Good day and welcome to the BJ’s Restaurants, Inc. Third Quarter 2015 Earnings Release and Conference Call. Today’s conference is being recorded. And at this time, I would like to turn the conference over to Greg Trojan, President and Chief Executive Officer. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone and welcome to BJ’s Restaurants fiscal 2015 third quarter investor conference call and webcast. I am Greg Trojan, BJ’s Chief Executive Officer. And joining me on the call today is Greg Levin, our Chief Financial Officer. We also have Greg Lynds, our Chief Development Officer and Kevin Mayer, our Chief Marketing Officer on hand for Q&A. After the market closed today, we released our financial results for the third quarter of fiscal 2015, which ended Tuesday, September 29, 2015. You can view the full text of our earnings release on our website at www.bjsrestaurants.com. Our agenda today will start with Rana Schirmer, our Director of SEC Reporting, providing our standard cautionary disclosure with respect to forward-looking statements. I will then provide an update on our business and current initiatives. And then Greg Levin, our Chief Financial Officer will provide a recap of the quarter and some commentary regarding the remainder of fiscal 2015 and some of our initial thoughts on 2016. After that, we will open it up to questions. And as usual, we will try to keep the call to around an hour, but as always we will be around after the call for any additional follow-up. So, Rana, go ahead, please.

Thanks, Greg. Our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. Our forward-looking statements speak only as of today’s date, October 22, 2015. 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.

Thanks, Rana. So, Q3 was another very solid quarter for our company. Excluding the one-time gain on our Century City restaurant, our net income increased 58% versus Q3 of last year and by 70% on a per share basis. Year-to-date, net income is up 54% and 67% on a per share basis when adjusting for Q3’s one-time gain and the shareholder settlement charges incurred in the first nine months of last year. Our strong performance was driven by solid comparable restaurant sales of plus 2.3%, which combined with 10% growth in restaurant operating weeks, drove a healthy top line sales increase of over 11%. This is our fifth consecutive quarter of positive same-store sales and this trend reflects the benefits of our investments in better, more unique food and in our core value proposition. BJ’s healthy revenue gains, combined with the continued excellent work by our restaurant operators, field support and home office support, continue to drive cost savings efficiencies resulting in consistent and impressive margin gains. Our income from operations, again excluding the one-time gain related to the Century City restaurant lease termination, is up 70% for the quarter, far outpacing our 11% increase in revenues and is a testament again to the significant leverage of our operating model. Our comparable sales gains in Q3 was driven by an increase in our guest check from menu pricing in the upper 2% range as well as favorable menu mix in food incident rates. This was offset by a slight traffic decline of a little over 1%. We are able to drive favorable item mix in food incidence in the quarter as we benefited from the popularity of our summer rollout of the Enlightened Keema bowls, Barbacoa Chicken and North Beach Mahi and Shrimp, followed by our tremendous new line of…

Alright. Thanks Greg. As Greg mentioned, revenues for the 2015 third quarter increased approximately 11% year-over-year to $229.4 million, while net income and diluted net income per share increased to $12.4 million and $0.48, respectively. As we noted in today’s press release, the third quarter included a pretax gain of $2.9 million related to a lease termination fee that will be paid to us by the landlord of our Century City, California restaurant as a result of a major mall renovation occurring at the Westfield Century City Mall. As a result of this mall redevelopment, we will have to close this restaurant as we were not able to agree on a suitable replacement location at the renovated mall. And as a result, we currently expect to close that restaurant in January of 2016. Excluding this one-time item, our net income is $10.2 million, a 58% increase over last year’s $6.5 million. And our diluted net income per share is $0.39, an increase of 70% over last year’s $0.23. Both net income and diluted net income per share were third quarter records for us. And the net income and diluted EPS excluding the gain as well as the third quarter revenue were well ahead of our internal projections at the time. As Greg Trojan noted, our solid operating results were driven by positive comparable restaurant sales and our productivity and efficiency initiatives. This led to a 19.7% restaurant level cash flow margin, which is 210 basis points better than last year’s third quarter. I will also remind you that included in our restaurant level cash flow is approximately 2.2% of marketing spend, which many peer companies include in their G&A. Therefore excluding marketing spend, our four-wall restaurant level margin for Q3 was 21.9%, which we believe are among the highest in…

Thank you. [Operator Instructions] And at this time, we will take a question from Matthew DiFrisco of Guggenheim Securities. Please go ahead.

