BJ's Restaurants (BJRI) Q1 2021 Earnings Call Transcript

BJ's Restaurants (BJRI -0.29%)
Q1 2021 Earnings Call
Apr 22, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the BJ's Restaurants, Inc. first-quarter 2021 earnings release and conference call. Today's conference call is being recorded. At this time, I would like to turn the conference over to Greg Trojan, chief executive officer.

Please go ahead, sir.

Greg Trojan -- Chief Executive Officer

Thank you very much, operator. Good afternoon, everyone, and welcome to BJ's Restaurants fiscal 2021 first-quarter investor conference call and webcast. I'm Greg Trojan, BJ's chief executive officer, and joining me on the call today is Greg Levin, our president and chief financial officer. We also have Greg Lynds, our chief development officer; and Kevin Mayer, our chief marketing officer, on hand for Q&A.

After the market closed today, we released our financial results for the first quarter of fiscal 2021, which ended Tuesday, March 30. You can view the full text of our earnings release on our website at www.bjsrestaurants.com. Our agenda today will 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 Greg Levin will provide some commentary on the quarter and the current environment.

After that, we'll open it up to questions. So Rana, go ahead, please.

Rana Schirmer -- Director of Securities and Exchange Commission Reporting

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 could cause the 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 22, 2021. 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 full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission. Greg?

Greg Trojan -- Chief Executive Officer

Thanks, Rana. I'm very pleased to report the positive momentum in our business continued and accelerated throughout the first quarter of 2021. Propelled by both improving dining room seating capacity in key markets and guests eager to return to our restaurants, our sales are continuing their steady recovery. The quarter began with weekly sales per restaurant averaging $66,000 in January as strict indoor dining restrictions remained in place in a number of states, including California, where we operate 62 of our 209 restaurants, where all on-premise dining was banned, including outdoor patios.

In February, our weekly sales average rose to 76,000 as certain states loosing restrictions, and we have the benefit of sales from outdoor patios in California that were allowed to open in late January. In March, the pace of our sales growth accelerated even further, with our weekly sales average increasing to 97,000, a 27% increase from February as California began allowing guests to dine indoors, albeit with limited seating capacity. Our sales increased by 50% in the span of the quarter, highlighting guests' appreciation of the BJ's concept. And I couldn't be prouder of our teams that continue to deliver our gold standard service in this rapidly evolving environment.

We continue to see positive momentum in April with our weekly sales per restaurant now averaging more than $100,000 a week. Additionally, on a comparable restaurant basis, sales are now within 7% of 2019 sales levels. In fact, more than one-third of our restaurants now have higher sales than in the same weeks in 2019, which is quite encouraging when you take into account that we're operating with still only approximately 70% of our seating capacity given ongoing restrictions. And that our late-night business, while improving, still lags 2019 levels as bar-centric late-night traffic remains challenged.

Offsetting these sales hurdles has been our team's ability to drive outdoor dining and off-premise sales. Regarding outdoor dining, we've installed temporary patio spaces in more than a third of our restaurants, which are currently adding approximately 10% to our effective seating capacity. Even as our dining rooms are allowed to open at higher seating capacity, some guests still prefer outdoor dining, especially as the weather continues to improve. We are even seeing guests book these outdoor spaces for special events such as birthday parties and other celebrations.

And we're entering a busy time for our restaurants with Mother's Day, Father's Day, and graduation season in the coming months, and anticipate these additional seats will continue to serve us well throughout the quarter. Next, our takeout and delivery sales have held up extremely well even as on-premise dining has begun to recover. Our off-premise weekly sales average per restaurant was more than $26,000 in the first quarter and has maintained at more than $25,000 to date in April. Our delivery and take-out sales remain more than double pre-COVID levels as our guests continue to take advantage of the convenience of enjoying BJ's in their homes, while also returning to our dining rooms.

We're encouraged that the off-premise innovation we introduced during the pandemic, including expanded family meals and our connected curbside service, remain very popular with our guests. We continue to believe that the habits such as these formed during the pandemic, which increased consumer convenience, will remain strong going forward. All told, we're very pleased to see both our in-restaurant sales and off-premise sales now higher than the levels in the fourth quarter of 2020, demonstrating strong momentum across all of our channels. As we welcome back into our restaurants, nothing is more critical than delivering our gold standard level of service on each and every visit.

Last year, we took a balanced approach to streamlining parts of our menu, which benefited our execution while maintaining BJ's tremendous variety, which is one of our key competitive advantages. And we continue to see the results in our NPS metrics. In fact, our dine-in NPS recommended score reached another all-time high in Q1, beating our previous mark set in Q4. The key to continuing to deliver our gold standard service as our sales volumes recover is hiring and retaining talented restaurant managers and hourly team members.

We estimate that to return to pre-COVID sales levels on a sustainable basis, we need to recruit and train more than 5,000 additional kitchens in front-of-house team members and another 125-plus restaurant managers. These restaurant leaders are critical to both strong execution today and to fuel our future growth as we ramp up our new restaurant openings. Much like our long-standing philosophy on opening new restaurants, where we always have prioritized the quality of openings over quantity, we will not compromise our hiring criteria as we seek only the best hospitality-focused team members. We've also made notable continued progress on several key initiatives, that we believe will be key sales drivers in the coming quarters and years, including our Beer Club and our virtual brand called Slo Roast.

In March, we launched our Beer Club to the majority of our California restaurants. As a reminder, our Beer Club is a subscription program where members pay $30 every two months for two unique and exclusive beers from our brewery team, as well as perks that include a free appetizer, a free Pizookie, large pizza, and $5 growler refills to go. While we're still in the early days of the broader California launch, we continue to be encouraged by the guest interest in and engagement with the program as it is driving both incremental visits and profit. Looking beyond California, we are encouraged to see the progress of updates to liquor laws in certain states that could enable us to offer our Beer Club in other large markets such as Texas and Florida.

