BJ's Restaurants (BJRI) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Director of SEC Reporting - Rana Schirmer
• Chief Executive Officer and President - Lyle D. Tick
• Chief Financial Officer - J. Todd Wilson

TAKEAWAYS

• Total Revenues -- $358.6 million, an 8.6% increase driven by strong traffic growth and menu execution.
• Comparable Restaurant Sales -- 8.1% growth, representing the company's ninth consecutive quarter of top-line expansion.
• Traffic Growth -- 8.3%, supported by the Pizookie Meal Deal value platform and seasonal product favorites.
• Average Check -- 0.2% decline, reflecting a moderation in check compression from the 1.8% decline reported in the second quarter.
• Restaurant Level Operating Profit -- $52.9 million, an increase of $11.5 million due to sales outperformance and operational discipline.
• Restaurant Level Operating Profit Margin -- 14.7%, expanding 220 basis points primarily through labor leverage and cost of sales improvements.
• Cost of Sales -- 25.3% of revenue, a 40 basis point improvement resulting from easing commodity inflation and reduced kitchen waste.
• Commodity Inflation -- 2%, representing a significant reduction from the 5% inflation experienced in the second quarter.
• Labor and Benefits Expense -- 36.2% of revenue, improving 90 basis points as the company leveraged fixed costs against higher sales volumes.
• Occupancy and Operating Expenses -- 23.8% of revenue, a 90 basis point improvement driven by sales leverage on fixed expenses.
• Adjusted EBITDA -- $31.4 million, representing a 48.6% increase compared to the third quarter of the prior year.
• Net Debt -- Approximately $4 million at quarter end, a substantial reduction from $61 million at the start of the fiscal year.
• Debt Repayment -- $28 million during the quarter, utilizing strong cash generation to strengthen the balance sheet.
• Share Repurchases -- $1 million for 17,000 common shares in the third quarter, with an additional $1.6 million repurchased in the fourth quarter to date.
• FY 2026 Comparable Sales Guidance -- Approximately 4.7% growth, raised from the previous range of 3% to 4%.
• FY 2026 Adjusted EBITDA Guidance -- $149 million to $154 million, increased from the prior outlook of $145 million to $152 million.
• FY 2026 Capital Expenditures Guidance -- Approximately $80 million, representing a reduction from the previous range of $85 million to $95 million.
• Unit Development -- One new restaurant opening in Joliet, Illinois, scheduled for the fourth quarter, followed by a Buckeye, Arizona, opening in the first quarter of 2027.
• Future Growth Pipeline -- Mid-single digits, or approximately four to five new units, anticipated for 2027 as the company refines its prototype.
• Marketing Investment -- $900,000 increase in spend during the quarter, representing a 13% rise to support core growth drivers.

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RISKS

• Wilson stated, "Our outlook includes an approximately 100 basis point headwind in the fourth quarter from unfavorable shifts for Halloween and Christmas as many others in the industry have noted," indicating specific calendar-related pressures on upcoming performance.
• Wilson warned that occupancy and operating expenses are expected to rise to approximately 23% of revenue in the fourth quarter, reflecting higher costs for general liability and repair and maintenance as the company targets facility improvements.

SUMMARY

BJ's Restaurants, Inc. (NASDAQ:BJRI) reported a ninth consecutive quarter of traffic and sales growth, with management attributing the performance to a refined value platform and targeted menu renovations. The company stated that traffic increases were broad-based across all geographic regions and dayparts, supported by the Pizookie Meal Deal and seasonal product introductions. Management reported that moderating check compression and continued operational discipline in labor and waste management facilitated significant margin expansion. The company indicated it is transitioning toward a new chapter of unit growth, focusing on a refreshed brand expression and a right-sized prototype for future expansion.