Thank you so much. Gentlemen, I am just wondering if you can sort of comment on the new stores, I know you were saying how it is impressive you are opening up more stores, yet they are not weighing on the margins. How about looking at that as far as a comp contributor when I guess the next couple of quarters, you are going to start to get some of those newer openings as you return to more substantial double-digit growth. As they roll into the comp base, what’s the ceiling like as far as what’s the sophomore year of these stores looking like as far as growing and starting to come off of those lower opening volumes, how do they sort of progress as a sales contributor. And then would it be aggressive to think that even though they open up at good margins, with those comps, presumably they are getting comps in the sophomore year, they would also get better margins?

Yes. Matt, this is Greg Levin. We mentioned this on the Q2 conference call and it’s the same trend into Q3. And that is our new restaurants as they drop into the comp base at 18 months, are negative to us from a comp sales perspective. We mentioned at the Q2 time in July that our comp sales then would have been 50 basis points higher, taking out basically the Class of ‘13, which after 18 months are kind of dropping in as well as some of that early Class of ‘14. And that’s 50 basis points to our overall comps is consistent even in this quarter, meaning we would have been closer to 3% comp this quarter frankly if we did a 24-month comp perspective. We don’t not at this time are we contemplating changing comp sales metric or anything, but generally, as I have said, I think the last couple of years have been pretty consistent on this that had 18 months as our restaurants going into comp base they do go in negative. After about six months or so in the base, so as you start to hit months 24 and greater they start to comp positive. In fact, I would say that over the last two quarters of this year, every single class of our restaurants had been positive. So meaning that Class of 2006 and prior, Class of 2007, class of 2008, 2009, ‘10, ‘11, ‘12 were all positive here in Q3. And the Class of ‘13, as they go into the comp base, has been negative. So I think we will continue to see that drag on our business. To your second part of your question now, even though they may be negative from a comp sales perspective, it just seems like we have a longer honeymoon. Our margins do get better in that second year. The fact of the matter is your restaurant team is just more seasoned. They have got theirs sea legs under them and we see nice acceleration in margins. I would tell you specifically that our restaurants like Oviedo, which is now basically 12 months old, is not in our comp sales base yet, but it’s the first proto-7,400 that we ran, that we opened last year. Now it finished with margins in the 19-plus percent range. So we are seeing that nice improvement. And that includes the 2.2% or 2.3% of marketing on there as well. So we feel confident that we are going to continued to be able to move margins on those newer restaurants, but there will be that drag from comp sales for new restaurants.

That’s great color. I really appreciate that. I guess if you could just – should we understand then when you, let’s say ‘17 or late ‘16, is there going to be an inflection point where you are 10% on top of 10% or 11% growth on top of 11% growth, rather than 11% growth on top of 7%, which you seem to be at now, when the new stores coming in the comp base, I recognize there will be a drag, but maybe that you become less of a drag as you are lapping comparable years in openings, over even the – well, comparable years in openings like I am trying to open the model here and think of one that actually – when you drop to the high single-digits and now you are coming back to double-digits?

To your point, I don’t know the exact data, we are double digit over double digit, and it starts to normalize, I think you bring up a valid point, since that last year we didn’t open as many restaurants. We don’t have quite I would the drag. And now as we start to build more restaurants again, you got more coming into newer comp base. So I can understand what you are saying there, I just don’t know the exact timing.

And then just a follow-up question as far as when you are giving the commentary on the guidance there, it sounds like you definitely have a very good tailwind in the commodity front, yet you are still taking a decent amount of price plan too for ‘16. So I would assume then, you are sort of looking at your prime costs in a basket as far as potentially what you might get hit on the labor pressures. It sounds like it’s going to be a complete offset on the commodity cost environment or at least manage to keep sort of this 58% to 59% prime cost total rather than losing that leverage?

Yes. Matt, when we look at it and really over the last, I would say 18 months or so, we become much more selective in how we take menu pricing and have many more tiers than we had a few years back. So when we think about taking menu pricing, you might see greater menu pricing and like California that’s taking an increase in minimum wage. So net, it will be somewhere in that percentage range or so and we will continue to evaluate that based on some of the other prime costs. But as we go in, knowing that we are going to have inflationary impact here in California specifically, we know that that’s going to result in a little bit higher of menu pricing per se in select markets. And that’s kind of how we look at it and that’s where we kind of come up with that range of 2% to 3%.

