Good day, ladies and gentlemen, and Welcome to BJ’s Restaurants Incorporated First Quarter 2022 Earnings Release and Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Greg Levin, Chief Executive Officer. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to BJ’s Restaurants fiscal 2022 first quarter investor conference call and webcast. I’m Greg Levin, BJ’s Chief Executive Officer and President. And joining me on the call today is Tom Houdek, our Chief Financial Officer. We also have Greg Lynds, our Chief Development Officer on hand for Q&A. After the market closed today, we released our financial results for the fiscal 2022 first quarter, and you can view the full text of our earnings release on our website at www.bjsrestaurants.com. Our agenda today, we’ll 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, Tom Houdek will provide some commentary on the quarter and the current environment. After that, we will open it up to questions. So, Rana, please go ahead.

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 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, April 21, 2022. 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. Greg?

Thanks, Rana. I’m highly encouraged by the recent trends in our business. BJ’s generated record Q1 revenue, beating our previous high set in 2019, even with the significant industry-wide impact from the Omicron surge in January. With Omicron in retreat, guest demand and team member staffing levels stabilized in February and then accelerated in March. Our team members shined once again, showing they can provide our guests with the gold standard level of service and gracious hospitality in every operating environment. Our average weekly restaurant sales improved from $96,000 in January to $110,000 in February and $118,000 in March. Compared to 2019, our comparable restaurant sales increased from negative 6.4% in January to negative 0.6% in February, and then to a positive 1.2% in March. Our solid performance continues in April with period-to-date weekly restaurant sales averaging $118,000, which equates to positive mid-single-digit comparable restaurant sales growth from the same period in 2019. Our restaurant margin also improved throughout the quarter with full quarter restaurant margin meaningfully better than January levels, which were impacted by Omicron. Our top line performance is being driven by improving underlying fundamentals. Staffing continues to be a key driver of sales, and we added hourly team members and further reduced the number of understaffed restaurants throughout the quarter. Due to our improved staffing position and solid guest demand, we began adding back more late night hours starting in March. Our restaurant hours of operation are now approximately a half an hour less per day as compared to pre-COVID hours. Moreover, late night comparable sales are now trending positive in April compared to 2019. Next, our team member turnover trends improved in the first quarter as well compared to the last several quarters. Our training and engagement programs designed to retain team members are working and…

Thanks, Greg, and good afternoon, everyone. I will provide details of the quarter and some forward-looking views. Please remember this commentary is subject to the risks and uncertainties associated with forward-looking statements as discussed in our filings with the SEC. For the first quarter, we reported total sales of $298.7 million. Our sales increased approximately 34% versus Q1 of 2021 and 3% versus Q1 of 2019, which makes it our highest Q1 sales ever. On a comparable restaurant basis, sales increased by 34% compared to Q1 2021 and declined by 1.5% compared to Q1 2019. As Greg mentioned, our comparable restaurant sales improved through the quarter and finished with positive comparable restaurant sales in March versus 2019. Deleveraging from early in the quarter -- early quarter Omicron sales impact and continued inflationary pressures resulted in restaurant margins of 9.8%, which was in line with our expectations. Restaurant margins improved sequentially through the quarter as our sales improved. Adjusted EBITDA was $13.2 million and 4.4% of sales in our first quarter, beating Q1 of 2021 EBITDA but behind Q1 2019 EBITDA. We reported net income of $1.5 million and diluted net income per share of $0.06 on a GAAP basis. Our net income included a $10.2 million income tax benefit, which includes the usual FICA tip credit and applying our estimated annual effective tax rate. The quarter started with January weekly sales per restaurant averaging $96,000 in comparable sales of 6.4% behind January 2019 levels as the Omicron wave was surging across the country. Encouragingly, our sales accelerated in February as COVID cases declined and we continued to add restaurant team members. We increased our weekly sales to $110,000 in February, which was within 0.6% of 2019 levels on a comparable restaurant basis. Our sales trends further improved in March with…

Thank you. [Operator Instructions] We’ll take our first question from Alex Slagle with Jefferies. Please go ahead.

Hey. Thanks. Good afternoon. Just had a question on the quarter-to-date same-store sales and average weekly sales. Just trying to think is that all apples-to-apples in terms of the calendar and promotions, or anything to call out on the comp versus ‘19?

