Brian Mullan, the restaurant and food distribution analyst here at Piper Sandler. Very happy to have BJ's Restaurants CEO, Lyle Tick. Thank you for being here.
Thank you, Brian. It's good to be here.
Lyle, you just hit or will soon hit about a year with the company. You formally got the CEO role in June. Congratulations.
Thank you.
I think maybe a good place to start is with the Pizookie Meal Deal. You've seen success with driving traffic back to the restaurants. You've talked about this as a platform that you can evolve and build upon over time. So maybe for those less familiar, just talk about the genesis of this, how it's structured today, maybe where it sits in terms of the percentage of the business, and then consumer behavior, and really just anything you want to add.
Sure.
Yeah. Thank you.
Yeah. No problem. I mean, I think I'd probably start by thinking about just kind of the big picture and contextually where it sits, and then I can talk a little bit more about it. What we've really been focused on at BJ's for the past year, and when I think about the last year, it's been about strengthening the foundations of the business, right? So the way we're looking at building this business is ultimately building a better, more consistent, more sustainable BJ's over time. And so in the past year, the things that we've been focused on are kind of foundational, what we call table stakes operations, so improving the effectiveness and efficiency there, which I'm sure we'll talk about. We've seen come through in our NPS scores and record low turnover.
The other one is value, so the overall value equation, which part of that is delivering a better hospitality experience, but part of it is a value platform like the Pizookie Meal Deal, and so the Pizookie Meal Deal is a $13 deal. There are eight entrees, and one of the things that people tell us they love about it is the variety of it, and it's anchored in the Pizookie, which for anyone who doesn't know, the Pizookie is a kind of cookie we cook through the pizza oven. You get ice cream on it. It's become a kind of phenomenon and piece of social content on its own. It's our number one traffic driver outside of California and our number two traffic driver in California. So it's rooted in an iconic product that people are interested in and provides an amazing value.
It helps build the brand while also bringing new people into the business. We've seen that during the week. It helps bring new guests into the business. The new guests that we see coming into the Pizookie Meal Deal are guests that we ultimately see more often, so they come back more often. It is roughly about 15% of the business on the week and closer to 20% during those specific weekdays.
Understood. Thank you. And you've talked about the ability to potentially build upon or evolve this over time. I think you're looking at ways to drive upgrades or drive additional attach. At the same time, I think you want to keep the platform fresh. So maybe just talk about those efforts and where you are with those.
Yeah. So I mean, the way I think about a value platform in full service, right? Because we have less frequency than QSR or even fast casual. And so I don't love the idea of cyclical promotional programs that require a lot of media to get short-term volume to make up for check compression, right? So what we're trying to build is a value platform that people can count on over time. And everything we've seen from our metrics and our value scores is that Pizookie Meal Deal is doing that. So now it's a question of how do we keep it fresh and how do we build around it? So we're kind of in the early innings of this. We did one set of add-ons, which were a salad and/or chips and salsa to start, or you could upgrade your Pizookie from a mini to a full size.
We're seeing high single-digit uptake in that, but the vast majority of it is the Pizookie side of it, and almost all of it is at dinner, right? So nobody's really doing upgrades at lunch. They're focused on dinner, and they're not interested in the offer we put on for the appetizer, right? So we got some of it right, but we're going to continue to kind of learn and evolve and see how we can grow there. The other thing that I'm actually probably more excited about is we had a Smash Burger that we were working on, and we decided to introduce the Smash Burger through the PMD exclusively. It became the number one item on the PMD, and people were asking for it on the weekends.
So now as we go into our next menu change in a week or two, the Smash Burger is finding its way onto the regular menu at full price, where people can engage on that probably on the weekends, but maybe during the week. And it's become an interesting way to both keep that fresh but also test and learn some stuff. So I think there's a lot more to do with the Pizookie Meal Deal going forward. So encouraged by everything I'm seeing.