Earlier this month, we expanded the test of our virtual brand, Slo Roast, to approximately 30 restaurants in California and Texas. Our survey results show top-tier satisfaction scores and a high level of guest incrementality, which supports our research and optimism that this brand can flourish alongside BJ's. We use learnings from our earlier testing to make adjustments to the menu, and we're now testing various price points to determine the best pricing structure to optimize sales and profits. We expect to be in a position to establish a broader rollout plan in the coming few months.

And no discussion of our growth prospects would be complete without mentioning our new restaurant openings. We remain on track to open our two 2021 openings in the second quarter located in Merrillville, Indiana; and Lansing, Michigan, which were already under construction at the outset of the pandemic. Our Merrillville restaurant will open this Monday, April 26, and we also intend to reopen our Richmond, Virginia location in the third quarter. Our pipeline for 2022 and beyond continues to build, and we remain incredibly optimistic about the opportunity for many more new future locations as we continue on our path to at least 425 domestic restaurants.

Reflecting on an unprecedented 12 months of operating during a pandemic, I remain amazed at the dexterity and ingenuity of our teams in our restaurants and at our restaurant support center. BJ's has a long-standing tradition of rigorous testing with an ability to move quickly to implement changes across our system. These efforts were supercharged during the pandemic as we evaluated and executed on many opportunities to optimize our business in such a rapidly changing environment. We are using the learnings of our most recent innovative work to build an even stronger innovation capability with a cross-functional team from key areas in our restaurant support center and select test restaurants, so we can learn even faster through testing and iterating on how to best approach our next opportunities.

Also in the past year, we have expanded our guest research capabilities. We're still in the early innings, but I believe our enhanced ability to identify top priority consumer needs and quickly filter and refine solutions which are bolstered -- with our bolstered innovation process will be a powerful driver of outsized performance going forward. Finally, I'd like to take a moment to share my immense gratitude to our restaurant team members. Our results wouldn't have been possible without the hard work and dedication of so many of our team members going above and beyond to welcome guests back to our restaurants with our world-class gold standard execution, which sets us apart.

We can see through consumer surveys that guests are enjoying their dining experience at BJ's more than ever, which is only possible with the best teams in the business. So now, let me turn it over to Greg to provide more detailed update from the quarter and current trends. Greg?

Greg Levin -- President and Chief Financial Officer

Thanks, Greg. As Greg just outlined, our sales continue to be largely dictated by capacity restrictions. Therefore, my commentary on Q1 and Q2 to date reflects where we are with the ever-changing national, state, and local restrictions and regulations regarding dining room limitations. Please remember, this commentary is subject to the risks and uncertainties associated with forward-looking statements as discussed in our filings with the Securities and Exchange Commission.

As restrictions eased throughout the quarter, especially in California, where we started with off-premise only in January and then added outdoor patios in February, followed by indoor dining in March, BJ's weekly sales increased impressively as we finished the last two weeks of March with average weekly sales greater than $100,000 per restaurant. Our comparable restaurant sales compared to fiscal 2019 improved sequentially as well from negative 36% in January to negative 31% in February and finally negative 17% this past March. Total revenues for Q1 were $223.3 million and we reported a net loss of $3.1 million and diluted net loss per share of $0.14 on a GAAP basis. The easing of dining room restrictions during the quarter allowed us to productively leverage certain variable and fixed costs in our business, resulting in restaurant-level operating margin of 11.5% and positive adjusted EBITDA of $12.7 million for the quarter.

Specifically, cost of sales came in at 25.1% for the quarter, which was in line with last year's first quarter. Sequentially, cost of sales came down 70 basis points from Q4, and that was driven primarily by decreases in cheese costs and our overall sales mix in the quarter. Labor came in at 36.6%, which was 420 basis points lower than the prior year. Adjustments we made at the beginning of COVID, including reducing our menu and continuing to drive off-premise sales, allowed us to leverage our kitchen and dining room labor compared to a year ago when COVID restrictions were just beginning.

While it is difficult to compare 2021 labor to last year, our 36.6% labor is only 40 basis points higher in Q1 of 2019 when our weekly average was 26% higher at $111,000, compared to $81,000 this past quarter. Our labor productivity is really a result of the adjustments I just mentioned regarding a slightly smaller, yet still a very broad menu, changes in management staffing levels based on weekly sales results, the continuing strength of our off-premise sales, and the leverage we are getting from the continued increase in weekly sales as capacity restrictions ease. Right now, our sales are ahead of our ability to hire the talented people needed to operate our restaurants at the level expected. As Greg Trojan mentioned, the key to continuing to deliver our gold standard service as our sales volumes recover is hiring and retaining talented restaurant managers and hourly team members.

Great people delivering our gold standard food, service, and hospitality is how we grow our sales volume beyond our prior levels, which enables us to manage labor as a percentage of sales at levels that productively contribute to bottom-line growth. Operating occupancy costs were 26.8% for the quarter, inclusive of about 1% of sales for marketing. Operating and occupancy costs averaged about $22,000 per restaurant operating week for Q1, representing a decrease of 2.6% compared to last year. Included in operating occupancy cost was over $1.3 million of operating expenses for temporary patios, which generated over $60 million in revenue for the quarter.

G&A for the quarter was $15.3 million. We are still targeting G&A of approximately $67 million for 2021, which includes more than $6 million for incentive compensation, compared to less than $500,000 booked in 2020 due to COVID and its impact on the business last year. Our G&A budget also includes $8 million related to equity compensation, compared to only $7 million in 2020. As always, depending on our results, the $6 million of incentive compensation may vary.

Now, turning to the balance sheet. As we previously reported, in January, we raised an additional $30 million of equity capital. And that, combined with our improving sales and productivity, resulted in us finishing the quarter with approximately $90.7 million of cash on our balance sheet and funded debt of $116.8 million. At current sales levels, we are now generating more than $2 million of cash per week.