Yes. Alex, it’s Greg Levin. Yes, it is Easter. When we look at the numbers and what we’re talking about here in that $118,000 we’re in kind of the mid-single-digit comps, we’re still comparing it to 2019 being kind of the last time to compare it to. And back in 2019, Easter lined up the same weekend as this past weekend, so everything from an apples-to-apples perspective seems pretty much in line.

Great. And just consumer spending habits and overall health. I mean, just get an idea of what you’re seeing, if there’s anything in your data or anecdotal observations on consumer spending dynamics or health or any -- demographics, any kind of shifts you’re seeing just given the inflation headwinds? I mean it looks -- sounds pretty strong, but just curious if you have any other comments on that.

Yes. I’ll add some color to it. And I don’t know if Tom will have something to add to it as well. But, I think what we’re seeing is, and we mentioned a little bit on the formal remarks, and that is our lunch specials are working really well with our guests, and that is the value play there. The ability to get full service sit-down chicken parm for $10 and here in California for $11 in a higher cost area tends to be a great value, and we’re seeing that improvement in that lunch daypart. It’s still a softer daypart for us though, overall, and that’s where I think we can continue to lean into that and drive the excess capacity in that business. We have tended to continue to see increase in incident rates thinking about kind of from a pre-COVID standpoint, so guests are still ordering more items in that regard. And we did mention the late night seems to be coming back. So, people are feeling more comfortable getting out from a late night perspective. Other than that, from our mix, it’s been pretty consistent. I don’t know if there’s anything to additional to that, Tom?

I would say the -- in terms of the overall business, it’s great to have the everyday value across our menu, but we also have very sharp price points at Happy Hour and daily Brewhouse specials. So, the guests that are the most price sensitive can come in at any time. But we haven’t seen any shifts in mix in the business really. And in terms of pricing, we -- when we go through these pricing rounds, we’ll measure to see what the flow-through is and if we’ve seen any trade between products. And really, we haven’t seen any shift there as well. So, we haven’t seen anything of concern. It really is -- it seems to be still a very healthy consumer.

Thanks. And a follow-up on the overtime and training, how much of a headwind do you expect that to continue? I’m just trying to think about 2Q, is that starting to come off, or is that headwind expected to continue that you talked about, on the margin?

I would say, in the second half, we should see that improving. And I think it’s a gradual improvement as staffing improves. You hire less, you have better staffing and overtime goes down. So, I would say in the second half, we should see that adding more of a tailwind than it is right now.

We’ll take our next question from David Tarantino with Baird. Please go ahead.

My question is on the margins. And first, I wanted to ask, on the Q2 outlook, is that a good run rate to think about on an underlying basis, or are there some factors in there that you would consider temporary that are suppressing the margin? And then, I have a second question maybe about the longer-term outlook. But I guess, how should we think about the current run rate on margins versus what you think is normalized?

Yes. David, this is Greg. And I think that’s a reasonable run rate in the margins as of today and still assuming that there’s going to be inflationary pressures coming on there. The second part of that question is really -- or part of that question comes down to is where you, from a modeling or even us internally start thinking about where our sales trends go, because we’re still not fully back to where we want to be in the dining room. And that’s our opportunity and that leverages the rest of the business going forward. As we just put up this quarter here, we still saw cost of sales in the 27% range. And I do believe when you think about the business longer term, the goal is for that to start to move itself down. That will be both a little bit of pricing as we continue to develop new menu items around the core of the Brewhouse menu. And then, over time, we’ll also start to leverage more on the labor. So, when I think about that business, or I think about the margins, I should say, I don’t see any reason why, over time, our margins don’t continue to accelerate back into the mid-teens and get back to historic numbers over time. This year, I think, it’s still going to be, as Tom was touching upon, still going to be some training as much as it comes out in the second half of the year. I still think we’re going to see some inflationary pressures going on in commodities and so forth. And we’re purposely underpricing maybe compared to our peers, only taking 1.8 and coming up here at 1.4. Those are pretty low numbers because I just think we have enough excess capacity in our business that we can drive guests into the unique dining experience that BJ’s is and we’ve definitely seen guests want a place to have a social experience. And I’d rather use that, get the guests in and drive leverage over those fixed costs versus trying to just completely lean into pricing. I don’t think that’s the right approach.

