BJs Restaurants (BJRI) Q4 2021 Earnings Call Transcript

BJs Restaurants (BJRI 2.15%)
Q4 2021 Earnings Call
Feb 17, 2022, 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. fourth 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 Levin, chief executive officer and president.

Please go ahead, sir.

Greg Levin -- Chief Executive Officer

Thank you, operator. Good afternoon, everyone, and welcome to BJ's Restaurants fiscal 2021 fourth-quarter investor conference call and webcast. I'm Greg Levin, BJ's chief executive officer and president. And joining me on the call today is Tom Houdek, our chief financial officer.

We also have Kevin Mayer, our chief growth and brand officer; and Greg Lynds, our chief development officer on hand for Q&A. After the market closed today, we released our financial results for the fiscal 2021 fourth quarter and year ended Tuesday, December 28, 2021. 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 Tom Houdek will provide some commentary on the quarter and the current environment. After that, we will open it up to questions. Rana, please go ahead.

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 may cause 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, February 17, 2022. 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 risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission. Greg?

Greg Levin -- Chief Executive Officer

Thank you, Rana. The pandemic has taught us to remain steadfast in our long-term strategy and operating principles, and to prepare for new scenario as operating restaurants during these periods requires innovative and agile teams to quickly respond to changes in the environment. In this regard, Q4 was no exception. So let me take a moment to thank the BJ's teams that once again proved we have the best team members in the industry by providing our guests the gold standard service they expect through the omicron's surge that is thankfully in retreat.

For BJ's, we see encouraging signs in our business every day as our staffing continues to return to pre-pandemic levels, which allows us to expand hours, and capacity in our restaurants while serving guests the full BJ's menu. We have talked in recent calls about the impact that labor availability had on our ability to operate at capacity. And to that point, we've hired more than 7,000 team members since the start of the fourth quarter, and we are thrilled to have them on board as part of the BJ's family. Against this backdrop, BJ's generated record Q4 revenue, meeting our previous high set in 2019, even with the significant COVID impact from the omicron surge starting in December.

During the quarter, our two-year comparable restaurant sales went from negative 1.4% in October to positive 1.8% in November. The top-line improvement occurred as the operating environment stabilized, and more than half of our restaurants were staffed at pre-pandemic levels by the end of November. In mid-December, as the casual dining industry began to experience omicron-related headwinds, our positive two-year comp trend turned negative, and we ended December down 3.3%. The sudden contraction in comp sales led by a pullback from guests, heavy rain in California in December, and an unprecedented level of team member exclusions deleverage margins during what is normally one of our highest sales periods of the year.

Despite these challenges, we were able to drive average weekly sales of more than $125,000 the week before Christmas, which was our highest sales week of the year, highlighting the affinity guests have for our concept and the sales levels our restaurants are capable of, even with limited staffing and reduced hours. While Tom will go into the cost side of the business in more detail, we continue to experience high inflation in Q4. Specifically, our fresh meats, including rib-eye, prime rib, Tri Tip and pork ribs experienced some of our largest year-over-year cost increases. Related to labor costs, market rates continue to tick up, albeit at a slower quarterly sequential increase than the past couple of quarters.

And given our restaffing initiative, we incurred extra hours on a short-term basis, as we invested in training and experienced higher than typical overtime due to COVID-related exclusions. During the quarter, we were able to rebuild our manager pars to pre-COVID staffing levels. Now with the restaurant manager teams in place, we continue making progress on our hourly team member staffing, which will allow us to build sales and deliver on our gold standard level of operational excellence. To mitigate some of the recent inflation impact, we implemented rounds of menu pricing of 1.4% in November and 2% again in early February.

We are carefully balancing the overall pricing to deliver attractive margins as sales recover with pricing rounds designed to limit any impact to guest traffic. To date, we have not seen a negative guest reaction to pricing actions, and we are continuously monitoring this to ensure our approach to pricing is aligned with our short- and long-term sales and profit goals. Now as I enter my sixth month as CEO, I remain highly confident in BJ's ability to return to industry-leading results based on four key factors: our differentiated concept and sales and product initiatives, our team members, culture and gold standard service, our guest affinity to our brand offering value and hospitality and are very significant near- and long-term restaurant expansion opportunity. Our strategy and initiatives going forward for each of these key factors is in part based on the learnings from our recently completed most valuable guest research.