• The company is building a long-term menu strategy focused on three pillars: Pizookies, the Pizookie Meal Deal, and consistent product news. CEO Tick stated, "The team has done a fantastic job of building a craveable Pizookie pipeline with clear visibility through 2027."
• Management is utilizing national scale tests, referred to as PMIs, to accelerate learning on new categories like Wagyu burgers and higher-tier steaks before permanent menu inclusion.
• Operational efficiency is being supported by investments in practical tools, including point of sale upgrades and a new learning management system for restaurant teams.
• The company has shifted its facilities strategy toward a planned preventative maintenance program to reduce the incidence of more expensive unplanned repairs.
• New restaurant prototypes are being designed with a focus on brand expression and cost efficiency, with CEO Tick noting a "right size, right place right cost approach to our next chapter of unit growth."
• Management highlighted that higher-tier menu renovations in pizzas and burgers are driving increased sales and higher average checks while improving dollar margins.

INDUSTRY GLOSSARY

• AUV (Average Unit Volume): The average annual sales generated by an individual restaurant location.
• NPS (Net Promoter Score): A metric used to measure guest satisfaction and loyalty based on their likelihood to recommend the brand.
• Pizookie: The company's signature deep-dish cookie dessert.
• Pizookie Meal Deal (PMD): An everyday value platform combining a meal and a signature dessert to drive traffic and customer acquisition.
• Product Marketing Initiative (PMI): A strategic window used for national scale testing of new menu items to inform future category refreshes.

Full Conference Call Transcript

Operator: Hello and welcome everyone to today's BJ's Restaurant Q3 26 Earnings Release and Conference Call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the Q&A session. To register to ask a question at any time, please press *1 on your telephone keypad. Please note that this call is being recorded and that we are standing by if you should need any assistance. It is now my pleasure to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead.

Rana Schirmer: Thank you, operator. Good afternoon, everyone, and welcome to our fiscal year 26 third quarter investor conference call and webcast. After the market closed today, we released our financial results for our fiscal 26 third quarter. You can view the full text of our earnings release on our-- at www.bjsrestaurants.com. I will begin by reminding you that our comments on the conference call today will contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 2000. Investors are cautioned that forward looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements.

These statements are based on management's current business and market expectations, and our actual results could differ materially from those projections in the forward looking statements. 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 risk and uncertainties associated with forward looking statements contained in the company's filings with the Securities and Exchange Commission. We will start today's call with prepared remarks from Lyle D.

Tick, our Chief Executive Officer and President followed by Todd Wilson, our Chief Financial Officer after which we will take your questions. And with that, I will turn the call over to Lyle. Lyle?

Lyle D. Tick: Thank you, Rana. Good afternoon, everyone. And thank you for joining to discuss our third quarter financial results operating performance and outlook. Q3 was an outstanding quarter for BJ's. Outpacing internal expectations and underscoring both the progress we have made over the past 2 years and the sustainability of our growth drivers. We delivered another quarter of strong traffic growth, with moderating check compression as anticipated, and importantly, continued profit growth as our operators efficiently converted top line gains into strong margin expansion. This was our 9th consecutive quarter of sales and traffic growth, and our 8th consecutive quarter of profit growth. Same store sales increased 8.1% driven by 8.3% traffic growth.

On the profit side, restaurant level operating profits increased $11.5 million and margin expanded 220 basis points to 14.7%. Adjusted EBITDA increased $10.3 million and adjusted EBITDA margin increased 240 basis points to 8.8%. A few notable highlights from the quarter. First, our operators continue to elevate the guest experience. As demonstrated by ongoing improvements in our net promoter scores. While maintaining exceptional operational discipline reflected in the flow through of our sales outperformance. Throughout the year, I have been very pleased with our team's discipline managing the control Labor, waste, and comp food and beverage while remaining focused on executing our strategy. Second, Q3 reinforced the effectiveness of our growth drivers working together to drive performance.

The Pizookie Meal Deal or PMD continues to resonate as a powerful everyday value platform, driving both new guest acquisition and repeat visits. Our seasonal Pizookie platform was anchored in 2 returning fan favorites, S'mores and the Spooky Pizookie, both in their 3rd year, and we continued to support menu and product improvements with a focus on our handheld category. Third, as previewed in our Q2 call, check compression moderated in Q3 as growth became more evenly distributed across our growth drivers. And fourth, our marketing plan continues to work effectively and efficiently. We continue to be agile, optimizing channel and messaging mix, while maintaining a consistent reinvestment rate when looking at the year as a whole.