Yes, great. That’s helpful. That essentially answered the second part of what I was going to ask about. But with respect to traffic, could you give us a sense of how much traffic in April is down versus, I guess, the pre-COVID levels, or I guess, versus 2019? And I’m talking specifically about the in-restaurant transactions, just to kind of frame up what the opportunity might be if you recapture all of those transactions?

Sure. So, looking at just April here, our traffic versus 2019 just dine-in is still down in the 10% to 20% range. So, there’s still a meaningful amount of dining of traffic capacity in our restaurants that we can add back. The sales levels that we talked about, I mean, the benefit of the off-premise being double where we were, it’s great because that pushes us to the comp positive position. But as we really see the opportunity of getting more staffing in our restaurants and being able to serve more guests, there’s a big opportunity to grow that traffic back over time.

Great. And last question, I promise. On the margin outlook, Greg, that you just mentioned, is it recapturing all of that traffic necessary to get the margins back to the mid-teens over time? I know there are several puts and takes, but is that how you’re thinking about it?

Not entirely. No. Because as much as we, right now, are taking a very measured approach in regards to inflation, there will be additional pricing. We’re just -- everybody is going to have to do it to offset some of that. So, as that additional pricing over time comes in, that’s going to be part of it. And then just the fact that we do have the strong off-premise sales and holding on to that off-premise sales, you don’t really need to get all that dine-in traffic back to start to move your margins closer to maybe some historical run rates.

We’ll take our next question from Joshua Long with Piper Sandler. Please go ahead.

Great. Thank you for taking my question. And thanks for the commentary around the daypart trends. It was very helpful. Curious if you’re seeing similar trends across regions. So maybe, is West Coast, which had been hurt a little bit longer in terms of that late night and some of the return to office pieces, if that had bounced back more, or just what you’re seeing across geographies as added the context to the daypart trends that we talked about?

Yes. I’ll give you a top level, and Tom, chime in here. But in general, Josh, everything has moved in the right direction across our business, meaning all geographic areas have been improving period-over-period from that perspective. I would still tend to say that the Bay Area is still softer, but it’s moving in the right direction, which obviously we like. We talked about the fact that late night moving in the positive direction and lunch has improved. So, when you look at the business overall, and you look at both geography and dayparts, they’re moving in the right direction. But I think as Tom just said there -- and I’ve emphasized as well, there’s still a lot of opportunity to drive this dine-in traffic, and frankly, still to drive off-premise. We should be getting all-premise higher than where we are today. So, we like that opportunity that we have in front of us. And when I talk about that opportunity, that opportunity is around transactions. It’s not guest traffic coming in versus driving the higher sales purely on menu pricing.

Got it. That’s helpful, particularly, in terms of the daypart piece. When we think about some of the remodels that you have lined up, it sounds like those are initially still early on, but initially doing pretty well. Curious if you could kind of frame up how you’re thinking about that, having a couple on your belt now in terms of being able to roll those out and at what speed or cadence the next grouping of those would it entail?

Sure. So, the two that we’ve opened, we -- there’s a model of our restaurants that’s about somewhere in the quarter to a third of our restaurants that had some unused space that we can rebuild and turn into three large booths. And when we look at where we have the most capacity constraints or we run weights at dinner time, the extra sales that we’re driving, again, early data here, but we’re seeing up to 1,000 or 2,000 more of sales per week. So, the early data that we’re seeing out of these restaurants is encouraging. Where we need to -- we’re still thinking through what the schedule and rollout looks like. And we also have some other thoughts of ways to remodel different areas of our restaurants as well. So, early days of the remodel initiative, but from -- again, very early results here, we’re encouraged by what we see and definitely think that when we pencil out what the cost is versus what the upside could be. There’s some really great returns here. So, we’re excited about what this could look like.

I’ll follow along as well and see how that progresses. One last one for me. In terms of thinking about the comp for the quarter and within the context of the menu price windows that Greg talked about taking, how much effective price was going in or was in place during the quarter? And just trying to create a base for some of those next windows that Greg outlined.