And our range is of course, given our concentration in California Matt, it’s going to look higher than folks out there that are more geographically distributed, right.

Of course, okay. Last question the – with respect to the prior years, you actually have made maybe even like 5 years or 6 years ago was you used to breakout the same-store sales when the Inland Empire of 13 stores or so. We are going through some significantly, regionally tough comps. How should we look at Texas as far as on a level playing field versus the rest of the country for you? Is it at the point where maybe we start extrapolating out those stores and what the comp would be versus what it is in Texas or is it too close still and you just want to call it out as yes, it is weaker than the rest?

I think it’s the latter there. We will continue to evaluate if there are some pocket effects that tend to do a little bit better. Even I think when you look at it, Texas overall, we talked about this year that’s been softer for us, but we are not necessarily at that point where I do think as we look back 4 or 5, I guess more like 6 or 7 years ago, there were some very specific restaurants that were dragging us down. And frankly at that time, 13 restaurants on our base had a different impact maybe to Texas.

Excellent. Much appreciate it. Thank you.

And this time, we will take your question from Brian Bittner with Oppenheimer & Company.

Hi, great. Thanks. This is Mike Tamas on for Brian. Just a question, if you do sort of like a 1 to 2 type comp, what sort of leverage do you think you can get in the business as we think about it going forward?

Mike, I think, well, short-term meaning this next quarter, I think we still have the ability to continue leveraging our business. Going forward, I think if we can get into that upper 2% range or in closer to 2%, I think there is continued leverage with some of the initiatives and things we are doing going forward. Your 1% becomes a little bit more challenging. I would say this so. It depends on how you get that 1%. 1% coming from pricing should allow maybe a little bit more leverage versus 1% coming from traffic. Obviously, pricing allows you to leverage cost of sales, labor, etcetera, a little bit better versus traffic from that standpoint. We will have a better idea on some of that as we finalize our plan for 2016. But generally, one of the things that we have talked about in our business really over the last two years is if we can consistently put out numbers around 2% or so, we think we have the ability to manage our margins and improve our margins.

Got it. Thanks. And then just on the labor, you sort of touched on that a bit, but outside of your productivity initiatives, what sort of labor inflation rate are you seeing either today or what you expect to see going into ‘16?

I don’t have a specific number for you right now. I would tell you though in general, we have been able to manage that over the last year, year and a half. And I think you see it in our numbers in the sense that our labor cost per operating week, have been flat, if not down over that. But as we experienced Q3 and it’s one of the reasons I guided a little bit higher for some G&A in Q4, we are seeing pressure in regards to managers and line cooks that we really hadn’t seen over the last 18 months. I don’t have in front of me what I think that that labor inflationary pressure is, but it is seeming to get more intense as we are seeing a lot more new restaurants open up in some of our markets that we currently exist. And you are seeing, I wouldn’t necessarily call it the bidding war that you saw in the early part of 2000s, but you do see pressure in regards to holding on to managers and hourly team members.

Particular the kitchen side.

Okay, great. Thanks guys.

At this time, we will take your question from Jeff Farmer with Wells Fargo.

Thanks. Just a line up on Matt’s earlier Texas question, I am just curious of that same-store sales underperformance gap for the state, has It stabilized or is it still growing at this point?

You know what Jeff, it’s been kind of looking at it right now, it’s been choppy this year. And if anything, coming out of September, it started to grow a little bit. So, I would tell you looking at it from a trend standpoint, it seems like it’s been going up a little bit, definitely moving into September and into October.

Okay. Then again just sort of going back to the October same-store sales trends, I am just curious looking at that across transaction, you saw a nice mix benefit in Q3. Is the makeup I am understanding that it’s a little bit softer in October, but is the makeup similar, meaning you have negative transaction then a little bit of mix tailwind working for you?

I think the general dynamic is still the same deficit to softer traffic.

Yes, so that will be next area. And well, we don’t – and we always say that we never want to be a forge dependent concept. It’s about the creativity of unique food, great social place, great year and so on. Looking specifically getting into October, some of the softer days in Northern California are definitely days that the San Francisco Giants were playing last year, and this year, they are not. They are not in the playoffs, not going to World Series. And I think it’s something like 16 games they were in last year that we are not going to see this year and when we look at our numbers across by being soft as we see some of this volatility in our business.