With sales continuing to recover, subsequent to quarter-end, we paid down an additional $15 million on our credit line and plan to further reduce our debt balance in Q2 by another $10 million to $20 million, depending on the sales environment. But the bottom line is we have a very strong balance sheet, cash flow, and the capital necessary to opportunistically and aggressively pursue new restaurant expansion while further investing in our sales-driving initiatives. Shifting to today. As I said at the beginning of my prepared remarks, our sales continue to be governed by the varying capacity limitations imposed by local and state regulators.

While many state and local jurisdictions continue to ease their capacity, we have seen some states roll back the easing of dining room restrictions. For example, certain counties in both Washington and Oregon have reduced allowed dine-in capacity from 50% to 25% recently. Furthermore, despite some eliminating all restrictions, we continue to operate our restaurants with the safety of our team members and guests first, and therefore, continue to follow CDC guidelines of maintaining 6 feet of social distancing in our restaurants. This safety-first practice will cap our total capacity to around 70% to 75% in the near term.

However, with the strength of our off-premise sales and the continued use of temporary outdoor patios, we believe we have the opportunity to continue growing our sales sequentially each quarter until all restrictions are eliminated. As we noted in our press release today, on a comparable restaurant sales basis comparing current sales to 2019, we are down around 7% for the first three weeks of April. This equates to a weekly sales average of approximately $102,500 per restaurant so far in April. I'm encouraged by both the recovery of our dining room sales, which was led by California in late March when dining room restrictions were eased, as well as our ability to maintain off-premise sales at more than double our pre-COVID levels.

Going forward, we expect some modest sales benefit in the coming months, which are seasonally stronger historically with guests celebrating Mother's Day, Father's Day, and graduations with us, but believe sales will be range-bound until dining room capacities return to the 90-plus percent level, which generally will not happen until we can safely eliminate the 6 feet of social distancing. We are all hopeful this will be sometime in the second half of the year as the growing number of vaccinated Americans will further reduce the spread of COVID. With regard to the middle of the P&L, right now, we anticipate commodity inflation between 1.5% and 2% with cost of sales in the mid-25% range for the second quarter. This is slightly up versus Q1 as we are seeing more freight cost increases and other supply chain challenges as manufacturers and distributors ramp back up for increased restaurant sales.

At the current time, we have about 55% of our food commodities locked for the rest of this year. While labor as a percent of sales is trending back to more historical levels, as Greg Trojan noted, we estimate that in order to return to pre-COVID sales levels on a sustaining basis, we will need to recruit and train more than 5,000 kitchen and front-of-house team members and another 125-plus restaurant managers. While this is an investment in our business for the long term, it will put some upward pressure on our labor as a percent of sales compared to Q1. We are in the high-touch business in which our precise execution of every aspect of our business, including food, service, and hospitality drive long-term sales growth and therefore, profitability.

I'm anticipating G&A to be in the range of about $17 million, which will include about $2.1 million in equity compensation compared to $1.6 million for Q1 and increased investment spend as we ramp up our hiring of new managers and people to continue driving sales. Additionally, I'm expecting our diluted shares outstanding to be in the 24.6 million range for the second quarter. And finally, the positive and growing sales trends discussed today clearly highlight the work of our exceptional team members combined with the strength and attractiveness of the BJ's concept and the quality and level of hospitality our guests know and love. BJ's is positioned to not only excel today but also to emerge from the pandemic with strong opportunity to grow sales volumes and profitability exceeding pre-COVID levels.

Our solid balance sheet enables us to opportunistically reaccelerate new restaurant growth beginning next year as we enter a new normal operating environment and to continue investing in additional sales-driving initiatives like our Beer Club and guest research. We continue to believe that the BJ's concept can grow to at least 425 restaurants domestically and that the combination of our sales momentum, higher cash flows, and strong balance sheet can readily support an acceleration in our restaurant expansion program. Thank you for your time today, and we'll now open up the call to your questions. Operator?

Questions & Answers:

Operator

Thank you. [Operator instructions] And we go to our first question from Brian Bittner of Oppenheimer.

Brian Bittner -- Oppenheimer & Co. Inc. -- Analyst

Thank you. Good afternoon. Congratulations on the recovery you're seeing thus far in your business. Greg, you said in your prepared remarks that one-third of your stores are currently trending at higher sales volumes than experienced in April of '19.

Can you just maybe break out the commonalities in this cohort of stores? I'm sure they have higher seating capacity than the other stores and still have very high off-prem. But any more specific color you can give related to this group that's now outperforming the 2019 levels would be helpful. Is there late-night business coming back more quickly? Is the check averages a lot higher? Anything else you can give would be helpful on that.

Greg Levin -- President and Chief Financial Officer

Yeah. Brian, that's a great question. And obviously, yes, it's nice to have a third of our restaurants comping positive three weeks into April. Generally, I think what we see is those are in areas that have either pretty loose restrictions, so that's given us, obviously, the ability to have greater capacity than other areas.

And in some of those locations, like we have a few here in California that are comping on the positive side as well, and those generally have pretty large exterior or external patios right now that are temporary patios. And then there's been a little bit, to your point, of some late-night that's come back in there. And then these are restaurants that have really done some nice job on the off-premise. So they're holding on to that off-premise sales.

They've got the patio and the late night. It's a combination of that. And honestly, it's very mixed as well. Like I said, there's some California in there.

There's Texas in there. There's Arizona. It's very broad geographic.

Greg Trojan -- Chief Executive Officer

Brian, the other thing I'd add is even though there are some states that have virtually eliminated all restrictions, we're still operating -- Greg mentioned this. We're still operating with 6 feet of social distancing because we think, frankly, it's just the right thing to do. So even where you might be envisioning restaurants with very loose capacity restrictions, we're adhering to social distancing, which, in general, it varies by restaurant layout. Still caps our capacity at about 75%.

So just give you that information as background and context to those positive comps.

Brian Bittner -- Oppenheimer & Co. Inc. -- Analyst

Thank you for that. And just as my follow-up, Greg, you have given some color in past earnings calls about where margins could go as your sales restore. You've talked about a path to getting back to 2018 levels or even better. Now that you're sitting here operating against these volumes that are clearly improving closer to 2019 levels, can you update us on how you're thinking about margins in a 100% sales recapture scenario? I mean, it's clearly looking like that scenario is now imminent, but you did also talk a lot about the need to hire and train all these employees.