Yes. I don’t have it specifically here, but we generally roll out our menus in kind of January, June, kind of September, October. Those are kind of the windows. So after we kind of roll through this June one, September will be the next time that we would take menu pricing. I want to say, overall, our many pricing somewhere is around the 5% range right now. But I tend to -- even as we look at that, the inflation really that everybody’s experience started pretty heavy in Q3 and 4 of last year, and obviously, into Q1 that everybody is currently facing. In that time frame, our pricing has been a little bit less, more in the kind of 1.5% to 2% range at different times. So, as we started to face this inflection of higher pricing, I think that’s where we’ve kind of taking our pedal off the gas a little bit on overall pricing as we continue to build the business forward. But, I want to say, we’re all in looking at back to the Q1 and 2 of last year, it’s probably around 5% or so.

Got it, and for 1Q. And then maybe to your commentary there, just some level of obviously, awareness, the sensitivity around managing that price. So, when you layer on the incremental 1.5% to 2%, does that get you meaningfully into that mid-single-digit -- mid- to high-single-digit range of pricing perspective, or as we take in those pieces that roll off on a year-over-year basis, does that keep you more or less in that mid-single-digit range?

Yes. That’s the latter there. As we roll over from a year ago, we’ll actually be maybe even a little bit less on pricing, because I think maybe Q1, Q2 might be a little bit more 2021. So, it will still be in that kind of 4% to 5% in total as kind of the constant pricing.

We’ll take our next question from Brian Mullan with Deutsche Bank. Please go ahead.

Just a question on staffing. It sounds as though things have gotten much better of late that has helped drive the recent sales recovery, but also that you’re still adding employees even now. So, just a clarification question, is staffing still an issue that is holding back sales at certain restaurants here in April, or have you now kind of officially moved past that point on staffing?

There’s pockets, Brian. I want to say there might be a handful of restaurants are a little bit more where the staffing levels are still below where we’d like them to be and that inhibits sales. So, we still have that in certain areas. The other thing that plays into this as well is your staffing levels might feel pretty good when we look at them on a piece of paper, but we still end up with callouts and other issues, just whether it’s COVID or something else that plays into it. that will impact sales for that day or for a couple of days. So, staffing is not where it was in ‘17, ‘18 or ‘19 from that perspective. But, if I had to think about looking back on the last year plus, 15 months or so, we’re in a much healthier place today than where we’ve been over that time frame.

Okay. Thanks. And then, as a follow-up, in the prepared remarks, you indicated again, looking at ways to mitigate costs across the organization. Just trying to get a sense if there’s something unique you’d call out that you plan to do at the restaurant level, or is this more of kind of a corporate G&A opportunity actions that you have in mind? Just any color.

Yes. I’m going to hold off on the color there because, frankly, we’re testing a bunch of different things, and we don’t know what’s going to work or not work. At the end of the day, we want to take care of our guests first and foremost. So, we’re not looking and saying, okay, maybe we eliminate server assistance, and therefore, we don’t have that position or we take servers to 7 or 8 tables. We know the reason that guests come to us is because of our people and taking care of them in our restaurants, and we want to make sure that our high-touch points stay there. What we wanted to continue to do is look at areas in regards to consumables, some of the operating expenditure costs and see if there’s other things that we can do that will help reduce costs or -- and continue to keep the kind of the uniqueness in the posh casual look that we have at BJ’s. The challenge is, frankly, the macro world continues to make it more difficult. At times when supply chains seem like they were getting better, things in the macro made it a little bit more difficult. Again, with maybe things being shut down in China in regards to some of our consumables, the supply chains have gotten longer, where I want to say in February time frame, and we were able to start seeing a little bit more normalization of supply chains and allowing us to do some reverse auctions. But we’ve got a lot of different things going on from a test standpoint. When those work, and we don’t see any pushback from our guests and it continues to make BJ’s stand out and be differentiated, we’ll discuss those. The thing that I’m trying to make sure we at BJ’s, and we talked about this as our executive team, we are not going to get succumbed by the term skimpflation out there. We’re not going to all of a sudden raise prices and give our guests less. And so, things we’ve done already this year, like we’ve increased our chicken sandwich from a 4-ounce to a 6-ounce chicken breast. We’ve increased the amount of portion we have in our Chicken Alfredo. There’s just too many other businesses out there that want to raise prices and take away things. And while that might make us feel good for a quarter, it’s not how you build the business for the long term. And so, everything we want to look at comes to the point that we’re still giving the guest a unique and better dining experience than our peers.

We’ll take our next question from Jeffrey Bernstein with Barclays. Please go ahead.