And they are very consistent about losing.

Yes. Unfortunately, they have not just lost the first round of playoffs in the last three years. So that hasn’t helped it.

Understood. And then just a final question and Greg you might have touched on this in your prepared remarks, but just looking at the relationship between same-store sales growth and average sales growth, is there a potential for that to maybe get to 2 points in 2016 meaning that same-store sales outpaced average sales growth by a full 2 points?

I don’t know the answer to that, Jeff. We are happy with our new restaurant openings. It’s just and I think you kind of can see it in that 18 months comp, so to speak, in the sense that as they come into the comp base, they come in negative. So, what you are seeing is that honeymoon or that decrease in new restaurant sales can last a little bit longer. And that gives you that little bit of a different spread per se than maybe 5 or 6 years ago. So, it’s just kind of a steeper decline. I would tell you while we don’t go into specifics, but things like Huntsville, Alabama, Murfreesboro, moving down our McCandless, Greg Trojan and I all talked about, those restaurants are all opening up in the mid 100 plus thousand range, but they will settle down closer to our average unit volumes of 100 plus thousand a week. So, we are very happy with where a lot of our new restaurants have opened up. I think as any business when you opened up 17 or 18 you have got some that performed better than others, but we are excited. We like where they are opening up. We like the returns that we are getting out of them. We are just seeing a little bit longer honeymoon than what we have seen before. And as I mentioned earlier, every class of our new restaurants, meaning taking out the class of ‘13 has comped positive. So, it just seems like it takes a little longer to get to that comp positive state.

Okay, thank you.

At this time, we will take a question from John Glass from Morgan Stanley.

Thanks very much. I had two questions. First, Greg, just on your traffic this quarter, so traffic this year has been better than last year, but at least the way I look at it, it’s been a little bit lower than the industry. And last year, you were above the industry. Maybe what do you think your gap was to or however you look at the industry this quarter Black Box or Knapp? And how do you understand why that is the case when you have made so many improvements, your traffic seems to be now lagging more than it did a year ago, let’s say?

Actually, John, my take on it would be this quarter we are pretty much in line. The Knapp and Black Box numbers were more different than typical we would be. Black Box, by a reasonable margin and we are just behind on Knapp. So, I call – we think of that in the margin there of being about where the industry is. And you have to remember, we were beating traffic starting particularly in the last part of last year, really I think three quarters of last year pretty heavily. So, our two year traffic growth rate is candidly. I think our average is over 100 basis points of traffic premium to the market even this year. So, that’s really more the dynamic and that’s been incredibly consistent even through this year. So, my argument is the way we think about it is look, we always want more traffic and we want to be positive traffic, which we weren’t this quarter, but versus the industry and the dynamics of the industry were faring pretty well.

Yes, John, I got, I mean, without getting into – I guess I am getting the specifics. But when I look at our numbers here, I have got a feeling Knapp-Track and Black Box and maybe I am off on different things every quarter of 2014 we are up in 2013. We made some of those changes in here. And I have a feeling really, Black Box and Knapp in Q1 of this year we are off a little bit in Q2. And then as Greg Trojan said, we are kind of better than Black Box, a little bit behind Knapp in Q3. So, maybe I got different data than what I recorded. I doubt it in that regard, but I don’t see that quite the comment you just made.

Well, you used – you did say you used to be bidding and now you are let’s say pride, my only question was why weren’t you accumulating greater momentum just given the changes, but that was the comment. Can you maybe – go ahead…

Maybe that has to do with the restaurant in our Texas market, while we still have that, but have some pretty good comps this year with some of the movements in regards to mix and so on. We do have 32 restaurants, about 20% of our base in Texas and that’s been kind of a tougher market. I don’t have the breakout of regionally between Black Box and Knapp in front of me here, but maybe that’s kind of diving it down a little bit.

Yes, that’s helpful. That was the kind of intent I was looking for. And then just on your margins, right you are now cycling all the improvements, the big step up improvements you made last year, you are still seeing some improvement at the restaurant level. Do you, and you are ahead of kind of what your target was I think you said out a year and a half ago where you should be or wanted to be. So are you now at a point where you think you can forecast the new let’s say run rate restaurant margins or is this going to be sort of smaller increases just depending on comps that was do you think you can target 20% restaurant margins or do you think you have a new goal that we will be able to have a new goal soon on operating – overall operating margin?