So any update on where you think margins go in a 100% recapture scenario?

Greg Levin -- President and Chief Financial Officer

Yeah. I think it's a little bit of a two-part question here, Brian. I think in the first part, as sales start to recover, we're going to need to bring those team members in and get the training. And there's going to be that investment cost in our business.

And I think in the shorter term, that makes it a little bit more challenging per se if you're at that 100% level. But I actually look at it secondly, and I think more importantly, and that is, I think the real opportunity for us, and we've talked about this a lot internally as we look at our business, and that is it's not so much 100% sales volume. We want to be 105%, 110% sales volume of where we were before. And ultimately, by holding on to the off-premise, the initiatives that Greg Trojan touched on, on Beer Club, I think Kevin and his team are leading up some of the things around our most valuable guests.

I think that gives us really this opportunity to take sales above the $110,000 weekly sales average that was kind of our historic trend line. And when we start to bring that above there, we're ultimately going to bring down more dollars down to the bottom line, and dollars is what we take to the bank. So I think there's that opportunity for more dollars per restaurant week coming to us as we grow our sales volumes. We do need to get through some of the, I think, short-term challenges here around hiring.

I'm hearing that across the industry from that perspective. But I like the road we have in front of us.

Brian Bittner -- Oppenheimer & Co. Inc. -- Analyst

Thank you. Thanks for the update.

Operator

And we'll go next to Jeffrey Bernstein of Barclays.

Jeffrey Bernstein -- Barclays Capital -- Analyst

Great. Thank you very much. Two questions as well. First, just on the -- as you're reopening the dining rooms, it seems like you're encouraged by the off-premise.

I think you mentioned April, $125,000, or maybe it was $100,000 average weekly sales. And just looking to clarify, I think you had said it was 25% of the $100,000 in average weekly sales was still in off-premise if that was true. I'm just trying to figure out how you measure the incrementality once the restaurants reopen their dining rooms, whether you have some examples of markets that are back to 100% in restaurant dining, and how incremental those to-go sales have been, that would be helpful. And then one follow-up.

Greg Trojan -- Chief Executive Officer

We don't know like from a micro basis, Jeffrey. I mean, what we know is -- you're correct, first of all, in that we're holding on to that level of about $25,000 a week, and that is occurring in the face of very significant ramp-up in dine-in sales, so which I've maintained for quite some time that delivery and takeout are separate occasions. There's going to be some pressure on them as dining rooms come back when there's no alternative. But they are filling a different need, right? And that's what we're seeing.

So we're seeing -- it's not like we're seeing a disproportionate differential in restaurants that have open dining rooms more than less. It's been very consistent that we're holding on to the sales volumes when dining rooms were constrained more generally, geographically, if that makes any sense. So again, we're encouraged that we're holding on to these sales, and it's our intention going forward is to grow our off-premise business. We think guests are certainly reacting to the product changes that we've made.

We think we have a lot of advantages with the variety of our menu. We've done a lot of product development at what we think are screaming values out there. So we think there's room to grow off of that $25,000 a week.

Jeffrey Bernstein -- Barclays Capital -- Analyst

Gotcha. Right. So it's 25% of your sales are currently to go, and those are really holding up even in markets where total sales are reverting back to historical levels?

Greg Trojan -- Chief Executive Officer

Correct.

Jeffrey Bernstein -- Barclays Capital -- Analyst

Gotcha. OK. And then just my follow-up in terms of labor because I know you guys emphasized it in your prepared remarks. First of all, the fact that it was down 400-and-some-odd basis points for the quarter, very impressive.

And I think you said it's actually quite close to the labor you saw as a percentage of sales two years ago, yet the average weekly sales are significantly lower. So I'm just wondering how much do you think is permanent or sustainable savings versus what's coming back? I don't know whether you can share a forecast for labor in 2Q or for 2021 with all that rehiring and training, but just trying to separate out what has to come back and maybe what is permanent savings or what you're expecting labor to be in the near term? Thank you.

Greg Levin -- President and Chief Financial Officer

Yeah. Jeff, I don't know if we have the answer to that just because the amount of training that we're expecting to come back in is going to be much more substantial than what we've seen over the last year in that regard. And the other side of it, as you think about the dining rooms open, you're attaching a server to that additional sale versus the leverage that comes from off-premise. So I think those two things generally will move our labor percentage up maybe a little bit versus what we saw in the Q1 time frame.

And in my prepared remarks, I tried to basically say, frankly, sales right now are running ahead of labor. They're not where we like them to be in regards to our traditional staffing models as much as our NPS scores are up and everything seems to be going in the right direction. The ability to hold on to those and from a perspective or sustainability, as we said, really comes down to making sure we've got the right team members on there. They're working the correct amount of hours and the right shifts so that they like and love working at BJ's from that standpoint.

So I think that the labor number gets a little bit up and down from that standpoint over this year. We have said in the past, and I forget the exact number here, but with the change in the menu and the things that we've addressed this year, we pulled out labor hours in both the kitchen and the prep in the morning and the kitchen hours and other things from that standpoint. And that will definitely stay out. The hard part about your question, Jeff, is really where inflation kind of moves into some of those positions within really the back of house or in what we call the kitchen area of our restaurants.

We know us, as well as the rest of the industry, are all fighting to get good people back into the restaurants, and that will put some inflationary pressure on there. So it's hard to kind of quantify labor hour savings versus what the dollar rates may be.

Greg Trojan -- Chief Executive Officer

And then ultimately, I would just say, as Greg was saying earlier, overall sales volumes will leverage our fixed labor. And off-premise, we think, is going to settle in at a much higher level than it was pre-COVID. So given the lower labor content up there, those are the offsets against what we are continuing to see is wage pressure and inflation.