To put that in context, our most valuable guests come to BJ's for a social dining escape where they enjoy the comfort of the familiar transformed to Brewhouse Fabulous. Our guests responded that they love the extraordinary mix of upscale, yet approachable ambience, and BJ's menu and food that clearly exceeds other casual dining concepts at an extraordinary value. Through these learnings, we will be launching a remodel program later this year to address short-term and long-term benefits, including elevating the experience to further engage the senses of our guests, solidifying our Brewhouse authority, and expanding table capacity through some changes in our dining room layout that should provide a nice lift in sales going forward. I look forward to sharing more on this effort in the coming quarters as we finish designing the full scope of remodel options and begin this rollout.

With regard to menu, we heard consistently from our best guests their love of favorites and familiar dishes with a Brewhouse twist. This phrase we heard -- the phrase we heard directly from guests is the comfort of a familiar transformed to Brewhouse Fabulous. In addition to the familiar, we also heard the breadth of our menu as a key differentiator compared to our peers. So maintaining breadth is important but making sure it matches with BJ's core menu items will be a focus for us going forward.

For example, some of our best-selling menu items that have that Brewhouse twist include our Brewhouse blonde fish 'n' chips made with BJ blonde beer, or our deep dish Ziti that goes to our pizza oven in a deep dish pizza pan. Our chief brand and growth officer, along with our head of culinary, are completing a category-by-category analysis of all of our menu items. Our goal is to make sure we maintain our breadth, but with more focus on the core BJ's. As I noted earlier, familiar items that our guests understand and identify with, but transformed to Brewhouse fabulous.

Price point affordability is another key area for our guests. We delivered tremendous overall value and received high marks in our guest research for both value and food quality. However, there is an opportunity to make sure that we have a clear price point affordability on some key menu items while at the same time, allowing guests to indulge and spend up as they desire. We also have an opportunity to increase value on some items based on our research.

While this is a challenging topic to address in an inflationary environment, it does influence our menu strategy going forward. Our broad and differentiated menu is capable of maintaining this balance between introductory prices for some menu items while allowing for menu creativity for indulgent items. We are already attacking these opportunities today. For example, our new lunch special test has seen a more than 600 basis point improvement in traffic compared to our control group.

We are also increasing value on some of our most popular dishes by adding additional sauce to our chicken alfredo pasta, increasing the portion on our side for our seafood taco. And we just recently introduced a larger shareable pizza at a slightly higher price point to replace our small pizza, enhancing the value statement and quality of our signature craveable deep dish pizza offering. Our guests love the service and hospitality that our team members deliver every day. We heard comments like hospitality you can't get anywhere else, and it's the people who make me feel comfortable and special when I go to BJ's.

At the same time, for those that have been following BJ's over the last year, we have hired a lot of new faces, and we are excited to have them on board and become part of the BJ's family. But we need to ensure that each one of these new team members is delivering the BJ's gold standard level of operational excellence and gracious hospitality. Our operations leadership team and our talent department are developing new training programs so we can increase the distance between BJ's and our peers in delivering an experience you can't get in any other casual dining concept. To that point, we are continually optimizing our restaurant training programs and technology to help our team members be highly effective in their current roles and prepare for the future opportunities across our growing system.

Engagement at our restaurants is very strong, aided recently by an internal online social platform where our managers can share accomplishments, best practices, and culture-building activities at their restaurants. We are so pleased with the level of engagement and increased connectivity between restaurants that will be expanding access to this platform to all our hourly team members later next month. We believe providing best-in-class training, advanced opportunities and engaging workplaces are key to attracting and retaining our talented team members. We are also applying our deep learnings from our guests as we build our guest 360 digital platform.

We are just beginning to use this capability in our website personalization, programmatic targeting, and segmented loyalty campaigns. In the near future, we will also have the ability to do more one-to-one gamification. These efforts will build a stronger engagement with our guests and provide an enhanced and leverageable marketing capability that will make a difference in the future. Regarding some of our other sales-driving initiatives, we have seen continued positive momentum in the early stage of our catering and beer club initiatives.

Catering showed progress in Q4 as we did over $400,000 in off-premise catering in the fourth quarter with just one company. And we have additional $150,000 of Q1 sales either completed or scheduled to be completed in the coming weeks with that same company, showing the scale and recurring nature of this type of business. This is a new skill set and revenue channel that we did not have a year ago. We have high expectations for our catering business, especially as businesses more fully be opened later this year.