We are going to go after a new target, that’s part of our mindset from there. I don’t exactly know where it is. It obviously gets more challenging as we continue to move up that ladder. In that regard, I think one of the things that we mentioned specifically at our Analyst Day was our plan kind of centered on a 2% comp. And here we just put out a 2.3% comp and it shows the type of leverage that we can get in our business. And I still think we have that opportunity and we have got other things that we are continuing to work on, to frankly hopefully move it above the 20% range in that regard. But I think it becomes more challenging as we go into Q4 and into next year.

Got it, okay. Thank you.

At this time, we will take a question from Jeffrey Bernstein with Barclays.

Great. Thank you very much. Couple of questions, the new units you are talking about for 2016, I was wondering you gave us kind of the quarterly progression, I am just wondering new markets versus existing markets, I think you said there are a couple of new states, but as we are trying to assess how many of these stores are I guess at the different dynamic from a comp and a margin perspective and I am just wondering what that breakout might be?

Yes. Okay. Jeff, I am kind of looking at this as we speak here. We are going to jump into the Carolinas next year. So that will be a new market for us.

I think in general, I think the big part of the story is in terms of California and Texas openings, I am remembering correctly. Greg, I think we got two in California and I am not sure we have one in Texas. Virginia, Maryland, we have continued Pennsylvania, Indianapolis, Indiana.

Those are all states that we are already in. It’s really – as we mentioned before, we try to build out that mid-Atlantic hub and it started to build from there. And we are going to continue to go after that those areas. Frankly, our Akron, Ohio restaurants have done really well over the last couple of years. So we are excited to get back into the Ohio Valley market. So really, as I think I mentioned, the Carolinas tend to be only two new markets.

Got it. And just as a follow-up on the last questions with regard to the cost saves, as you said now it’s going to be a little bit harder going forward to once you effectively lap that, I am just wondering are there still big buckets of opportunity where other than the leverage you will get from the 2%-plus comp, what are the big opportunities might there be, just from a pure cost reduction standpoint?

Well, Jeff, the general comment I would make is our level of effort and the process we put in place was really, you have heard me say this before was ground-up in nature. And they were driven by ideas coming from our restaurants and field operators in large part. So in terms of the process and the important level of effort going against it, we are not treating this is like we are done and we are going to stop looking in fact at anything, it just gets more and more important as level of competitive intensity and labor pressures and all that continue to way out in our business. So – but just the fundamental law diminishing returns is we are not going to get to the same level of dollars that we had when we were 18 months or 24 months ago. But we still think there is – I mean we still continue to find some good buckets and some good ideas out there that we have in place that will help us next year. But you guys have been following us long enough to know it’s not going to be the same yield, but they will still be important and still help us particularly as we continue to try to take less pricing than our competitors out there.

Got it. And then just lastly, Greg or Greg Levin I should say, you gave tremendous detail in terms of the outlook for 2016. And I know you said some about the modest comps in the units and otherwise give a lot of those line items, just to avoid confusion as everyone models this out, I mean nothing was really missing from that. I mean ballpark, I mean restaurant margin and/or earnings, I mean is there any directional color you can provide on that, just to kind of keep us all on the same pace?

Jeff, not yet, I mean as I started off the commentary in general, we haven’t built up our plan in that regard. And that we are right in the middle of building that plan. And we get the information from our operators what we are looking at and those initiatives. And that determines sometimes if we have to take pricing what that marketing strategy might be, etcetera to kind of manage the margins in that regards and see what we can do. So unfortunately, I don’t have that as much as I say modest comp, I really can tell you if modest comps meant 1% or 3% next year in that regard. We will tend to look at it how the trends are going and what comes back from our operators and what we decide to be the right target that we are going to go after and fill the plan accordingly.

Understood. Well, thank you for all the detail.

My pleasure.

At this time, we will take a question from David Tarantino from Robert W. Baird.

Hi, good afternoon and congratulations on the great results. My question is really – I got a couple of questions about the unit growth. And first maybe you mentioned that you are very pleased with the return metric versus some of the new locations with the new prototype, I was wondering if you would be willing to share what type of volumes and margins you are getting an average in those recent classes and maybe what the cash on cash return profile is shaping out to look like for that prototype?

