BJ’s Restaurants this month began serving a new kind of chicken wing. The jumbo, bone-in wings arrive raw rather than pre-cooked. BJ’s then cooks them in its slow-roast ovens and fries them to order.
They’re the best wings the chain has ever served, said CEO Greg Levin. They’re also expected to save $3 million annually.
“We are now saving materially by sourcing a commodity raw jumbo wing as opposed to a precooked wing that was made specifically for BJ's,” he said during an earnings call Thursday.
The wings are one example of cost-saving measures that 214-unit BJ’s began rolling out late in the third quarter and that it expects to add as many as 200 basis points going forward.
It comes as the chain continues to battle inflation in food and labor, though it said the increases have moderated. For the third quarter ended Sept. 27, food costs were 5% higher than the same period last year and up modestly from the previous quarter.
Hourly labor costs, meanwhile, improved by 30 basis points due in part to more efficient scheduling. “That's quite an accomplishment by our restaurant operators,” CFO Tom Houdek noted. Overtime and training hours were also lower.
“Our staff and team members have gotten their sea legs under them,” Levin said.
Nonetheless, restaurant-level operating margins remained thinner than a year ago: 10.3% compared to 11.2%. But BJ’s expects to reverse that trend in Q4, with margins projected in the 12% range vs. 10.1% a year ago.
And that improvement doesn’t necessarily reflect BJ’s cost-saving efforts, which Levin said should start bearing fruit in the first half of next year.
“Some of the things will come in faster. Some will take time to roll out,” he said.
Executives cautioned that the lower costs won't mean anything if BJ’s doesn’t continue to grow sales, which it plans to do in part through better staffing, remodels and catering. Same-store sales for the third quarter rose 8.9% compared to a year ago, suggesting those efforts are having an effect. About 6 points of the sales growth came from higher prices.
And yet sales slowed down a bit to start the fourth quarter. Through the first three weeks of this month, sales were up 8% year over year, which includes an adjustment for the impact of Hurricane Ian.
Levin said the deceleration reflects smaller party sizes now compared to over the summer when people were spending more on travel and leisure.
“Our guests per check was higher in the summer months versus where our guests per check is now,” he said.
If anything, he said, that behavior indicates a return to pre-COVID rhythms at the Huntington Beach, Calif.-based chain.
“As we get back into the October time frame, sales bottom out a little bit and we start to grow a little bit in the holiday time frame,” he said. “And that tends to be what we've seen in our business.”
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