Jeffrey Bernstein -- Barclays Capital -- Analyst

But it's fair to say, I think you just mentioned that you think labor as a percentage of sales would be higher than the 36.6% in the first quarter in the near term as you invest so heavily.

Greg Levin -- President and Chief Financial Officer

That's correct.

Greg Trojan -- Chief Executive Officer

Yes, exactly.

Greg Levin -- President and Chief Financial Officer

And I think that -- but I do think, just going on what Greg said, he does break -- I think a really -- I think he breaks it down a really effective way, and that is we talked about before, our hourly labor is down significantly year over year because of the changes we've made, the ability to get off-premise, and that number is going to go there. When we look at labor versus two years ago, it's really because that management labor is deleveraging off on the lower weekly sales average. So as that weekly sales average can get back to more normal layer or levels, that management labor should come down a little bit and while the hourly labor goes up. So if those two can offset, I think the ability to run more historical labor is out there from that perspective.

I just think in the short term, as we work through the pushes and pulls, it's going to be a little bit more difficult.

Jeffrey Bernstein -- Barclays Capital -- Analyst

Understood. Thank you.

Operator

And we'll go to our next question from Alex Slagle of Jefferies.

Alex Slagle -- Jefferies -- Analyst

Thanks. Just want to follow up on that conversation just kind of what else you think need to do to get the best people and retain them. I mean, do you think you need to raise wages more broadly? Or what else you might need to do to make sure you're able to execute like you want to, whether you'd consider capping capacity at certain locations or something like that that maybe we hadn't thought of?

Greg Trojan -- Chief Executive Officer

You know what, Alex, it's a good question. We have always had some advantages as a concept, particularly with our high volumes of being an attractive place to work financially, particularly front of house. But also, we've worked hard on our culture good place to be, etc. And even though there's a lot of pressure out there, I think we've hired about 750 people in the last three weeks, right? And we have not had to curtail hours of operation or take out seats in dining rooms at this point.

I mean, our team is handling the pressure well, and we are seeing success in hiring people. So the core of operations is creating the right place to work and the right conditions if you will. And so far, we're still optimistic. We remain optimistic we'll be able to negotiate through it all, but it's just going to -- it's tougher.

It's tougher right now.

Alex Slagle -- Jefferies -- Analyst

OK. And then a question on the barroom activity. And do you have a sense for what traffic looks like more recently in the later hours and the periods and how you expect the bar room activity, the pick-up as the restrictions loosen a little bit more and people get more comfortable? And do you have any -- just remind us what the historical mix or sales volume of that hard-hit period is?

Greg Levin -- President and Chief Financial Officer

Yeah. So, Alex, generally, that late-night business is somewhere in the $12,000 to $13,000 range. So when you start thinking about $100,000 or $110,000 week of sales, you're getting in 10%, 12% coming from that later night period. We have seen it slowly improve.

I think as stimulus checks came through in March, you had the NCAA tournament, gave a reason for people to start to venturing out a little bit more. And I think, again, vaccinations are playing into that where people are feeling more comfortable. But it's still down when I look at that business compared to the other times of the day, it's got our largest decrease on a percentage basis year over year. When I have to think about it, it's going to play out based on how people think about the pandemic itself and how different areas start to continue to ease restrictions.

So our view, at least probably through Q2, is it's still going to be on the softer side there. And then hopefully, as we get to the second half, we'll start to see not only our capacity increase within the rest of the restaurant but the ability to get a little bit more on that late night. That's why I think Q2, our weekly sales average as much as we like where they are right now, I think they're a little bit range-bound until this next level of improvement, and improvement meaning more vaccines and the COVID cases come down.

Greg Trojan -- Chief Executive Officer

Now, just as a reminder, we have curtailed operating hours and are closing our restaurants earlier than normal in most markets. We started to see enough volume in some markets where we're not going all the way to usual hours, but we are extending our closing hours by a bit, it's usually about an hour or so. And so we're seeing some of that business come back, but that's a big part of it, obviously, is we have to be open to drive the sales, but we want to make sure the demand is there.

Operator

And we'll go to our next question from David Tarantino of Baird.

David Tarantino -- Baird -- Analyst

I was wondering if you could comment on your views on how much the stimulus checks might be impacting the sales trends in the late March and April to-date period? And I know that's a tricky thing to isolate, but perhaps you can talk about what's happening in the restaurants that aren't seeing capacity changes during that period as an illustration.

Greg Trojan -- Chief Executive Officer

There really aren't any of those, so that's tough.

Greg Levin -- President and Chief Financial Officer

Yes. What I would tend to say is the sales volumes that we're seeing right now, just taking out the capacity changes. So we're looking at more maybe like a Texas and Florida that have had looser restrictions versus California see the business is the sales trends are very similar to sales trends in 2019. And that is you come into the March time frame and that's spring break, and in spring break, it's a little bit higher of a seasonality standpoint.

So we see sales increase in that standpoint in a lot of those existing markets. I think you put that with the vaccinations, and you put that with the stimulus check, and I do think there is kind of a couple of weeks there more in the kind of late March where the numbers bumped up. And then they probably come down a little bit, which tends to look at, frankly, how our sales trends were in prior years, taking obviously 2020 out of it. So I definitely think that there was some benefit to it, but it doesn't feel like two weeks later or three weeks later, the stimulus has gone and sales have declined some significant amount from that standpoint.

In fact, I'd probably say they generally with -- stay positive -- not stay positive, stayed up in regards to the sales levels.

David Tarantino -- Baird -- Analyst

And just, Greg, so I have the context, it sounds like a lot of those markets are close to being even to 2019. When did you start to see that happen? Was that, I guess, pre-stimulus checks, kind of early March, were they also kind of approaching 2019 levels? Or did you see that step up late March and into April?

Greg Levin -- President and Chief Financial Officer

I think we saw more of a step-up into kind of late March on those markets. But I would tend to tell you that the sales trends were similar to prior-year sales trends, meaning March generally is a higher weekly sales average trend for our weekly sales average for us than February and January is because of the spring break, because of how Easter might be. And then we saw those same type of patterns from that standpoint. But I do think that as the stimulus checks came in that kind of late March, mid to late March, that's when we saw that step up.