Next, our Beer Club that has rolled out across most of our California restaurants continues to add new members. The level of the engagement and additional traffic driven to our restaurants is surpassing our expectations. This year, we will continue fine-tuning the membership program and testing other benefits for members to make sure we have the best offering possible before expanding to other key markets. Before I move on to our restaurant growth opportunity, I think it's important to note that for us to provide a higher quality differentiated casual dining experience, we will also remain focused on eliminating inefficiencies and driving productivity through our organization.

While nothing can substitute for the leverage from driving top-line sales, we are working hard to minimize cost and efficiencies in our business given the current environment around supply chain, labor staffing, and overall inflation. About six to seven years ago, we implemented Project Q to go after these cost savings. While Project Q never went away, it is being elevated today as a strategic priority, given today's environment. Our supply chain team and operators have already identified new opportunities that we will be testing over the next several months to help us mitigate inflationary costs.

Additionally, as supply chains normalize, we will once again be in a much better position to proactively reverse auction and bed many operating costs that have creeped during the pandemic. In fact, we were recently able to reduce certain takeout-related costs as more suppliers came back online, and we were able to proactively bid. Last, but very importantly, is our significant near- and long-term restaurant growth opportunity. We have a terrific pipeline of sites identified for new BJ's restaurants in 2022 and beyond.

We have been unwavering in our real estate standards for top sites and premier trade areas. And we believe our openings in the next few years will be some of our best yet. Demonstrating our ability to drive strong sales to new restaurants we continue to be encouraged by our recent restaurant openings. Our Class of 2021 restaurant openings continue to exceed both our internal targets and the sales levels for other BJ's.

We are targeting as many as 8 new restaurants in 2022, but the final number depends on timing of permits and receiving critical equipment such as HVAC systems. Remember, we have a clear path to at least 425 domestic locations, which is about double our current footprint. I'd also like to take a moment to highlight our recent work and success on ESG initiatives as I know this is an important topic to our guests, team members, communities, shareholders, and other stakeholders. We have maintained a top governance score of a one out of 10 as rated by ISS QualityScores.

Recently, we improved our social score to a two out of 10, which is a leading score for our industry after publishing a number of documents highlighting our human resources, our diversity and inclusion and other labor-related policies and programs. Finally, we also improved our environmental score in Q4, though we have more work ahead of us on this front. We will be engaging with an outside environmental consultant to help us determine our strategic priorities for this important aspect of our business. We are proud of the strategy we have made across the ESG spectrum and are committed to pursuing and reporting on additional initiatives and progress on this time.

I'd like to finish by taking a moment to once again acknowledge every one of our team members. The omicron surge provides a new level of disruption to our operations and I truly appreciate all their hard work and dedication to manage through the most challenging days to deliver gold standard experiences to our guests. Now let me turn it over to Tom to provide a more detailed update for the quarter and current trends. Tom?

Tom Houdek -- Chief Financial Officer

Thanks, Greg, and good afternoon, everyone. I will provide details of the quarter and some forward-looking views. Please remember this commentary is subject to the risks and uncertainties associated with forward-looking statements as discussed in our filings with the SEC. For the fourth quarter, we reported total sales of $291.3 million, our sales increased nearly 50% versus Q4 2020 and came in slightly ahead of Q4 2019, which makes it our highest Q4 sales ever.

On a comparable restaurant basis, sales increased by 46% compared to Q4 2020. And while we were on track to meet or exceed 2019 levels, the impact of -- with the impact of omicron, Q4 2021 comparable restaurant sales declined 1.1% during -- compared to Q4 2019. The late quarter sales impact from omicron and continued inflationary pressures led to restaurant-level operating margins of 10.1%, which improved by 350 basis points as compared to Q4 2020 but trailed Q4 2019 by 580 basis points. Adjusted EBITDA was $13.7 million and 4.7% of sales in our fourth quarter, beating Q4 2020 EBITDA but behind Q4 2019 EBITDA.

We reported a net loss of $4.7 million and diluted net loss per share of $0.20 on a GAAP basis. We started the quarter with October weekly sales per restaurant averaging $103,000 and comparable sales were 1.4% behind October 2019 levels. Encouragingly, our sales accelerated in November and as COVID cases declined and we added restaurant team members, we increased our weekly sales to $108,000 November, which was 1.8% above 2019 levels on a comparable restaurant basis. In November, on-premise sales were within 20 -- 10 percentage points of 2019 levels, and our off-premise sales were more than double 2019 levels.