That's great, and obviously, that helps address value one way, and so separate from that, you've identified (just I just want to talk about the menu) you've identified maybe four key areas of the menu. Maybe you could just remind us what those are, and I think you're starting with pizza, so just talk to us about the insights that led you to address pizza first. What did you see in the test, and maybe just talk about the rollout later this year and what you're hoping this does for the business.
Yeah. So pizza is a core platform. Pizookies are a core platform. We call them Pours, but it's really a craft beverage rooted in our craft beer kind of heritage. Shareables is the other big kind of the core four. And then we also know that our steaks and slow roast category and our burgers are big traffic driver categories, right? So we kind of have our icons and our traffic driving categories. So those are all big focus areas for us. We started with pizza for a number of reasons. If you don't know BJ's, BJ's was founded on pizza, right? Before there was beer as part of BJ's, it was a pizza place. I'm a big believer, and I come from a brand background.
When you look at a brand and you're ultimately looking to kind of both re-energize and reinforce a brand, you go back to the DNA. You go back to the core, and you need to make sure that the core is strong because that's what gives you the right to do anything else. And so we needed to make sure that our pizza was awesome. And the fact is that our guests were telling us it had gotten less awesome, right? So over time, we saw incidence going down. We saw comps going up. And when you look at kind of the word clouds of what people were saying, the biggest thing that came out was the crust. It was that over time, our crust had gotten doughy and stopped being crispy consistently. And then you start looking at some of the other comments about ingredients and all those things.
It led us to do a complete ground-up rebuild of the pizza. We went on pizza safaris. We looked at what's trending in pizza, what makes a great, now we knew we were going to do deep dish, so what makes a great deep dish pizza, what things have kind of evolved over time that we maybe hadn't evolved with, and went for kind of a ground-up rebuild of the pizza. That was the dough, taking some inspiration from Detroit crust, but doing it in a round. We've really gotten back to a dough that's super crispy every time and light. Our sauce was a paste-based sauce where now if you look at where sauce has gone, it's much more fresh-packed tomatoes, much brighter. We went to a fresh-packed tomato, extra virgin olive oil, just very simple and bright.
Went from a cheese blend to 100% mozzarella cheese. Went from kind of some old-school pepperoni to the cup-and-char pepperoni. A new sausage that we slow roast and hand crumble. So really a complete ground-up reinvention of the pizza. Been really pleased with what we've seen in the test markets and in the restaurants. Overall, incidence up, the restaurants are outperforming their controls. So all of that is very, very encouraging. And in Cali, because the thing you get nervous about is kind of those old-school guests. What you hear a lot from them is, it reminds them of when the pizza was great because what they remember is a pizza that every time was crispy and fluffy. And again, the crust was kind of the biggest thing that was coming out.
The other reason we started with pizza, outside of just reinforcing kind of the core and the DNA of the brand, is pizza is a great value. So we have the Pizookie Meal Deal that's running right now. But a pizza, even if you load up a large pizza and that shelf edge price can get high, you feed a family of four for $40 on a pizza. So it's a great value, provides another occasion for people to come in. And that offering is pretty unique to us. A pizza in kind of our category, you don't see a lot of competition in full service providing a great artisanal high-end pizza.
And then the last thing that we found, which was I'm excited about, is our Chief Operating Officer and our kitchen managers are telling us that it's kind of re-energized a focus on just great execution and the details. And the reason is pizza dough is a live object because of the yeast. So it's not like you're just going freezer to fryer or patting a burger and then making it, and it's cooking three minutes and three minutes. You've got to be all over this dough while you're proofing it and then cooling it and then reproofing it before you put it in the oven to make sure it's coming out right. So it's just kind of refocused people around culinary excellence, and that's been an exciting kind of, I guess, secondary benefit of it.
That's great. And so pizza is the first big overhaul. As you map out and plan the future, as you think about the other three shareables, craft beverages, and Pizookies, is there one area that you're likely to turn to next? And maybe if that isn't the path or you don't know yet, maybe what would you like to improve? Or is there an overarching thing with each where you see opportunity?