And I think consumers after that felt good about going out and they've kind of held on to that kind of dining trend that we've seen.

Greg Trojan -- Chief Executive Officer

David, another thing that might help answer your question again, indirectly, is we have seen some really solid check growth in our business. And the biggest driver of that check growth is party size, is that people are going out and they're calling friends and family and driving the average, like number of people in making up a check or a party a big growth factor. They're also ordering more per capita, even in alcohol. And like people are just like so glad to be out and they're spending more when they are out.

And we haven't seen that -- that wasn't like I've got a stimulus check, like let's go out and have a party. That has been very consistent. So I find that pretty interesting as it relates to the stimulus. There's no question that it helped, but we're seeing -- I think it's more fundamental human behavior of like glad to be out and be with friends and family that's going to be with us for some time.

David Tarantino -- Baird -- Analyst

Very helpful. Thank you.

Operator

And we'll go to our next question from Nicole Miller of Piper Sandler.

Nicole Miller -- Piper Sandler -- Analyst

Thank you. Good afternoon. I want to ask first about labor and the hiring. And I mean, it kind of sounds a little overwhelming, as you can imagine so.

Is there some perspective or context to how many BJ's employees you have in the field today to kind of right-size that? And then I know this is a super challenging question, but how many of the hires are familiar or worked with you in the past, how many are well versed in the restaurant industry space? And how many do you have to like really teach to do these jobs?

Greg Levin -- President and Chief Financial Officer

Yeah. Nicole, I'm trying to think through all the different questions that were in that one question, so to speak. So we, pre-pandemic, we had about 23,000 kind of hourly team members. So we're somewhere in the neighborhood of 17,000 to 18,000 today, which gets us back to that 5,000 that Greg Trojan kind of mentioned on this call from that perspective.

And then in regards to the hourly team members coming back, it's across the board from that standpoint. We obviously want people that have high integrity, have high hospitality, can handle the high volumes of BJ's from that perspective. And generally, we tend to look for people that have restaurant experience when they want to join us. The thing that we've got to see here is -- I believe it's in early September when the federal unemployment starts to run out or does run out.

And there might be a little bit more of an influx of people that come at that time frame. This set of unemployment insurance that's been given through the pandemic, and frankly, not going to debate whether right and wrong or indifferent from that standpoint, but it was given at a rate to really supplement or bring people in lower-paid job or in service-type jobs to make them whole. So there's less of an incentive sometimes for people to get back into some of these positions that are in the $15 to $20 hourly wage rate right now. And I think that might change in the September time frame as the unemployment insurance expires from the federal level.

So I don't know if that answers all of your question -- your entire question. It's hard to tell exactly how many have been in the restaurant space before versus haven't from that standpoint. But we've got a good reputation. As Greg Trojan was saying out there, we've been actually hiring a decent amount of people over the last couple of weeks.

Our retention levels right now are lower than they were, I believe, in 2019. So people enjoy working for us from that perspective. It's just the -- we're not only competing with our peer companies out there, and I know everybody is challenged with that, we're also right now kind of competing with the federal government and somewhat of the unemployment subsidies.

Nicole Miller -- Piper Sandler -- Analyst

That really does help. It makes sense. I know it's a really dynamic situation. The last question for me, you've always helped us think about leading indicators of same-store sales, and I would typically think value for the industry and for yourselves.

And then maybe it was the idea or notion of safety. And I'm just wondering now if it isn't like fun and entertainment. So does your guests study lead you in any direction of what the leading indicator of sales might be?

Greg Levin -- President and Chief Financial Officer

You know, I'll let them answer this. But thankfully, everything you just mentioned is BJ's, value, front-end entertainment, and safety. Those are all three things that we do very well.

Greg Trojan -- Chief Executive Officer

You must have been in some of our focus groups, Nicole, but very much -- we know that BJ's is a social gathering place. And for all those reasons, but really is at the core of the dining experience of our brand, and that is going to serve us in that -- has served us well, but particularly given the dynamic of coming out of the pandemic, I think, is a really great strength to have, for sure, sort of that high energy, comfortable gathering place. And we like structurally have the ability to serve large parties better than most concepts out there. I mean, we're set up to accommodate large parties without reservation, etc.

And we've been doing that well for a long period of time.

Nicole Miller -- Piper Sandler -- Analyst

Thanks for the update tonight. Appreciate it

Greg Trojan -- Chief Executive Officer

You're welcome.

Operator

And we'll move next to a question from John Glass of Morgan Stanley.

John Glass -- Morgan Stanley -- Analyst

Thanks very much. I wanted to ask about the two new emerging sales layers you've talked about: the Slo Roast virtual brand and the Beer Club. Any early sense of how we should think about the size of that opportunity relative to whatever else you want to think about, like maybe it's the overall off-premise business? And specifically in the Beer Club, you mentioned there's obviously regulatory issues in certain states, how many of your restaurants could you actually put that into now just given current regulations?

Greg Levin -- President and Chief Financial Officer

Yeah. On the Beer Club, I want to say it's somewhere in the neighborhood of 70% or so. And hopefully, as Greg Trojan said on the call that that number could expand into Texas and in Florida. In fact, I think Florida, they may have changed some of their laws just recently.

But taking those two states out, I believe the majority of the other states we can get into, which gives us pretty close to 70%. So you start thinking about that in the 150 range or so on the 210 restaurants. And then, John, real quick, we have not quantified where we think both of those can go for us. One of the things we've talked about in the Beer Club is -- and Greg mentioned it with all the different perks, our idea on the Beer Club is to drive people into our restaurants to spend more in our restaurants.

And at least in the -- in kind of the test of Sacramento and in all of California, we are seeing incremental visits from those guests. One of the things we'll have to see is as opens in California, will that incrementality even increase even more in that regard. But right now, the Beer Club is showing incremental guests come in -- or incremental visits to us, and they tend to use the perks and spend up. And it's, in that case, driving incremental revenue.