Two questions. One, I just wanted to talk a little bit more, Greg, about the unit side of things. I know you’ve often said quality over quantity. But it does sound like you found a way or you feel an increasing confidence in accelerating that new unit growth from what might be a 4% today to 5%, 6%, 7% future years. So, I’m just wondering if you can give a little more color on that. And whether we’re talking about new versus existing markets? Any kind of color on that acceleration in the unit openings would be great.

Yes. Jeff, great question. First, even taking a step back here, our restaurants in our portfolio has always been very strong. And I know we’ve accelerated over the times I’ve been here and then pulled back on other initiatives as we built the Company over time. So, there’s never been a concern that a portfolio of classes didn’t work or markets didn’t work for us from that perspective. So, as I’ve taken on this role and seeing just a history of good restaurants that continue to work for BJ’s, I thought it was important that we get consistent in regards to our cadence of growing our business. And you did make the right comment that we’ve always used, and that is it’s going to be quality over quantity. So, even as we look out and trying to get it above 5% to 6% and 7%, we want to make sure that we’re doing it at the point that we can execute with really, really good quality. That high weekly sales average is so important to our business to drive margins and continue driving a high ROI, and you do that with great people. So, we’re going to always continue to make sure that it’s done at the right cadence that we can execute and not get ahead of our ski tips. And I do feel good that as we build this year, back those regional training teams that need to be built, we need to rebuild our supply chain team, which is more difficult today than any time in the past because opening up a new restaurant takes a little bit of a different supply chain skill. And then, as Greg Lynds, who’s here with me, continues to build out his team in regards to being able to open restaurants consistently that we do that this year, and that’s part of that G&A investment that will allow us to accelerate restaurant growth next year. And again, I want to get above the 4%. I think we can do that at BJ’s in the 5%, 6%, 7% range. In regards to locations, and I’ll let Greg Lynds, he’s the expert to talk to it. But right now, we do have a lot of the ability to go into some of our existing restaurants, which I really like. I don’t know how much of it’s kind of new properties versus repurpose, and maybe you want to talk about that more of a macro, Greg?

Yes. So, hey, thanks for the question, Jeff. With only 213 restaurants today in 29 states, you think about Olive Garden with 800-plus, Texas Roadhouse with 600-plus, we have plenty of room within our 29 states or adjacent states to really keep our expansion within our existing markets and where we can leverage our supply chain, our supervision, our brand awareness. And that’s our goal certainly for the next two years. But we’re excited about the opportunity to not only expand in our existing markets, but also take on a few new markets as we grow in the coming years.

Understood. And then, just following up, Greg, you mentioned longer-term targets that sales $2 billion plus, which accumulated the 400 units of the volumes you’re doing. But I know you mentioned that you have a variety of internal targets. I was wondering whether you’d share any incremental color on I think you said margins over time getting back into the mid-teens, kind of what all that translates to, if we go out over the next few years from an earnings perspective? Any kind of color you can give on that longer term algorithm beyond just the top line sales?

Jeff, we’re still working through some of the details there and want to plan to present that to the investment community in the near future here. Generally speaking, from a very simple cadence, we’ve talked about this before, and that is getting that unit growth up to 5-plus-percent, driving mid-single-digit comp sales starts to get your revenue getting close to kind of 10% range. And then, we have to leverage the middle of the P&L and drive earnings above the 10%. Also at that time, we should be generating some significant free cash flow and using that also to augment shareholder returns. That’s kind of the -- the kind of algorithm that we’re looking at in our business. And again, it all starts with driving the weekly sales average because that’s going to allow us to continue to leverage the middle of the P&L to get that earnings above. And that’s kind of our view there. And look, between all of us on the call, we hope to get to $2 billion in sales with less than 425 restaurants. That’s our goal. We’re not just wanting to get there by a double of the BJ’s restaurants. We want to grow that weekly sales average up, and I think we have a good opportunity in off-premise. And I think we still have a good opportunity in the dining room because even what we’re doing today, as Tom mentioned earlier, we’re still seeing negative traffic in the dining room. So, I like the opportunities in front of us.

Understood. And also, to just confirm, I know you said 13.5% to 14% in the second quarter, and that was a good run rate for the back half of the year. What is it incorporating in terms of commodity and labor inflation as we look out over the next few quarters? Like, what visibility do you have on either those, or what’s the assumption baked into that 13.5% to 14%?