Yeah. Yeah. Sure. So one thing, by the way, I was probably remiss. Pizza's launching in November. So if you got a BJ's near you early November, please come and try the new pizza, right? And our programs around the pizza will be very much focused on trial and word of mouth. We really think we have a better product here, so that's what's going to be the focus. If you look at the rest of the menu and the other categories, so we started by doing a bunch of category work. And essentially, what we identified was we have categories where we feel like we're over-assorted, right? And so those categories, what we're going to look at is where do we reduce the size of the category? Where do you eliminate kind of low-volume products?
Where do you eliminate products that are bringing a lot of single-use SKUs and efficiency in? And then we have other kind of categories where we're looking to refresh or renovate like we did with pizza, and ultimately getting to a better menu that's more focused on our cores really clearly popping out and being easier to execute. So with the pizza as well, as we're launching the new pizza, we're going from, I think, eight composed pizzas on the menu down to five, right? With the Pizookie, we've already eliminated two SKUs of Pizookie that are standing SKUs. By doing that, we're focusing on the top performers, but we're also giving ourselves an opportunity to bring news, right? So later this year, when we launch the pizza, we're also bringing back our Monkey Bread Pizookie, which we took away, and social media won't let us stop hearing about it.
We actually might have another surprise Pizookie for holiday season as well. As we streamline some of those pre-made pizzas, we can start to bring seasonal pizzas into it. So making the room for ourselves to kind of reinforce and drive the core as we go forward is really the goal of the overall menu work.
That's great. And I do want to shift over to the operations. So far, you've done some things to improve the KDS, the POS. I think you've taken some action to make the reservation process simple for both employees and guests. It seems like the activity-based labor model is something worth paying attention to. So maybe where are you with that initiative, and does that move to all the stores next year?
Yeah. So I think on operations, this is the area where I'm probably most pleased with. And if you're talking about where you are on a schedule, I would say we're probably ahead of where I would expect it to be from an operations point of view. The work that we've done this year, and it sets the context for the ABLM, has really been about the hard work of operating better restaurants. And we're clearly operating more effectively and efficiently, as you see through the margin numbers. But that's been focused on an outlier program that is focusing on some really clear metrics where managing waste, managing overtime, looking at some really key metrics, managing the outliers. As we bring the outliers up, the bottom comes up. So it kind of raises all ships and everything gets more efficient.
And so we've been really effective at doing that and driving that accountability through our DMs and our GMs, incentivizing them correctly and holding them accountable. It may not sound like the sexiest thing in the world, but it's the hard work of running a great restaurant, and it's been great progress there. On the simplification front, which is some of the stuff you talked about with the KDS and POS, that's where we looked at. We've peeled apart our gross to net, and we saw that a third of our food and beverage comps were rung wrong and prepared wrong. Nobody's coming into our restaurants trying to ring things in wrong and prepare them wrong, right? So ultimately, we had to put a shoulder up into what was getting in the way. We talked to all the team members.
A lot of it was about how complicated modifiers got, how difficult it was to ring things in. And through that, we brought food and beverage comps down double digits this year by just putting a shoulder up against one-third of those things and those two kind of unforced error categories, right? So I think we've really leaned into some of the basics of running good restaurants. And to me, all of those programs are programs that ultimately we build on and continue over time. Through that, we've started to pilot the ABLM. And the activity-based labor model basically takes AI forecasting, and then the AI helps us do our actual labor model. Instead of just giving the forecast to a GM where they're doing it, it's actually doing the labor model for them.
What we've seen in the restaurants, we're in 20 restaurants right now, is we see better guest metrics, which, by the way, is our primary metric that we look at, so we see better speed, better guest satisfaction because ultimately, our thinking around everything that we're doing, I ask the team to think of two questions. Is it better and easier for the team member or better and easier for the guest? Because if you invest in those things, you're ultimately going to get to a more efficient and effective restaurant, so the ABLM is showing that. It's also showing some labor savings. What it's telling us is we need more labor during our peak hours, but we're really loose around the shoulders in our non-peak hours, so it is showing some labor savings as well.
