is there some give and take?

Yes. I mean, as I look at the -- as I think about the year, right, we started off the year looking at about a 2% to 3% comp. And I think as Brad mentioned, as we've come through the year and now where we are, we're looking more at the 2. And what that takes into account is the impact of July and the better visibility on how our initiatives are ultimately rolling out.

So as we look at that, we've been able to kind of dial in there what that looks like for the rest of the year. But ultimately, the year really is playing out very much the way that we expected it to in terms of the shape of the sales outside of that February [indiscernible]

This will conclude our question-and-answer session as well as conference call. Thank you for attending today's presentation. You may now disconnect.