Sure. So, in terms of the commodity inflation, it’s similar to what we’re seeing right now. We’re seeing, versus last year, up kind of in the high single digits. On the labor side, it is sequentially still going up kind of more in the low single digits. So, that’s baked into the margin assumptions that we provided.

We’ll take our next question from Todd Brooks with The Benchmark Company. Please go ahead.

First, if we look back, I think, $118,000 a week in April, if you look back to -- I’m just wondering typical seasonality in this quarter because you do have big events coming up with Mother’s Day, Father’s Day graduation. If you go back to that pre-pandemic kind of Q2 of ‘19, how did April rank relative to May and June? And how the quarter progressed from an average weekly sales standpoint?

Sure. So April, it’s about -- it was slightly less than in May and June. You see some nice levels still because of spring break. So, it’s a little less than May and June, but not much, but you do see some pickup into May and June, and that’s really driven by those big weekends, really that Mother’s Day and Father’s Day weekend as we see those big increases.

Yes. It’s surprisingly consistent, Todd, which I know it sounds -- it doesn’t, in one sense -- makes sense, I guess. But what ends up happening is April gets a pretty decent spring break number. So, it brings up your weekly sales average pretty high. And then, as you get into May and June, you get kind of peaks and valleys. You get a Mother’s Day that drives that number up a lot. You get a Father’s Day, that drives that number up a lot and then some graduations here or there. So, it’s kind of peaks and valleys, but it’s surprising. April is not that much of a low watermark versus May and June. They’re all relatively consistent. And I think we did 113-or-so in 2019. And the delta between the 113, meaning between like a May and June and an April is pretty much the same, pretty consistent.

Okay, great. And then, how do you feel about the staffing levels to handle these peak events with Mother’s Day, Father’s Day? Are you -- I know it sounds like staffing has healed quite a bit, but when you get to peak kind of weeks like that, are you equipped to fully kind of take advantage of the opportunity at this point?

That’s a great question. And we were able to do it on Valentine’s Day in February, which is a tough day in of itself. And then, we’ve seen it on a couple of other days as well where we’ve broken some sales records here in Q1. And thankfully, we’ve got great managers in our restaurants that get prepared for that. We’ll end up doing other sales driving initiatives and staffing initiatives that we’ve done around the other holidays. But we’re always thinking about our staffing levels and making sure we have the right team members in our restaurants that can deliver gracious hospitality, take care of our guests and make sure our managers take care of our team members. Because ultimately, if we had that right culture in the restaurant, we’ll have the great staffing, and we’ll be able to take care of our guests come these bigger celebratory events.

That’s great. And then March was in that $118,000 average weekly sales range. Can you maybe kind of try and take some of the noise out from early in the quarter when the Omicron hit the margins? Did March margins kind of match up with that 13.5%, 14% restaurant level that you’re guiding to? Is there some other improvement that needs to happen expense-wise in Q2 versus how you were exiting Q1 to hit the margin target?

Yes. I would say, the margins were in that area. We will be taking some pricing in June. So, we’ll see a little bit of that benefit in the back end of the quarter in Q2. But yes, for the most part, you’re thinking about it right.

Okay, great. And the final one for me, this is just a follow-up from David’s question earlier. I know you say you don’t need to get dine-in volumes back to historic levels to get to the margin targets. But, I’m just wondering if you’re seeing anything or looking at the competitive environment, do you have any reason not to believe that you’re going to get the dine-in volumes back given just the number of kind of competitive closures in the category? And scaled brands getting stronger over the course of the pandemic? Thanks.

No, I don’t see any reason why we wouldn’t get our dining room back. It’s -- the trend toward historical dining patterns seems to be playing out. And I know everybody wanted it to happen yesterday and so forth, but as we look at our business and people get more comfortable going out, we, all of a sudden, see late night now in a positive comparable restaurant perspective. I don’t believe there is any issues there. I still think, as Tom mentioned a little bit earlier, and we’re getting there and you talked to it as well, Todd, it is about making sure you’ve got the staffing to be able to handle it. And while staffing is not like it’s been in the past, the more people we have and the better people we have, the more people we can take into our restaurants, so we want to continue working on that staffing. And then we’ll continue always working on ways to drive efficiencies on there. While we didn’t talk about it specifically, and I forget the exact amount, but things like mobile pay, or using the QR to pay, like, those are turning out to be fairly sticky in our restaurants. They’re not at the levels they were in the pandemic when everything was touchless per se, but there’s little things like that that can make it faster on the guests to make it better on the guests from an experience standpoint and make it easier for us from a team member perspective and be able to therefore turn those tables quicker. So, we want to continue working on those areas at the -- kind of at the shoulders of the guest dining experience to be faster and more productive in our restaurants. But getting back to your original question, I don’t see any reason why our traffic patterns wouldn’t return to where they were pre-COVID.