We're going to expand that to 20% of the restaurants this year and then hopefully expand it out as we go through next year. The thing that I'm cautious or conscious about is our ops team's made great progress this year on just kind of the fundamentals of the restaurants that I talked about. And as you roll out an AI labor model, it takes a little while for the GMs and the machine to become great friends and really get the most out of it. And what I want to make sure is that as we roll this out, it is additive and we don't take any step back and conquer, surrender any territory that we've conquered. So yes, I would see it rolling out over next year, but it's going to be a methodical approach to rolling it out.
And then that's the first in what would be kind of a sequence of AI use cases. Because once it's really working on labor, you can start to think about where it might go. It can help you think about prep if it's forecasting really well. It can help you think about ordering if it's forecasting really well. But the first use case that we're spending our time on is labor.
Understood, and maybe all that's a good segue. I just wanted to ask about store-level margins. It is topical for investors in the company. Just using consensus as a discussion point, this year will wind up somewhere in the mid-15% range. In many ways, you are just getting started with a lot of the things you're talking about. Prior to COVID, margins were up at 17% for a couple of years, 16% in 2019, so not guidance next year, but where can these go over time, and if everything works out close to the way you're planning for the business, is there room for upside to your core margins?
Yeah. So the short answer is I do think there's room for upside, and I don't think that those numbers are unreasonable. I don't have a timeline for it. And really, the focus that we have is how do we grow sales and flow more dollars to the bottom line, right? And that's through investing in the things that I talked about, right, which is things that make team members' lives better and easier and things that make guests' lives better and easier. Because if you do those things, you're going to get more repeat. You're going to get more sales. And obviously, a new transaction is the best thing you can do for expanding your margins. But we're really focused on driving that growth, driving more dollars to the bottom line that we take to the bank. And over time, that virtuous cycle, I think, obviously affects percentage margin.
But I'm less focused on hitting a percentage margin goal than I am on growing the business and growing the profit dollars.
Understood. Wanted to ask you about marketing kind of short-term and long-term. What can you do now to use marketing to drive traffic and awareness in the here and now? And then kind of what might be your medium-term or longer-term vision? How can marketing eventually play a bigger role?
Yeah. I mean, look, I mean, I think the marketing team has done some really good things over the last year. We, in terms of the architecture of the marketing, really focusing on PMD and the value message at those times when we do have broader marketing, right? We're really choiceful because we're not going to win a share of voice battle about geographically where we deploy and times of year where we deploy. So we're choiceful about that. But when we do deploy, we see our media markets outperform other markets. I like the architecture of using the PMD to drive traffic in, using product news, things like what will be the pizza launch or seasonal Pizookies thus far to drive a lot of social dialogue and kind of brand relevance or brand heat.
And then we've done a lot of work with consolidating with our agency performance marketing to get the bottom of the funnel more effective. So structurally, I like what's going on, and the marketing is clearly having an impact when we deploy. I think as we go forward, what I'd like to see, frankly, for a business of our size is us having a more consistent cadence in terms of social influencer kind of cultural marketing. And when I look at the pipeline we have with the menu work, starting with pizza but seasonal Pizookies and then the other category work, I actually think we have a lot of the tools to feed that. So I'd like to see a more consistent layer of that going forward.
What I do like to reinforce, though, is when we think about how we're going to compete, we are not a share of voice competitor, right? We are not going to suddenly be outshouting the big guys and leveraging kind of price point promotional programs to do that. The pathway to success for BJ's is kind of improving the foundations, as I said, of operations, improving our value proposition, and improving our product. And I see it as building layers in cake like kind of layers in a cake over time to build a more sustainable and stronger business from the foundations up. So marketing will play a role, but it's going to continue to be choiceful and targeted. We're not going to move to a share of voice-driven kind of approach is what I would say.