Yes. Well, a couple of things. First of all, David the restaurants are so new that it’s hard to talk about them and whether they are shaping up from that standpoint. And as you know, as we just talked about, we have got this 18-month timeframe for them to go into comp sales. And they go into comp sales negative. So when we talk about a restaurant I think we mentioned it last year like Oviedo, we talked about our first new prototype. And I think it did up to 150,000 its first couple of weeks coming out of the gate, which not only proved that we can do that at 7,400 square feet, which we know we could because of our existing restaurants. We also made the comment that that’s honeymoon sales volume and it’s going to come down. So it’s hard to sit here and say well, this is where it’s going to exactly come down to because we know they come down. I would tend to say that album come off the honeymoon, in that regards our operating margins ramp-up of all of our restaurants has been better than historically what we have seen. So as it might have taken in the past, taken about 90 days to 120 days to hit food costs, you can get 180 menu items in there and more complexity in regards to how we manage the kitchen per se that 90 days to 120 days has been shrunk down to 60 days or so. If labor used to take basically in this case 240 days or six months, we have seen labor come a little bit more in line maybe somewhere it’s in the 150 days or so. So we are seeing much better improvement all around in regards to our internal productivity measurements. Trying to understand where the sales volume has really been a challenge as they go through the honeymoon perspective. The one thing I would tell you though is as we would look at our numbers and while we don’t have them in all the new states, I would say that our restaurants that we opened in a pace like in Florida and compare them to our existing prototype restaurants in Florida are opening at the same levels of volumes in that regards and they are doing the same sales level. Our Avon Restaurant, Avon, Indiana is opening up at the same as our Greenwood, Indiana restaurant. So we are not seeing any real change in regards to top line sales volume. We are just seeing improved productivity out of those restaurants. I think as maybe we get into next year, we have now got restaurants more under our belt, closer to the 18 months to 24 months. I think you can see that kind of mature run rate, maybe we can give a little bit more color. But frankly right now, we just don’t know except we like where they are going.

Great. And I guess as a follow-up, the sales volumes are tracking similarly and the Box is smaller and more efficient, is it reasonable to think that the margins will settle into a level that’s higher than what you have averaged previously?

Yes. We believe that will be the case.

Right, okay, thank you. And then last question on unit development outlook, as you push up the number of openings, I think 18 to 19 will be your highest ever in the history of the company. And I just – I guess bigger picture, how are you feeling about the infrastructure to handle that pace of growth? And then secondly how long do you think you can keep push that number up and delivering kind of that 10% type unit growth?

Yes. Look, we made the comment on the – of Greg and I in different forms. I think one of the things is I wouldn’t say unique, but we are through our operating expertise and our development team have prudently can do is grow this number at this kind of growth in our model and still not take big picture on margin perspective and actually expand margins. So, look, we are not growing – you don’t hear us talking about growing our expansion plans and opening 25 or 30 restaurants next year for that reason, because we start outrun, outstrip the runway, so to speak if we were to do that. But within the ranges we are talking about of those low double-digit restaurant week growth we are very comfortable that we are able to both do a good job of operating our existing restaurants and open what we have. And it doesn’t – we have been doing this as a company for quite sometime now in this level of growth. And we have gotten pretty good at it. And we are very comfortable where we can continue at that level of growth without sacrificing quality and margins in our existing restaurants. And it doesn’t require a step function from a G&A or other infrastructure point of view, if that’s your question.

That makes sense. I guess the nature of my question was as you approached 20 a year or more that’s pretty given the complexity of your operations, that’s a pretty big number. And I am just wondering how you are feeling about your ability to keep pushing that number up as you look at 2017, ‘18, ‘19. And it wasn’t more a comment about this year or next year, more so for the out years just think about the numbers?

That’s a good question. No, no, no I hear you. And look, the biggest limitation we have often said is really at the restaurant management level is making sure that we can attract and develop, but we just don’t put a General Manager from another concept to run a BJ’s and open a new restaurant. So, that is the biggest limitation as people. We have capital and great returns to build more restaurants than we are today. We think Greg Lynds and his team could even find more real estate, but that is the limiter. And so you are right, on an absolute basis, that’s true, but you have got to keep in mind the number of restaurants as the base to promote people into those jobs increased it as well. So, the percentages actually do make some sense, not even though those absolute numbers get up or going to get bigger.