And Slo Roast is doing the same thing for us. It doesn't have as much, what's the word I'm looking for, cannibalization against our own product and the analysis that we've done. But we've kind of held back on giving specifics as we want to see how these things continue to grow over time in the test period. I don't know --

Greg Trojan -- Chief Executive Officer

John, part of the reason for that is, first of all, we haven't been at it that long. But when you think about the time frame, I mean, we consciously did this, we might have been a little crazy, but we rolled it out in Sacramento in the midst of the pandemic. And so it's operated under a few different conditions of dining room availability, right? So it's been interesting to watch because throughout -- even when our dining rooms were closed, folks were taking advantage of the off-premise offers and the growler refill, for example, it's really popular. So that's been gratifying to see, but we really need a more extended period of time with some sustainable dining rooms open to understand where it's really going to settle out.

So we're obviously very encouraged because the micro metrics and the dynamics of the program look like guests are really responding well. That's the most important thing. But how big it can be and how this grows, we just need a little more time to see it mature a little bit before we have a better idea.

John Glass -- Morgan Stanley -- Analyst

Thanks. And maybe just a more detailed question just on the first quarter and store margins. What were the discrete COVID-related costs? I know you talked about -- and maybe they go both ways, maybe you had better insurance experience because in-restaurant experience was less. You may have had more costs associated with pay-related.

What were those puts and takes on the COVID basis in the first quarter that may not persist in the future?

Greg Levin -- President and Chief Financial Officer

You know, John, if I had to think about those costs, I think they're around the patio, I'm just trying to think of things that we've changed in our business. And I kind of brought at least one of them up on the call was the $1.3 million that we spent on patios that we didn't have before. There's obviously some PP&E and stuff like that that's probably in the $200,000 to $300,000 range in there. It's honestly from a direct cost, probably in the neighborhood of $2 million or so that I just think off the top of my head.

It's hard to discuss the insurance side of it because the insurance markets were just crazy last year. And they, unfortunately, have no relationship to the underlying business in regards to how you're managing claims and other things. The insurance market is just -- are really what I would call a very hard market. That, again, is something we haven't seen in 10-plus years, which, again, doesn't really reflect that having less people in the dining room, therefore, your slip and falls might be down, or general liability insurance should be down.

The fact of the matter is the insurance market was higher, and we self-insure on that. So if I had to think pure direct costs, it's somewhere in the neighborhood of about $2 million. The only other thing that I -- and I don't have the number in front of me here is the labor. We've spent a lot of money on overtime.

And as Greg touched upon, it really comes down to hiring those other team members to bring them on board that can reduce overtime, which can help us manage the labor cost a little bit better but also give better quality of life for everybody in our restaurants.

John Glass -- Morgan Stanley -- Analyst

That's great. Thank you.

Operator

And we'll move to our next question from James Rutherford of Stephens Inc.

James Rutherford -- Stephens Inc. -- Analyst

Yes. Thanks for all the details so far. Most of mine have been asked, so I'll just do a couple of bookkeeping things if that's all right. First, within that $25,000 of off-premise weekly sales, could you share the split between curbside and delivery? And within that delivery bucket, what's the split of first-party and third-party, please?

Greg Levin -- President and Chief Financial Officer

I'm just kind of looking at how the sales kind of played out here. It's probably -- it's pretty close to 50-50 looking at the number. It might be 55% delivery, 45% take-out. But I would probably think, James, it's 50-50.

And then on delivery, out of that, a good 85% of it's going to be – actually, probably closer to 90% of it's going to be third-party delivery. Frankly, all of it's going to be third-party delivery, except about 10% of it's what we call our white label, where they kind of go through our website versus going through a third-party aggregator site.

James Rutherford -- Stephens Inc. -- Analyst

Got it. OK. Thank you for that. And then one more.

Within your one-year comp, what is price running today? And do you foresee pushing a little bit harder on price given demand seems to be outstripping supply and given the ongoing wage inflation picture?

Greg Trojan -- Chief Executive Officer

Actually, you know, our -- thank you for asking that because I think it's an important element of where the business is right now. And I mentioned earlier that we're really happy to see guest numbers and incidence driving some healthy check growth. And we're taking that as an opportunity to price less, not more. I think it's one of the things that drives BJ's volumes and traffic is the fundamental value of our concept.

So we view this as an opportunity to invest in value, while we have some of these other dynamics working in our favor. So I would say we've been pricing in the two to -- low to mid-2s in the last few years, we're a good 100 basis points or so below that.

James Rutherford -- Stephens Inc. -- Analyst

OK. Thanks very much and congrats on the results here.

Greg Levin -- President and Chief Financial Officer

Thank you.

Greg Trojan -- Chief Executive Officer

Thank you.

Operator

And we'll go to our next question from Brian Mullan of Deutsche Bank.

Brian Mullan -- Deutsche Bank -- Analyst

Thank you. I was just hoping you could talk about current development expectations for 2022. Maybe some color or context around current thinking on how many units might be realistic next year? What are some of the key factors that will determine where that winds up in the end? And then is the intention right now to accelerate that number in 2023 just given the lead time the development pipelines tend to have?

Greg Levin -- President and Chief Financial Officer

So, Brian, so when we think about the business, the question overall, ultimately, I think what we want to get to is getting ourselves back to a restaurant growth of minimum 5% a year from that standpoint. So you start thinking about 200 restaurants, 5% puts you somewhere in the neighborhood of 10. I think going from two -- let's call it three this year because we're going to reopen our Richmond, which is going to act like a new restaurant opening for us in regards to hiring, training, etc. Moving from that kind of three to next year is probably, and we said this before, in the eight to 10 range or so going into 2022.

I think going into 2023, we would get above that again and start to move that into the low teens. We've done as many as, I'm looking at Greg Lynds, like 17 restaurants --

Greg Lynds -- Chief Development Officer

Eighteen at the beginning of year. Yes.