We maintained positive two-year comparable restaurant sales in the first weeks of December and sales continued to build sequentially week over week until the last week of December when omicron's impact was the most severe and we closed for Christmas, which fell on a Saturday this year. In fact, we posted our highest sales week of the year at more than $125,000 per restaurant in the week before Christmas despite the building omicron pressures in a number of our restaurants still being understaffed. The late December pressures pushed the month to negative 3.3% in the quarter to negative 1.1% compared to 2019. Moving to expenses.

Our cost of sales in the quarter was 27.4% of sales, which was 20 basis points higher than last quarter and unfavorable to the prior year and to the fourth quarter of 2019. The food cost inflation of approximately 10% continued in Q4, consistent with Q3, and was driven by our popular slow-roasted meats and other proteins. As a reminder, we serve only fresh meats to maintain our quality standards, which have experienced some of the highest impacts from inflation. And because they are fresh, many of these meat products cannot be contracted for long periods of time.

We expect prices on key commodity items in our food back to moderate with the supply chain gradually normalizing over the course of 2022. Therefore, we have locked into less annual pricing agreements with our suppliers than usual in order to have the ability to benefit if prices decline. Labor and benefit expenses at 37.9% of sales in the quarter were favorable to the prior year, but unfavorable to the fourth quarter of 2019. We historically leveraged sales and drive margins with very strong sales in the last weeks of the year, which were impacted by the late December omicron surge.

We are very encouraged to have ended the fourth quarter fully staffed in terms of restaurant managers that we did deleverage against these higher fixed costs when sales declined late in the quarter. Our training and overtime hours remained elevated in the quarter due to strong hiring and impacted labor as a percentage of sales by 60 basis points compared to Q4 2019. We anticipate these investments will drive meaningful sales growth in the near term and will more than offset -- more than offset by the incremental profit from the increased sales we can generate. If you see in operating expenses at 24.6% of sales in the quarter were favorable to the prior year, but unfavorable to the fourth quarter of 2019.

We increased our marketing spend in the quarter to 1.9% of sales from the low 1% in the first three quarters of the year, which still remain below pre-COVID levels. We are encouraged by our ability to maintain off-premise sales at double our pre-COVID levels, which results in certain costs such as to-go packaging and third-party delivery commissions remaining higher than periods with lower off-premise sales. We also continued to invest in refreshing certain restaurants too like new first class as we prepare to welcome back more guests to our restaurants. As Greg mentioned, we are redoubling our efforts to identify and implement cost savings across our restaurant operations.

Our dual mandate is define opportunity to save while also maintaining our highest standards for our atmosphere service and food quality. We are committed to not impacting what makes BJ's special and keeps our best guests coming back time and time again. G&A for the fourth quarter was $18.4 million. Given the environment at the start of 2022, I anticipate G&A to be in the $17.5 million to $18 million range for Q1.

We expect to ramp up G&A spending as the year progresses and conditions improve including investments that enable higher new restaurant operating levels and build operating capabilities like resuming in-person operations development meetings, including our career development conference. I expect full-year G&A to be in the $76 million area, including an additional $2 million in Q4 as 2022 is a 53-week year. Turning to the balance sheet. We refinanced our credit facility in November.

We maintained our $215 million capacity, and we were able to return to terms consistent with our pre-COVID facility. We repaid an additional $21.8 million of debt in the fourth quarter, reducing our debt balance to $50 million, and we ended the quarter with net debt of about $11 million. Our strong liquidity enables us to fuel growth with construction now underway on five new restaurants and with more slated to break ground in the coming weeks and months. Our new restaurant pipeline is robust and filled with high potential sites that are a mix of infill in some of our most successful markets and expansion into adjacent new markets.

Given the challenges of the last two years, we are very pleased with the strength of our balance sheet and will remain consistent in our approach of prioritizing growth-driving investments to build new restaurants, improve our existing restaurants, and fund sales-driving initiatives. We are targeting opening as many as eight new restaurants in 2022, though delays in permitting and receiving critical components such as HVAC systems, could impact the actual number of restaurants we opened this year. Our 2022 capex budget of $80 million to $90 million includes as many as eight restaurant openings during the year and starting construction on more for 2023 opening dates in addition to starting the remodel initiative Greg outlined. Looking to the first quarter of 2022, omicron had a significant impact on our business in January.