Yes. And David, one of the things that we always do is we try to continue with that cost of strategy. And it does become challenging at times, but that does help us as we continue to try and grow our business to make sure we are not just sprinkling onesies or twosies scenarios, but have basis to promote from as Greg just mentioned it at the end.

Great, thank you very much.

At this time, we will take a question from Nicole Miller with Piper Jaffray.

Thanks. I just want to clarify couple of things and then I had a quick question, if I may. Greg, for 4Q G&A, are you saying higher in percent or dollar terms, please?

Dollar terms. I said specifically I think $14 million to $14.5 million. I think we just finished at $13.6 million.

Thank you. Couldn’t write to play fast enough and then pre-opening that one side, that’s also a dollar amount, right?

That is correct.

And then big picture, I just wanted to comment the comp a little bit in different way. I mean, the comp is good and the pull-through is unreal. I am trying to think about not even the context to succeed, but just long-term, because you structurally change your business and improved the operational efficiencies. What might be an achievable flow-through rate on incremental comp as this is the model moving forward?

Well, I think a different way to state your question is what’s your baseline comp, because once you get above your baseline comp, your flow-through should always be somewhere in the neighborhood of $0.50 on the dollar. Granted, that, that flow-through is going to be dependent on is it traffic, is it pricing, or is it mix? But the general rule of thumb that we tend to use around $0.50 on the dollar, but taking a step back there, it really comes down to what is the normalized base comp that you need to manage your general inflationary pressure. And if I look at like our operating occupancy costs and talk about that line a lot, it’s been pretty consistent this year at about 20,000 – 420,500 per restaurant week. And that’s going down a lot in the past, but I don’t know how much more it’s going to come down, but the question is if you start seeing inflationary pressure there, what’s your normalized comp that you are going to need to offset that? And I do think as we start looking to next year with some of the minimal wage increases and other things, we are probably indeed somewhere close to 2% to kind of manage around the comp sales numbers. So, then you can start getting above that. I do think we have got the ability to have that flow-through. And you talked about we should get back more to a normalized $0.50 on the dollar or so.

Okay. And then the last one – sorry, I did have one more, G&A for 2016 I can definitely understand growing less than revenue to the dollar amount. I want to make sure that would include the extra week, so we model that appropriately, is that still the same out of that?

Yes, it should include the extra week. If you think about it the big portion of G&A for next year is personnel cost. So, you pay personnel cost by the week, so that you are going to have that entire cost there for next year. So, it will be one for one, so to speak.

Alright, thank you.

You are welcome.

You’re welcome.

And at this time, we will take a question from Andy Barish with Jefferies.

Hey, guys. Just two quick ones. On pre-opening, actually it looked really good in the quarter with a bunch of new market openings. Have you made some changes there? And then secondly, on California development, we haven’t heard that in probably year and a half or two or so, what sort of changed to get you more comfortable with putting a couple of new California stores in the pipeline for next year?

So Andy, we haven’t talked about it a lot, but we definitely have been able to reduce our pre-opening cost in our business, where at times, it ranges in the $500,000 plus range. We have seen that number coming down into the kind of low $400,000 range or so. So, it depends on that pre-opening phantom rent, but frankly, opening a little bit smaller restaurant and so on, you are going to have less personnel cost and other things and it’s been a big benefit for us. And it’s sustainable whether in California or other markets, it is sustainable. You will have bumps and things like that when you go into certain markets that are a little bit higher. But overall, we have made some of those changes that I think are good for us. As far as California goes, one of the new restaurants for next year is going to be in La Jolla, California and it’s just a replacement the La Jolla one we closed this year, because in this case again, it was the landlord redeveloping the property. In this case, we hope to get a site that we like and that property and the landlord and us we are able to make an agreement that works for us. And then we still have onesies and twosies in California and when is the right spot, we will take it, but that’s really what’s happening for next year.

Today, we have already been – we have been pretty consistent around there are still trade areas that frankly some of them we have been trying to get into for 10 years plus that when we find right real estate, we will still do, but as we have been consistent about we are not looking at California to drive most of the unit development going forward.

Thank you.

Thank you.