We’ll take our next question from Jon Tower with Citi. Please go ahead.

Just a quick clarification first, if I may. On the commodity inflation guidance for the year, I think you said up high single digit now. And I think you suggested that was going to persist for the year. But, how should we think about that in terms of -- as you start lapping some of the higher prices in the second half of ‘22, are you still thinking that it’s going to be high single-digit year-over-year inflation at that point in time, or is it going to be more like flat on a two-year?

It will be -- at that point and later in the year, so when I was responding, I was talking about specifically about Q2. When we get to later in the year, we should see that flatten out a little more. So, if we think about year-over-year inflation, we’ll see high single digits or we’re expecting high single digits for the next quarter. It should still be probably in the mid-single-digits maybe even slightly above that in the back half. But it does come down a little as we start lapping the higher inflation in the back half of ‘21.

Got it. That makes sense. And then, I love the comment, the term skimplflation, Greg, that you had mentioned on the call. And I’m just curious, are you seeing that, number one, today from any of your chain competitors or any of the independents in the markets where you traffic? And then, kind of following up to the pricing question earlier, like can you get into what drives your decision around the incremental pricing that you are taking in terms of -- is it something using your past history and saying, look, we take above this level even in the inflation backdrop that we have today, which is kind of unprecedented? We see some sort of resistance at a certain dollar level or a certain inflation level relative to the rest of the industry? And just trying to get a handle on how you guys think about pricing.

Yes, Jon, there is definitely science in there. There’s also some part in there that we look at. We, and historically, over the last couple of years, have had groups of restaurants that you hold out to see that when you do take pricing and you compare it to the holdout group, what happens to the menu mix and what happens to those certain menu items. So, we do tend to look at that. And then, frankly, we look across the board at where we’re priced in certain category items and make sure that we’re competitive or that maybe we’re below them. So, it’s a little bit of everything. There’s also, as we’ve done a lot of consumer research over the last year, we know the reason that guests come to BJ’s and where they are from a price sensitivity. So, we look at all of those in there from that perspective. I can’t specifically -- I’m going to your other part of your question, I can’t specifically say if I have seen skimpflation in any of our peer restaurant companies. I know restaurant companies that have talked about it, whether it’s less wings being offered or something else on their appetizer. I thought in The Great Recession, a lot of companies try to do less for less and it didn’t work in that regard because guests are used to getting a certain amount for a certain price point. I know when I travel and you think about going into hotels and used to having service and so forth, you don’t have any work to pay for a higher price. I know traveling on airplanes. I no longer get certain service by paying higher for the tickets. I get all of that that’s going on out there, and that’s where I see this skimpflation. And I think we have this ability with excess capacity in our restaurants to drive traffic. And traffic always has less of a flow-through than pricing does. But driving traffic into our restaurants still has flow through and it still leverages our business. And I think it’s the approach that we’re going to lean into right now. But we’re not saying we’re not going to take pricing. As we mentioned, we do have 1.4 coming here in June, and we’ll continue to evaluate that and where commodities go, but we want to make sure that we’re providing what I call price affordability on our menu, not just what people want to consider value being everything, but I want to make sure that there’s price affordability in that value equation as well.

Got it. And then just -- it’s nice to see that your numbers for unit growth are stepping up this year and the confidence in that persisting into the future sounds great. I’m curious, like, are you seeing anything in the environment change that’s boosting your confidence, specifically, site availability picking up, or are landlords calling you more frequently than they were previously?

I’ll let Greg Lynds handle this, but the one thing I would say, and I kind of tried to stay in this a little bit earlier as well is, we’ve always opened up really good sites. So, I’ve always felt comfortable and confident in our ability to pick great sites and build BJ’s Restaurants. In regards to the pipeline, I guess, Greg Lynds, have you seen any changes from landlords or...