The results continue to reflect the progress our marketing and culinary teams are making in aligning product, messaging, and go to market strategies. Overall, I am proud of our third quarter performance and our outlook for the year. Our 2026 performance is delivering ahead of expectations, The shape of that performance throughout the year has been consistent with both what we expected and guided, all of which gives me further confidence that our strategies are working and underscores the durability of our progress. Looking at Q4 specifically, performance to date has been in line with our expectations and guidance as we continue to drive growth building on a strong Q4 25.

Looking at the consumer, demand remains resilient, as we continue to grow traffic while moderating check compression and drive interest in new and renovated menu items. Over the past 2 years, we have clarified our positioning, organized behind our 4 strategic pillars, and refined our growth drivers. All focused on building a stronger BJ's and delivering sustainable and profitable growth. Over that time frame, we have increased average unit volumes roughly 10% to 6.7 million expanded average unit profit by roughly 24%, and improved NPS by more than 600 basis points. Strengthening a robust foundation for enduring growth.

Looking ahead, our strategy remains centered around ensuring our restaurants continue to be places our team members are proud to work in and our guests are excited to return to. Everything starts with our team members. They bring our brand promise to life every day. And we are committed to ensuring they have the tools they need to deliver for our guests. We just returned from our general manager conference, and the energy and enthusiasm were palpable. Our managers are aligned, engaged, and committed to getting better every day, 1 of our core foundational values. We spent our time together focused on leadership development.

Driving 1 BJ's way consistently across our restaurants, aligning around clear expectations of what great looks like at BJ's, and ensuring our teams have the operational support they need. From point of sale upgrades to a new learning management system, we continue to invest in practical tools that make our operators more efficient and consistent. On the menu front are 3 core pillars, Pizookie's, PMD and product news, continue to drive our calendar and we-- as we optimize to balance traffic and mix. The team has done a fantastic job of building a craveable Pizookie pipeline with clear visibility through 2027 while also developing the supply chain agility to capitalize quickly on emerging cultural trends as they present themselves.

I would encourage everyone to try our holiday lineup featuring our new Dulce de Leche bananas Pizookie and our brown butter bisque pizookie. They are both absolutely delicious and out now. The Pizookie Meal Deal continues to deliver driving both new customer acquisition and repeat visits. It is a BJ's ownable everyday value platform that reinforces 2 of our signature equities, menu variety and Pizookie. Across our core menu categories, I remain pleased with the work completed to date and excited about what lies ahead. Across pizza, burgers, and chicken sandwiches, each revamped category is generating higher incidents, increased sales, higher average checks, and stronger dollar margins. This is inclusive of more than $1.5 million reinvested back into product quality.

This holiday season, we are excited to feature a 16-ounce Hawaiian rib eye, which is a delicious upgrade and twist on our most popular steak for the holidays alongside a shareable sides platform led by truffle mac and cheese. Based on initial guest resonance during testing, we believe this shareable side platform has runway as we continue our menu work into 2027. As we advance our work across the menu, we will continue delivering a more craveable, compelling, consistent, and profitable offering over time. I look forward to sharing further updates in the coming months. as items move through testing and validation. Ensuring the atmosphere across our 219 existing restaurants remains a competitive advantage is an imperative for BJ's.

We continue to invest in the existing fleet to ensure our team members have the facility and equipment they need to deliver on our high standards and that our guests visit restaurants they are excited to come back to. We have made material progress on our deferred facilities work, with a focus on sharpening our replace versus repair strategy to ensure we are solving and not band aiding problems. This is supported by a diligent preventative maintenance program as we continue to drive a shift towards planned versus unplanned repairs and maintenance. Turning to new unit development, we are just a few weeks away from opening our Joliet, Illinois location. Followed by Buckeye, Arizona in Q1.