To put omicron in context of past COVID waves, the number of team members excluded for COVID-positive tests in the peak omicron weeks of late December and the first half of January was six times higher than the peaks of past waves. The amount of team member exclusions required us to limit our operating hours and menu in a large number of locations throughout January resulting in average weekly sales of $96,000 as compared to in comparable restaurant sales of negative 9% compared to the same period in 2020. As COVID cases receded, our average weekly restaurant sales have recovered to more than $106,000 to date in February, including the impact from a severe winter storm earlier in the month. In the most recent week, our average weekly sales increased to more than $116,000, which included both a slow day of Super Bowl Sunday and a strong Valentine's Day Monday.

Our two-year comparable restaurant sales have returned to positive in February to date when adjusting for weather and the shift in the timing of President's Day weekend. In light of the severe disruption omicron caused to our sales in January, we are now expecting restaurant margins to remain in the 10% area for Q1 2022 and which would be similar to Q4 2021 levels. The degree of sales deleveraging in January will weigh on the full quarter margins though we are encouraged by the margin recovery accompanying the higher sales in February to date as compared to January. We expect restaurant margins to continue recovering along with sales to the low to mid-teens as 2022 progresses.

Finally, I would like to highlight three elements that impacted recent sales, but that we expect to benefit future periods, restaurant staffing, challenged dayparts, and media spend. First, restaurant staffing continues to prove to be the key to unlocking higher sales. In the fourth quarter, restaurants consistent with pre-COVID staffing levels generated 4.4% comparable sales versus 2019 and which was more than 10 percentage points better than restaurants still in the process of rebuilding their teams. We've made meaningful progress in hiring throughout Q4 and into Q1 2022 and continue to add team members each week, enabling more sales growth.

Next, in terms of dayparts, lunch at late night remain the most impacted, which combined weighed on our two-year comp by approximately three percentage points in Q4. We expect lunch to rebound once more employees return to the office this year, the timing of which was extended due to the omicron variant. In a positive development, certain large companies have recently announced return to office plans. Additionally, we have seen encouraging early results from our new weekday lunch menu test, which is driving incremental sales and profit through nice traffic gains.

Switching to late night. Our reduced hours due to staffing shortages continues to directly impact late night sales in the range of $1,000 to $2,000 on a weekly sales average basis. Finally, media spend. In Q4 2019, we spent 60% more in media dollars promoting BJ's brand across channels, including television, when compared to our Q4 2021 spend levels.

Making the conservative assumption that investments just breakeven, the incremental media spent in 2019 base translates to more than 100 basis points of two-year comp headwind in the current quarter. We remain at a low media investment level currently compared with pre-COVID spend given the environment, but we look forward to bringing back more high ROI marketing this year once we enter a period of more normal operating conditions. These three factors weighed on Q4 sales by nearly 10 percentage points in aggregate, which can provide a meaningful tailwind to sale when reversing. The higher sales lead to higher restaurant margins.

In Q4, our fully staffed restaurants with two-year comp sales more than 10 percentage points higher than understaffed restaurants also had restaurant margins approximately 350 basis points higher than our understaffed restaurants with the lower sales. In summary, we know the best way to grow margins is to grow sales and the most current data from Q4 clearly indicates that we -- as we fully restaff our platform, we can accelerate top-line momentum. At the same time, we have elevated productivity and cost savings throughout our Project Q initiatives. We have a clear path to sales growth and margin recovery, and our long-term strategy remains intact.

While we have seen new challenges present throughout this pandemic, we continue to meet the challenges head on, manage our business for both the near and long-term objectives, and remain steadfast in our focus on providing our guests with the best experience, which will allow us to continue delivering outsized growth in the years to come. Thank you for your time today, and we will now open the call to your questions. Operator?

Questions & Answers:

Operator

[Operator instructions] We'll take our first question from Brian Bittner with Oppenheimer.

Brian Bittner -- Oppenheimer and Company -- Analyst

Good afternoon, guys. Question on margins. I was wondering if you could perhaps talk about the store level margins that you actually did see in the month of November because that is a time frame where two-year comps did turn positive relative to the rest of the fourth quarter, it was really choppy. I know you talked about store-level margins being in the low to mid-teens as '22 progresses.