Greg Levin -- President and Chief Financial Officer

We've done 18 restaurants in a year, so we know we can get ourselves back there. We're going to do it with quality. We're not going to race to quantity from that standpoint, but we want to make sure we always have great quality sites and are building that pipeline. And really, we've said this before, and I think there's a good opportunity for us to exceed this.

But that would be somewhere in that 5%, 6%, 7% unit growth, start thinking about 2% to 3% comp sales and you get yourself to around 10% revenue growth. And then our ability to leverage in the middle of the P&L allows us to drive EBITDA earnings growth into the low double digits.

Brian Mullan -- Deutsche Bank -- Analyst

OK. Thank you. That's great. And then just a follow-up, just a quick one on capital allocation.

In the past, you've carried a bit of modest leverage and you paid a dividend. I mean, do you view the dividend as necessary anymore coming out of this? And then what might you need to see to begin to feel comfortable doing share repurchase? I know we just went through development, which is the use of capex. But even with that, it seems like in a normalized year, the free cash flow is pretty attractive. So just wondering your latest thoughts, if anything has changed relative to how you used to do things?

Greg Levin -- President and Chief Financial Officer

Yeah. I think, look, this is something that we would obviously get together with our board of directors as we go through and put together the details of our plans as we come out of COVID from that perspective. But if we're in a position where we have significant amount of excess cash coming out of our business, we would look to determine what is the best use of that excess cash, which would mean to start thinking about a share repurchase or dividend program at that time. I think where we are right now, it's still a little bit early to start to put that on the table from that perspective.

I think we want to see the sustainability really start to see ourselves moving back to capacity restrictions being eased, so we can get to 100% capacity or 90-plus percent capacity. And when we start to see that, I think that's when we start to think about how we want to use our free cash flow in addition to what's extra after we continue to build new restaurants.

Greg Trojan -- Chief Executive Officer

The only thing I'd add to that is -- one thing I can say with a lot of confidence is that we would not change our conservative approach to the balance sheet. As I mean, we don't need another year like we just had to remind us of the advantage of running our business that way. So that's one thing that I don't think we have any intention on changing. And the other is the first priority is going to be the best use of capital is finding productive ways to grow our sales and grow our business, either through new restaurant openings or improving the restaurants that we have.

And then we'd look to dividends and share repurchases from there in that order.

Brian Mullan -- Deutsche Bank -- Analyst

Thank you.

Operator

And our last question comes from Sharon Zackfia of William Blair.

Sharon Zackfia -- William Blair -- Analyst

Good afternoon. Sorry if I missed this, but in terms of the labor and kind of getting back to the staffing, you'd like both hourly and managerial, how long do you think that would take? I mean, is that something you expect to be made whole on here in 2021? And how do you kind of juxtapose that challenge with labor with the development accelerating into 2022?

Greg Trojan -- Chief Executive Officer

That's a good question. Look, we don't have a crystal ball on this. It's our intention to certainly catch up to our sales volumes. Now, we're still not doing quite the sales levels yet, and you do have capacity restrictions.

So we don't have to get all these folks hired tomorrow, right? But if and as we would hope and expect, we continue to see progress on the sales front, and we'd like to see -- I actually think Greg's point on unemployment pulling back, we've even seen some states that are going to be joining the federal unemployment programs as well. That's going to be of help. And our hope would be by the holiday season, we'd be in a much more normalized place in terms of staffing, where sales and our staffing have reached a more normal equilibrium. And because we do need to hire managers, obviously, and establish that pipeline, but the numbers we're talking about are, Sharon, we have a high degree of confidence that we don't put new managers in new restaurants.

Obviously, they all count as a manager here. But we think that we can manage through, and the kind of numbers we're talking about growing into are imminently manageable from a manager perspective. And because they're new trade areas, they aren't really impacted by the levels of where we are and hourly workers, right? So I think you're asking a really good question on the balance of how those all work together, but that's how I'm thinking about it.

Sharon Zackfia -- William Blair -- Analyst

Can I just ask a follow-up? Is the labor dynamic more stressed on front of house? And I ask that because I'm trying to figure out with Slo Roast, the virtual concept, how you're protecting the kitchens if there is some shortage impacting kitchen capacity.

Greg Trojan -- Chief Executive Officer

Actually, that's a great question because typically, in the last few years, kitchen has been the most stressed. By a fairly wide margin, it's like finding front-of-house folks, not that it's anything is easy in the labor markets for the last couple of years. But we've been much more stressed in terms of filling kitchen jobs. And interestingly, I'd say in part because we were still fairly staffed in our kitchens, there's a kind of a fixed amount of hours you need to run our kitchens, that you're not going from the same low levels.

When dining rooms aren't open, we don't have many front-of-house people. So we're going from not zero but close. We had a good cadre of folks doing on the takeout and off-premise side of the business, but not nearly the number of front-of-house you need to run a dining room, right? So there's much -- there's more stress to the system on the front of house, which is different than it's been in recent history.

Sharon Zackfia -- William Blair -- Analyst

Thank you.

Greg Trojan -- Chief Executive Officer

You're welcome.

Operator

[Operator signoff]

Duration: 68 minutes

Call participants:

Greg Trojan -- Chief Executive Officer

Rana Schirmer -- Director of Securities and Exchange Commission Reporting

Greg Levin -- President and Chief Financial Officer

Brian Bittner -- Oppenheimer & Co. Inc. -- Analyst

Jeffrey Bernstein -- Barclays Capital -- Analyst

Alex Slagle -- Jefferies -- Analyst

David Tarantino -- Baird -- Analyst

Nicole Miller -- Piper Sandler -- Analyst

John Glass -- Morgan Stanley -- Analyst

James Rutherford -- Stephens Inc. -- Analyst

Brian Mullan -- Deutsche Bank -- Analyst

Greg Lynds -- Chief Development Officer

Sharon Zackfia -- William Blair -- Analyst

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