And our final question today will be from Chris O’Cull with KeyBanc. Please go ahead. Chris O’Cull: Thanks. Good afternoon, guys. Greg, it seems like you are developing in areas like Murfreesboro, Tennessee, Huntsville, Alabama, smaller towns than maybe for many of the other growing casual diners are focused. What are you guys seeing in those markets or what is – what about the brand makes those markets good targets for you guys?

I am glad you asked that question. It’s one of my favorite things about our concept is I often use these words, the breadth and appeal, but it’s that flexibility that you can do in California where we do as well in Montebello as we do in Huntington Beach and Irvine. And that’s what really works in some of the markets you were just choosing as examples, Chris. And so it’s really that the breadth of the menu enables us to do that. So we do see regional differences in areas of our menu that are more popular and by geography. But we still we have pretty much something on that menu that’s going to appeal to somebody in a wide range of demographics and geographic and that helps us a great deal. Our fundamental value just works in a lot of different t places as well. And one of the things we just briefly mentioned in our comment, but it gives us a lot of optimism when we see some of the put in the brand new market categories like the Pittsburgh and Murfreesboro that we are off to a good start there. Because there, people think we are a wholesale club more than a restaurant in some of these markets. But that we are doing as well as we do – said a lot about the strength of the concept. Chris O’Cull: I would think the investment in like Murphysboro or Huntsville is going to be a significantly lower than what you guys have been spending the past few years in some of these other markets, I mean is that true, are you getting to $4.5 million – $4 million, $4.5 million in total investment in these markets and are you still seeing sales...?

Sorry felt like we are done. Chris O’Cull: Well, I was just saying are you still seeing sales that are – sales to investment ratio is 1.2 or more?

I think we will frankly, I think we will do better than that. And look, our goal is to build these on average and we have been meeting it at $4 million, right. So that’s the $1 million that we have been saving here. And in some of those, in some of the markets you are referencing, we are able to do it or even less than that. But I don’t know what your definition of significantly is. The cost of materials aren’t going to vary all that much. So when you look at the labor content in our construction, etcetera, we do save. And there is more of a premium when we have built in places in the Northeast like our New York unit restaurants and etcetera. But to answer your question, we are building these restaurants closer to $4 million and achieving that $1 million savings goal. And we are able to do a little bit better in those markets, but the gas probably not as big as you think.

Chris, one – it’s an interesting comment that you made about the 1.2 to 1 sales ratio, so do you think about what Greg Trojan just said that, we can build these restaurants for $4 million. A 1 to 1 sales ratio is only 80,000 a week of sales average, because $80,000 times 52 gets you to $4 million. Now we are doing better than $80,000, but it does get you to think about the fact that everybody gets on the whole weekly sales average versus comp versus non-comp. When we get it at $4 million or we get it at $3.5 million we can generate a healthy 1-plus to 1 return on average and generate those margins by not having to do California weekly sales averages. And that said, part of the strategy in regards to the right use of return on invested capital for us going forward and it’s working out really well and we are pleased with where we are going. Chris O’Cull: That makes sense. And then my last question is just typically, Greg when you reduce the number – or when restaurants reduce menu items, the number of items in the menu, it has a difficult time of improving comps, do you have any consumer data that shed light on maybe how frequency or repeat usage has changed since you have reduced the number of menu items so dramatically?

That’s a good question. We are actually refreshing that data plans and are in the process of starting that process, Chris. So it’s a really good question. We do know in our loyalty base, which is we have greater visibility on frequency of those gaps, right? So we are driving frequency among our most loyal folks and that is improving nicely. And so that gives us comfort. And we do see that I mentioned earlier, we are seeing significant increases – improvements in our food quality scores overall. So we think that is a key driver in all of this. And it’s paying dividends. But the other thing – dynamic that I think you know but I would remind everybody is, the lion’s share of the reductions occurred last year. So we are still pruning as we are adding for this last menu or this latest menu coming out next week, keep a flat menu count in the 130 range. So we are taking items off as we add them. I still – we are still pushing the envelope and seeing if we can get lower overall net. But it’s not going to be like 180 to 130 kind of change going forward. But we are staying disciplined to make sure we don’t leak our way back into 140, 150 plus items, that’s the difficult restaurant to manage. Chris O’Cull: Great. Thanks guys.

Okay. Well, thank you, everybody for joining us today. We appreciate your time. And like we said, if you have any follow-up questions, don’t hesitate to grab us. Operator, thank you.