Both will showcase a meaningfully refreshed expression of the BJ's brand. These markets represent a balanced mix as Buckeye expands our footprint in an established high performing market while Joliet provides an opportunity to build brand awareness and drive operational leverage in a developing market. We continue to build our pipeline and expect to open a handful of additional units in 2027 as we continue to refine the prototype and apply a right size, right place right cost approach to our next chapter of unit growth. In closing, 2 years into our journey to unlock the full potential of BJ's Restaurant and Brewhouse, our results reflect clear and measurable progress.

With AUVs up over $500 thousand and average unit profit up $220 thousand BJ's now averages over $1.1 million in restaurant level profit per restaurant. And we are building from a significantly stronger foundation. We remain guided by our 4 strategic pillars, and focus on making BJ's better every day as we enter our next chapter of growth. Before closing, I want to thank all of our BJ's team members. Across our restaurants and the restaurant support center for their passion and commitment. We talk often about being better every day and stronger together.

And once again in Q3, our teams took care of each other, took care of our guests and our restaurants, and delivered another great result for BJ. Thank you, and I will now turn it over to Todd for more color on our financial results and outlook.

J. Todd Wilson: Thank you, Lyle, and good afternoon, everyone. We delivered another strong quarter of results, led by 8.1% comparable restaurant sales growth, Revenue increased by $28.5 million and restaurant level operating profit increased $11.5 million delivering more than 40% incremental flow-through and 220 basis points of margin expansion. And adjusted EBITDA increased by $10.3 million Total revenue for the quarter was $359 million an 8.6% increase versus last year. The comparable restaurant sales increase of 8.1% was led by 8.3% traffic growth partially offset by a 0.2% decline in average check. Our sales and traffic momentum was driven by continued execution against the proven growth drivers Lyle highlighted earlier.

Growth was broad based, with gains across every day of the week daypart and revenue center. We outperformed the 800 basis points with our outperformance extending across all geographic regions. The average check decline of 0.2% was in line with our expectations and a meaningful step forward from the 1.8% decline reported in the second quarter. We are seeing our menu renovation work lead favorable shifts toward pizzas, burgers, and chicken sandwiches where check contribution improved 40 basis points from the second quarter to the third. Combined with initial stabilization and our higher tier stakes and slow roast offerings, these efforts are driving clear sequential momentum in our check trajectory. Turning to restaurant profitability.

Restaurant level operating profit was $52.9 million and margins increased 22 basis points to 14.7%. Continued progress on our gross to net initiative contributed to restaurant level margin expansion. Total comps and discounts declined 50 basis points as a percentage of revenue reflecting stronger operational execution and more effective deployments of promotional offers while supporting strong traffic growth. Cost of sales was 25.3%, a 40 basis point improvement versus last year. Commodity inflation eased to approximately 2% in the third quarter, a reduction from the 5% we experienced in the second quarter. Operationally, we continue to reduce comp food and beverage incidents contributing to the overall gross to net improvement.

Our menu renovation work also contributed to the gains as the new pizza, burgers, and chicken sandwiches deliver an improved margin profile. Total labor expense improved by 90 basis points to 36.2% Our operators continue to execute with discipline delivering the leverage we expect with the gains in sales while continuing to improve guest satisfaction measures. These results include an increased restaurant bonus expense of 10 basis points, This additional compensation is well earned and deserved as our operators continue to deliver great work and results. Occupancy and operating expenses were 23.8%, a 90 basis point improvement versus last year. I would highlight 2 items within this category.

First, overall, the margin improvement was led by leveraging our fixed cost over the significant increase in sales. Second, marketing spend in the quarter increased $900 thousand a 13% increase versus last year and a 10 basis point increase as a percent of revenue. However, as Lyle noted, we expect our marketing investment as a percent of revenue on a full year basis to be consistent year over year. The increased dollars supported our proven growth drivers. PMD, Pizookies, and product news. Our marketing team has continued to drive significant traffic growth with improved efficiency and investment return. General and administrative expenses were 6.6% of revenue, a reduction of 20 basis points versus last year.