But any color on kind of the actual margin experience in November, I think, would help frame for us how to think about margins if your two-year trends do stay positive. And I have a follow-up.

Greg Levin -- Chief Executive Officer

Yes, Brian. It's still hard on November because the amount of training that was coming into the business. I would say, in general, when we think about this year, and maybe this is a better way to kind of frame it up and think about it. One is cost of sales where they are right now is in this 27% range.

Over time, we see that number moving down, whether it's through some of the menu pricing and supply chain getting back in line. So even in November, we saw the high cost of sales number there. And that's something that historically we've run in the 25% to low 26%. So there's 100 basis points there that, over time, I think we have the opportunity to continue to move that down.

We're going to take it prudently from that perspective. And then we continue to have the high labor even in November. And that was really, again, more of the training and rolling out the new menu that we end up rolling out. We take the 1.4% pricing.

But I would say, in general, it's about getting back into that lower to mid-teens. I think Q1 is going to still be, as Tom said, depressed to where we are today. I do call that a depressed number. But I think we have the ability to, again, move that back in the team, especially as we get into Q2, things normalize and our weekly sales average grows, and then the Project Q initiatives that we continue to work on.

Brian Bittner -- Oppenheimer and Company -- Analyst

And just my follow-up, based on the Project Q initiatives based on the supply chain normalizing your price increases, based on all those factors, where do you think that your average weekly sales need to be in order to potentially recapture those pre-COVID store level margins in that 16% to 17% range? Because I think that's what we're all kind of pinning the opportunity toward for store-level margins. And so thinking about the average liquid sales required to get there would be helpful.

Greg Levin -- Chief Executive Officer

I think that number -- and we -- I'm sure like you as well and us internally continue to run different scenarios and different levels on what the incremental flow through as our weekly sales average goes up. And we need to move our weekly sales average at least here in the shorter term into the $110,000-plus range to continue to grow those margins. I don't know the exact number. But that starts to leverage the manager leverage because that's more of a fixed number.

It leverages a lot of the operating occupancies and other controllable costs. So we see, for example, this last week, which is a Valentines' Day week, mixed with a very slow Sunday, because Super Bowl Sunday, and we see weekly sales averages in the $116,000 range. We start to tend to see restaurant-level margins getting back into that kind of mid-teens range or so. It's still at that higher cost of sales, and that's that number that over time we want to work it down in the right direction.

And that's probably going to be a little bit of lapping that and a little bit more pricing later in the year to move that down. So it's a little bit of a combination between that weekly sales average going, a little bit more menu pricing than where we have today. I mean, we're pretty conservative. We only take 2% menu pricing here despite California taking another dollar minimum wage as well as other states continue to see, I think overall food inflation at 10% and really take out 1.4% in November.

So when I start to think about your question, some of your question also relates to how much menu pricing we want to lean into later in the year. And our goal right now is to actually drive that traffic, get that lunch daypart back and get that late night part coming back as COVID declines and offices open. I think you add the pricing on top of that, I think we can get there with probably sales again, maybe mid-teens but probably lower depending on the pricing in there.

Brian Bittner -- Oppenheimer and Company -- Analyst

Thank you, Greg.

Operator

Next, we'll move on to Alex Slagle with Jefferies.

Alex Slagle -- Jefferies -- Analyst

Hey. Thanks. I wanted to dive a little deeper just into what you're seeing in the business day to day with the staffing and consumer behavior and perhaps just anecdotal or certain metrics, maybe Beer Club tidbits or something, things that give you confidence in the trajectory for '22? And then also maybe within this, I'm just kind of curious, a little more color on like what the traffic looks like in the bar room, the bar room activity. I think you said the later hours were still tough because of staffing, but kind of wondering what the demand is like as well there.

Greg Levin -- Chief Executive Officer

Yes, Alex, a lot of great questions in there. I would tell you, looking at and seeing our guests day to day, we're seeing incremental nice improvement. December and January were tough months. I think it's pretty straightforward in our formal remarks.

I think our team members did an unbelievable job managing through exclusions that were 6x higher than anything we've ever seen. And you start to put that in the context of what we are trying to do or doing in the fourth quarter. And that was hired team members roll out a physical menu and getting back to a full menu. If you remember in the October call, not all of our restaurants were at a full menu.

