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BJ's to grow with new menu items, loyalty program

A Heard on the Call report following third-quarter earnings

Editor's note: This story has been updated with editing changes.

The BJ’s Brewhouse chain is adding a new line of burgers to the menu next month, and new loyalty and catering programs next year in a series of sales-building initiatives to keep traffic up as menu prices climb.

On Thursday, BJ’s Restaurants Inc. reported a 14-percent increase in profits for the third quarter. Same-store sales were up 6.5 percent.

In the call, chairman and chief executive Jerry Deitchle described the sales increase as a “hat trick” of improved traffic and transactions, along with menu price increases.

However, he also noted that sales late in the quarter for the 113-unit chain were getting “choppy,” with strong weekends but slower results mid-week, a trend that has carried into the fourth quarter.

The company plans to increase menu prices 2 percent when it rolls out its fall menu in early November. Company officials said the increase would help offset the roughly 5-percent rise in commodity costs the chain has seen this year.

The new menu will include a line of “Fan Burgers,” with a marketing tie-in to the chain’s Facebook fans. Deitchle did not offer details.

Later this year, the company plans to open a new variant called BJ’s Grill in Anaheim, Calif., with a smaller 4,500-square-foot format — about half the size of a typical BJ’s — and a limited menu.

The venue will serve as a research-and-development kitchen for the brand with an exhibition kitchen testing various features, from potential menu items, to china, uniforms and the use of new technologies.

Other new menu initiatives include “advancements” on the presentation and toppings for BJ’s signature deep-dish pizza, designed to boost sales in that category, Deitchle said.

The chain is also expanding its reduced calorie “Enlightened Entrée” line, which Deitchle said has been “a tremendous success. Much more successful than anyone thought.”

Deitchle said BJ’s would continue to work on improving the nutritional profile of Enlightened Entrée dishes.

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More highlights from the call:

Pricing power: Deitchle said the chain would likely end the year with prices up about 3 percent. The chain deferred some price increases from May to November because of consumer sensitivity.

BJ’s has room to raise prices without affecting traffic gains, Deitchle said. The chain’s average check remains in the $13.25 to $13.50 range.

“We believe we can earn the ability to get an additional 30 cents to 40 cents per guest at BJ’s and still have them leaving happy,” he said.

Deitchle said the chain would continue to use a so-called barbell pricing strategy that offers small bites for $2.95 to $4.95, up to more premium-priced center-of-the-plate options.

The company is considering adding a line of steaks that tested “very, very well,” according to Deitchle. But the cost of beef has forced the chain to put that on hold, as it doesn’t want to add steak entrees that cost more than $20.

Food costs: The company has contracted most commodities through the end of the year, so officials expect food costs to remain stable in the fourth quarter.

The company said its aggregate commodity basket is expected to increase about 4 percent, less than it previously projected in a preliminary 2012 estimate.

Loyalty: BJ’s plans to roll out a new loyalty program in the first quarter of 2012. The program has been tested at three units in Las Vegas, but officials declined to give details.

BJ’s is also planning a new catering program.

Class-action lawsuits: The company took a $1 million pre-tax hit in profit after settling a class-action lawsuit in California related to employment practices.

BJ’s said the chain recently battled two cases of class-action labor litigation, both of which are now settled. It has no other suits pending.

Deitchle called the lawsuits part of the “risk of doing business as a restaurant company in certain jurisdictions, including California.”

BJ’s Restaurants Inc. has headquarters in Huntington Beach, Calif.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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