On a dollar basis, G&A increased $1.3 million primarily reflecting higher incentive compensation expense connected to our strong performance partially offset by lower deferred compensation expense. Driven by our strong financial results through the first 3 quarters, we now expect full year results to exceed target for incentive compensation. Compensation. As a result, we recorded an incremental $1.7 million expense in the third quarter compared with a $600 thousand reduction in the quarter last year. This represents a $2.3 million year over year increase in expense. Based on our current outlook, we anticipate $600 thousand of incremental expense in the fourth quarter.

Partially offsetting this increase deferred compensation expense declined approximately $1.2 million As a reminder, this expense reflects changes in the value of the program's underlying investments in which there is exposure to the broader equity markets and is generally offset in other income. Adjusted EBITDA increased to $31.4 million compared to $21.1 million last year, representing approximately 36% flow through on incremental revenue. Turning to capital allocation. Our strong cash generation supported investment in the business, share repurchases, and debt reduction. First, we invested $19.9 million in capital expenditures focused on supporting our current 219 restaurants.

We remodeled 2 restaurants during the quarter, bringing our total for the year to 12, and expect 1 more in the fourth quarter as we prepare to accelerate the pace in 2027. In addition, we are investing in the 2 new restaurants that are under construction. Second, we repurchased and retired approximately 17 thousand common shares for $1 million Third, we repaid $28 million of debt. We ended the quarter with net debt of approximately $4 million a substantial reduction from the $61 million we carried at the start of the year. Turning to our 2026 financial outlook, led by our consistently strong results, we are again raising guidance for select financial metrics.

We now expect comparable restaurant sales growth of approximately 4.7% compared with our previous range of growth of 3% to 4%. Restaurant level operating profit in the range of $233 million to $237 million compared with $228 million to $235 million previously. Adjusted EBITDA in the range of $149 million to $154 million up from $145 million to $152 million previously. We now expect capital expenditures to be approximately $80 million compared to our prior range of $85 million to $95 million Our share repurchase guidance remains unchanged at up to $50 million subject to market conditions, and reflects our financial ability and willingness to increase purchases meaningfully if market conditions warrant.

We repurchased approximately $9 million of shares through the third quarter and spent an additional $1.6 million in the fourth quarter to date. I will also provide additional color for modeling purposes. Starting with our raised guidance for comparable restaurant sales growth to approximately 4.7%. As we discussed last quarter, we expect to grow comparable traffic and sales in the fourth quarter even as we lap strong traffic growth last year. Our outlook includes an approximately 100 basis point headwind in the fourth quarter from unfavorable shifts for Halloween and Christmas as many others in the industry have noted.

Additionally, we expect occupancy and operating expenses to be approximately 23% of revenue in the fourth quarter compared with 22.6% last year. Approximately 20 basis points of the anticipated increase versus last year reflects higher marketing spend, with the remaining increase driven by general liability costs and repair and maintenance expense as we make progress toward our gold standard facility target. In summary, our third quarter results were excellent. Year to date, comparable restaurant sales have grown 5.6% restaurant level margin expanded 80 basis points, and adjusted EBITDA has increased $15 million These results demonstrate our strategies are working and our team is executing at a high level.

We are converting strong traffic and sales growth into higher profitability while continuing to invest in our restaurants and strengthen our balance sheet. These results are only possible because of the hard work of our restaurants, field leadership, and support center teams. Thank you, and congratulations. As we work to close a great year in 2026, we remain focused on executing our core strategies to continue our growth in 2027 and beyond to deliver value for shareholders. With that, we will now open the line for questions. Operator?

Operator: Thank you. Once again, that is *1 to ask a question. And our first question will come from Brian Bittner with Oppenheimer and Co. Please go ahead.