Understood. Okay. I'm going to pivot here. Just want to ask about the store base and development. I'd like to ask about both remodels and then the new build opportunity. I think maybe it would be helpful just to ask first. I think you're doing some prototype work, maybe working with some outside help there. So just take us through what you're doing there and what your goals are with both new store and remodeling and new store growth.
Sure. So the prototype work, I'm super excited about it and the agency we're working with. Where that starts is saying, does our physical space, is it the best manifestation, like the best living, breathing manifestation of our brand and our brand DNA? We talk about three words with our brand DNA. We talk about craft, we talk about cheers, and we talk about character. And is the physical space really breathing all of those things in the most contemporary way possible? And so that is kind of the driver of the prototype work to say, is that space going to continue because we know it has been going to continue to be a competitive advantage for BJ's? And I'm really excited about the work I'm seeing.
The other thing that maybe is a little bit different than how we've been thinking about it in the past is I like to think about it about right size, right place, right location. So in California, you go into our California stores and you see some of these big stores, and they're packed all the time. And you look at potentially opening some new stores and markets like that, maybe it makes sense to have a store of that size. If you go to some other markets where we might not have the same AUVs and those things, do we need the store to be the same exact size, right? So the work that we're doing is going to have us come out of it saying we're really clear on what makes a BJ's a BJ's and what makes a BJ's space be unique to us.
But then we want to have the flexibility to apply that to different sizes, apply it to ground up, apply it to conversions to make sure that we have the flexibility to build the right cost, right size, and right place. So the one we built in Queen Creek, Arizona is one of our smaller footprints. It's killing it. It's not holding back AUVs at all. It's one of our highest AUV restaurants. I was in Hagerstown, Maryland the other day. It's kind of an end cap. It's a smaller restaurant. It's a banger of a restaurant. I think we need to be a little bit more flexible with the format as long as we're staying really consistent on knowing what makes a BJ's a BJ's. So that's kind of the prototype work.
That will feed into the remodel program as we get it up and running and learn what parts of it are really singing and aren't.
That's great. Off-Premise business, I think you've hired a director to evaluate it, evaluate and help improve the business. Maybe what's that person going to be focused on? And is 26 a year where you'd expect to make some progress on whatever that person's focused on?
Yeah. I mean, I would see 2026 as when we start to make progress on that. When you look at our off-premise business, it grew a lot as most full-service businesses did coming through COVID. We're kind of a version 1.0 business, which again, probably a lot of our competitors are too, which is we kind of said, "Okay, we have to ingest this business," but we didn't necessarily say, "Are we the best at this business?" And I think we have a real commercial opportunity there. When you think about it, we have pizza as a core product. I think we have the best wings in the market. We have awesome burgers. The categories that are core drivers of the off-premise, we have great products across all of those categories. Operationally, we need to get better.
Our NPS off-premise is a fraction of what it is on-premise, and it's driven by missing and incorrect. So just like we talked about putting a shoulder up against wrong and wrong and prepared wrong in the on-premise, we're doing a similar sort of detailed analysis on what's driving missing and incorrect and how do we intervene. From a menu point of view, if you go and you look at our menu, it's our dine-in menu just run down online, right? It's a bit overwhelming. We shouldn't be offering all of our products in off-premise because not all of them are good for off-premise. There's generally a concentration of products in your off-premise business that are the real drivers of it. And we need to focus on those core products that are most effective. So there's a whole menu merchandising bit of it.
And then there is, for our own channels, I think there's an opportunity for our own channels to be much more effective. I wouldn't call our own digital journey frictionless at this point. And so we have a big shoulder up against that going forward. But I would say the off-premise progress that you'll see outside of optimizing kind of marketplace spend, but like the structural stuff, will be starting in 2026.
Great. Well, somehow we are up on time already. So thank you very much for being here. Really appreciate it. Look forward to following the journey.
Yeah. Man, I appreciate it. Thank you very much.