Yes. I mean, over the years, really -- and I’ve said this before on these calls is that the AAA sites, there’s always a lot of demand for those sites. So, the B sites, we are seeing more, what I would call, B sites from availability where landlords are offering more TIs and are being more flexible. But in terms of just overall site availability for BJ’s, I would say we’re pretty consistent with where we were, maybe even in 2019. However, we are seeing more, if you will, either restaurants or retailers that have gone vacant that require a complete redevelopment. We are seeing more of that coming our way, and we are anticipating that as we go forward as well.

Yes. It’s almost all repurposed. Either restaurants or other developed...

Retailers.

Yes, retails are being repurposed.

And not many major mall developments, right, if any. There are very few. And the ones that we are seeing are more mixed use with some type of apartments on top and residential involved.

Got it. And just last one for me for now. In terms of thinking about the labor spend versus 2019, can you talk about how much more you’re spending now per employee in total versus those levels? Are you up 5%, 10%? Just curious.

No, it’s -- I don’t have this in front of me, but if I think if you go back to ‘19, hourly wages are up in the 20%, 25% range. And some of that is the fact that we’re in California, and California had a $1 step up every single year until this last year. So, we probably might have a higher labor quotient than maybe somebody else. But I want to say it’s in the 20%, 25% range if you compare to ‘19.

Yes. That’s fair. And in terms of hourly labor, we were in the mid-10s at the beginning of 2019, and now we’re in the 13 area. So, it’s yes, 25%-or-so just in terms of dollar per hour.

Yes, not including tips. With tips, our key numbers are in the $20 range.

We’ll take our last question from Nick Setyan with Wedbush Securities. Please go ahead.

Thank you. Just a couple. First, just to clarify, did you guys say that you’re comfortable with the 13.5% to 14% margin range in Q3 and Q4?

So, that was our Q2 range. Seasonally, we do see our sales decline a little in Q3, so -- and then pick back up in Q4. So, I’d expect the margins to work similarly with a little deleverage and then a little more leverage, so there will be some. Again, the top line will drive it at the end of the day in terms of what we can leverage on the labor and other fixed cost lines. So, that was purely about Q2, but if we -- if sales are still in the same, say, comp versus ‘19 level, it should dip a little bit into Q3, but we’ll see at the end of -- when we talk next to where we are in terms of sales, and we’ll give more guidance then.

Okay. And then, transactions in the dining room is still down sort of 10% to 20% with, I think, what you -- what the commentary was. I guess what is the guiding factor there, right? I mean is it staffing? Is it just the daypart? Is it geography? Is it exposure in Northern California? Because I mean, that’s trailing a little bit, right, the peer set. So, I guess, internally, when you guys kind of look at the dining rooms and where transactions are within the dining rooms now, how do you think about that discrepancy versus the peer set?

Hey Nick, believe it or not, without us getting into all the specifics, we’re able to pull over Black Box dine-in traffic trends and sales trends. And we, because of our large sales and where our off-premise is, that’s why I think there’s an ability to still grow off-premise more. If you pull that out and just look at dine-in, we’re actually, in the last two periods, beating Black Box sales on a dine-in basis. So, we -- so I think what’s happening in the industry right now, and I think this is good for the industry, by the way, people get the off-premise sales, which helps grow their -- obviously, their comps. As with the 100,000 WSA to begin with, when we get a 10,000 increase in our off-premise and somebody else gets 6,000 or 7,000 increase in off-premise, it doesn’t have the same type of impact because we’re starting to just add a higher sales number. So, I think, the entire industry is still saying, I guess, I’m getting at softness in the dining room, even though it’s slowly coming back. And when we look at it, there are still certain geographies in there as we mentioned, that are coming -- that are slower to come back, some is still staffing levels, some is still office levels in there. So, it’s a little bit still in that lunch time frame. Frankly, as strong as dinner is, I think there’s an opportunity to drive more traffic at the dinner side. And then, it tends to be a little bit more geography. I think where we’ve got pretty well-known brand awareness, we’re driving better sales from that perspective versus maybe some of the other smaller markets.

Ladies and gentlemen, this concludes today’s conference. We appreciate your participation. You may now disconnect.

Thank you, everyone.