Mike: Hi. Thanks. This is Mike Thomas on for Brian. So congratulations first on the strong results. Know, commentary on the fourth quarter so far being in line with the guidance, are you trying to say that it is in line with the full year guidance or in line know, that would get you to the full year guidance? Because I think the math would imply that the fourth quarter would be in like the high 1% range. So if you could just clarify that And then maybe even with the holiday shift, it does, I think, suggest that the trends are maybe moderating a little bit. Is there anything that you are seeing that is giving you a little caution?

Or are you just trying to play a little bit safe right now?

Lyle D. Tick: Yeah. Sure. Look, I mean, I will start, and then, Todd can toss it to you. Look, This is Lyle, by the way. You know, I feel really good about Q4. You know, we-- I feel great about the programs that we are putting into market, which actually just kind of landed today. We are building on what was obviously a really strong Q4 25. And we are growing traffic. We are moderating check and building you know, a stronger business. So I feel I feel great about that.

I think, know, the thing that I also try and keep myself and the teams focused on is more importantly, when I take a step back, you know, I feel really good that over the past couple of years, what we have done is build multiple growth drivers that are now working together to develop a stronger foundation, which has allowed us now over 2 plus years or 9 quarters to be lapping positively and growing traffic and growing our business independent of what the lap looks like, and I do not see Q4 being any different. So overall, you know, I feel good about it, particularly as you look at the 1 and then 2 year stack.

J. Todd Wilson: Yeah. The only thing I would add on top of that is, just in terms of the guidance, you know, we have tried to be really thoughtful about how we issue our guidance. We have raised it now twice this year, and I think very thoughtful steps. And I think I would say broadly all of our comments, see what you referred to with Lyle as well as mine, we feel good with the guidance that we put out for the full year. And, obviously, we will we will do our best, and our expectation is that we will deliver that and take a step up from there.

Mike: Alright. Thank you. And then, just want to make sure I heard you right, Lyle. I think you said you are going to have 1 unit opening in the fourth quarter and then another 1 in the first quarter from those initial set of units. And then a total of a handful in 2027. So 1, is that right? And then 2, you know, how many handful is that? You know, 2, 3, 4, 5 plus? If you could just sort of help us frame that up.

Lyle D. Tick: Yeah. Yeah. Sure. So, yes, you heard me right. there is 1 in Q4. There will be 1 in Q1. And then as, you know, as you look at a handful. And the only reason I am cautious about this is because you know, with development, you know, you. You. Best laid plans and then permitting and construction and all of that. But you know, you are probably talking in that you know, mid single digit range. So around that 4 or 5 is a good place to be thinking for next year.

Mike: Awesome. Thanks. Congrats, guys.

J. Todd Wilson: Thank you.

Lyle D. Tick: Thank you.

J. Todd Wilson: Thank you.

Operator: Our next question comes from Jeff Farmer with Gordon Haskett. Please go ahead.

Jeff Farmer: Hey, Jeff. Thanks. Just wanted to quickly follow-up on the Q4 same store sales. So I hear you loud and clear on most of the pieces of this, but having said that, are there sort of notable sequential shifts relative to Q3 that we should be aware of as it relates to pricing, traffic mix? Anything that heard you on the 100 basis point calendar shift headwind, but anything else that would sort of push that 1 year and 2 year number down?

Lyle D. Tick: I mean, the only. The only thing you would be looking at is obviously, Q4. If you look at Q4 last year versus Q3 of last year, Q4 was, you know, we obviously had very strong performance in Q4 of last year. But so, I mean, I guess, you know, that would be the only thing. But, again, you know, for me, at least, you know, I.

I am looking at the business as are we building a foundation of a business that independent of what quarter we are lapping looks like, we have the tools and the ability to consistently grow our business over the course of, you know, the past 2 years plus the years to come, and that is what we are-- that is what we are focused on. So, you know, I feel I feel good about what we are seeing in Q4 so far. But the only thing would be the fact that the lap in Q4 is different than the lap in Q3.

J. Todd Wilson: I will chip in 1 more time, Jeff. I am just. I would make the point of you know, our annual guidance Yeah. If you think about the change, the raise in our annual guide, it really reflects the way we beat our expectations in Q3 flowing forward. We really did not make significant changes to our Q4 expectations. So you know, our expectation for Q4 has been very consistent.

Jeff Farmer: Okay. that is helpful. And then, just as a follow-up, you touched on it, but you introduced the holiday menu today. And I am just curious in terms of how you guys are sort of leveraging menu news. Obviously, your senior peers have had some success in doing that, but just as it relates to the strategy in leveraging the menu news in terms of driving traffic or attracting new guests, or is there something new or different that you guys are doing now?

Lyle D. Tick: I do not know if it is new or different. it is consistent with how we have kind of built the growth drivers over time. So if you just kind of take a step back looking at the story, right, we kind of first, we built the kind of the value platform in the Pizookie Meal Deal. Then we unlocked the seasonal Pizookies, and that became kind of a second layer in the growth driver. And then with pizza, we started on the menu work. And. Right? And that together started to build and codify for us this strategy of you know, Pizookie's PMD and product as we call it.

And then as we connect that to our marketing and channel strategies, right, we refined, and we see that particularly pizookies and products work very strongly for us in the kind of social word-of-mouth influencer space. While the value platform works better in kind of broader paid media as kind of air cover to that. Right? And so we have been refining and moving that strategy forward. So we went from pizza, then we did, I think, the Wagyu burger, then we leveraged chicken sandwiches in Q3. As we go into Q4, we obviously have the pizookie layer. Continue to have that PMD air cover.

And now with the with the Q4 platform, we have some shareable sides and this kind of rift on the steak and slow roast category. And the only other thing I would I would add for context for you guys is, you know, we are we try and leverage as many tools as we have to advance our learning. Right? So earlier this year, similarly, what we are doing this holiday season, we use what we call a PMI, which is a national kind of window to get a scale test on the Wagyu burger, and it went really well. And so we are able to accelerate that onto the menu as we continue to refine that category.

So this holiday season, we feel really good about this steak product and the shareable sides. So we are doing that in the kind of national promotional window. That will be able to accelerate scale learning for us and inform and help us accelerate those category refreshes as we go forward. So try to leverage you know, the tools that we have to learn and evolve our menu renovations. Allison, thank you.

J. Todd Wilson: Thank you. Alright.

Lyle D. Tick: Bye.

J. Todd Wilson: Okay.

Lyle D. Tick: Oops. Sorry. Go ahead.

Jeff Farmer: I was not sure if I interrupted, Gordon. No. I just said helpful. Thank you. Appreciate it.

Lyle D. Tick: Cool. No worries.

Operator: Our next question will come from Alex Slagle with Jeff. Please go ahead.

Alex Slagle: Hey. Thanks, and, congrats on the work. I wanted to ask, I guess, on mix as a component of check. Others have seen some softening mix like alcohol and desserts and things like that recently. So wondering if you are seeing anything on that front and then related to the 4 q thoughts, are there any, like, capacity issues as you head up into the holidays that maybe add a bit of conservatism or is that not really an issue?

Lyle D. Tick: So again, I will start at a high level, and, Todd, you can. You know, from a mix point of view, we actually have not seen, you know, any sort of negative mix increase. You know? If anything, we are seeing some balancing out of that mix in moderation of check. As we have kind of managed you know, the multiple growth drivers going into Q3 and in Q4. And so we would still expect that check to moderate as we flagged in Q2. So we have not been seeing those mix challenges, so far. From a you know, from a volume point of view, you know, I do not see a real capacity issue.

I mean, certainly, we know during the holidays we will be very busy as we always are, and we are uniquely kind of structured to deal with large parties, which is a great thing for us over the holidays. But, you know, when I look at kind of our top restaurants, the top handful of restaurants and the AUVs that they are delivering, And what we kinda see every you know, Valentine's Day and Mother's Day, it gives me confidence that, you know, as we focus on being, you know, as efficient and as effective as we can, managing the shoulders and the transitions that we have the capacity to grow the business.

So, you know, I feel good about our ability to do that. As we head into Q4.

Alex Slagle: Okay. Can you remind us what sort of those that strongest cohort of restaurants looks like in terms of like, what kind of restaurant level margins they are producing and if there are, like, commonalities about how they execute or staff up or leverage things like that.

Lyle D. Tick: Yeah. I mean, look, when you look at them, I mean, the nice part about it is you know, as you. As you are looking at that kind of 10 plus million dollar AUV cohort of restaurants, Right? They exist across the country. Right? So we have we have probably the highest concentration among the West Coast, but we have those restaurants across the country. And then, you know, from a margin profile, know, obviously, they all at that level are throwing off great cash flow. But, you know, the specific margin will vary a little bit depending on the operating dynamic of the market that they are operating in. Is what I would say.

But, you know, what we are always looking at is we. As we talk about our outlier program is how do we take what the top cohorts are doing in terms of managing their business effectively and share that across and how do we continue to bring the bottom cohort up. I do not know if, Todd, you have any other specifics there.

J. Todd Wilson: Yeah. Alexander, the only thing I would add on is, you know, I talked a little bit in my prepared remarks about the breadth of our performance. You know, obviously, our top performer, top quartile, you know, as a group, those restaurants are pushing $10 million AUVs. And so you know, that is a very high performing group. But I think, you know, equally encouraging to us is we see growth across all of the quartiles. Right? And I mean growth in terms sales. I also mean the growth in terms of restaurant level profitability. So just kinda reiterating the point of we are seeing positive movements across the entirety of the portfolio.

Alex Slagle: Great. Thanks.

Lyle D. Tick: Thank you.

Operator: Our last question will come from Sharon Zackfia with William Blair. Please go ahead.

Sharon Zackfia: Hi, thanks for taking the question. I guess I am curious, as we are maybe settling into kind of a more normalized comp run rate, What do you think that means for unit level margin expansion? You have done a tremendous amount of recovery in the last few years. I mean, what do you what does a low-single-digit comp kind of get you going forward in unit level margin?

Lyle D. Tick: Again, I will start and then at least You know, so I guess I think the underpinning the thing that underpins all of that, Sharon, is the growth. Right? And I feel really confident in the engine we built over the past 2 plus years and as we go into Q4. You know, our ability to continue to drive traffic growth and drive top line growth as we continue to lap previous performance. So, you know, I think my confidence in the foundations we built and our ability drive that traffic growth is the you know, are the foundations of everything.

And then I think, you know, as we continue to do that, you know, our focus as we have always kinda talked about, is gonna be about how do we make sure that we are dropping more dollars to the bottom line and over time expand margin but not let just expanding percentage margin get in the way of doing the right thing. Make sure we continue to drive that traffic and drive more dollars to the bottom line.

I also think the only other color I give is you know, I think it is also connected to the menu work that we are So as we continue to drive traffic and then moderate check and continue to evolve the menu work and see people exploring the categories that we are renovating like they have with pizza, like they have with burgers and chicken, as we have seen there, that tends to have a benefit to us from both a dollar and a percentage margin point of view as we renovate the category. So you know, at kind of a high strategic level, I feel really good about the road map there.

J. Todd Wilson: Yeah. Sure. And I will add some color of. I mean, if you look at our guide for this year, I mean, we are clearly guiding to grow restaurant level dollars and restaurant level percentage versus a year ago. And, you know, the company's. To your point, the company's done that for many years. Yeah. I think there is there is always different dynamics at play. You know, we have talked on prior calls about, the different dynamics of commodities or whatever it may be. But I think to many of Lyle's comments, you have seen us be able to navigate all of those things still grow the top line, still grow the bottom line.

So you know, a high degree of confidence that we can continue to make those gains.

Sharon Zackfia: K. Thank you.

Lyle D. Tick: Thank you.

J. Todd Wilson: Thank you.

Operator: Ladies and gentlemen, this brings us to the end of today's meeting. We appreciate your time and participation, and you may now disconnect.

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