So we got that into place in November. And actually we're making great strides we obviously have training with it and additional costs to roll those out, but really like to project the trajectory in regards to what we're seeing from our guests and what we see in our restaurants. And then it really took a turn – 180-degree turn with the way the omicron surge kind of came in, a little bit of weather in there, especially in California, and came through into the January month. As it starts to recede or has been receding, we're starting to see much more normal patterns, patterns that allow for us to optimize our business.

And that's really important. As we look at our business, the ability to predict weekly sales allows us to prep correctly, allows us to par our food out correctly. It allows us to staff correctly. It allows us to buy controllables correctly and so forth and leverage all the way through the P&L.

That's your optimization that happens when you have a very stable and predictable business. And we're starting to see that in February. So I like the green shoots that we're seeing in our business I think it gives us a nice trajectory forward to be able to drive top-line sales and then optimize in the middle of the P&L. Now in regards to the late night part of the business, in November, we saw the late night part of the business really start to flatten out.

We are less than $1,000 difference in our late night business comparing it to 2019. As we reached December, that number went back to somewhere in the $2,000 to $3,000 range. So it really decelerated on us. It decelerated on us as well into January.

From a February perspective, it's coming back. This weekend will give us a better telling because two years ago, in February, President's Day weekend was earlier and have already been passed and so forth. And those are big days for us for our holiday weekend. But what we saw in December was a real pullback there in that number.

And the same thing with lunch. Lunch was another one, and Tom hit it on his formal remarks, lunch pullback as well with omicron is, I think people just kind of hibernate end, they kind of stayed inside and we're starting to see that come. And our marketing leaning into our new lunch specials has really helped drive some of the lunch traffic, albeit at a little bit lower average check, which is a little bit of our design. I want to make sure we maintain a real strong price point affordability for guests as they start to come back to the office.

Alex Slagle -- Jefferies -- Analyst

Helpful. And then just on kind of looking ahead, your thoughts on your ability to be fully staffed and get full dining room capacity as you look ahead? And do you anticipate like full hours versus calendar '19? Or do you trim some at the late night just based, I mean, I guess, staffing really? The demand doesn't sound like the biggest issue.

Greg Levin -- Chief Executive Officer

It's a little bit of both in regards to that, I do believe we will get back to full staffing. We're making great strides, and we're seeing just that change throughout the workforce. More people applying for jobs showing up for jobs and building that team member ranks at BJ's. And we're always going to have some pockets here or there, and we've always had that even pre-COVID in restaurants in more challenging areas.

But I do see our levels really turn back to pre-COVID levels within our restaurants. And I commend our restaurant management teams are doing a great job of hiring people at the right pace that we can manage it within our business. In regards to late night, we've always been a place for late night, and it's an important differentiator for BJ's, and we want to get that back. It's going to be a combination of having the right people so we can add that back, but also making sure consumers are ready to go out late night as well.

And I think we are seeing that. But that's our goal and our target is to drive that part of our business back.

Alex Slagle -- Jefferies -- Analyst

Got it. Thank you very much.

Operator

Next we'll take James Rutherford with Stephens.

James Rutherford -- Stephens Inc. -- Analyst

Hey. Thank you for taking the questions. I want to pivot over to unit growth for a moment. You guided to open as many as eight units in 2022, and that looks to be about right around 4% growth.

And historically, you've grown much faster. I'm just curious, when you look at your pipeline out for the next few years and your plans, what's your thoughts on kind of regaining some of that historical growth? And will those units be would look much different than the one that you've built historically? And then I have a follow-up.

Greg Levin -- Chief Executive Officer

Yes. Great question. So ideally, I -- or BJ's, we would like to be at 5% plus unit growth. And that was originally the target for this year as well, is to get back to a 5% unit growth.

I think we can do that with high quality. I think you layer on top of that the ability to drive comp sales and then leverage the middle of the P&L. And I think that gets to a strong earnings cadence, going forward. This year, the reason we said as many as 8%, and originally, we were talking 8% to 10% is we are seeing a lot of challenges getting through the permitting and planning at a lot of communities.

And frankly, you're seeing the same issues with kitchen equipment and other equipment. So we've taken a little bit more of a conservative approach the way things are moving around. That 8% to 10% is probably looking more like as many as 8%, or 8% on that as we continue to manage kind of the supply chains out there. I would expect like we're seeing on the commodity side, meaning the food and controllables in our restaurant that as things continue to open up and people work through the supply chain challenges that the kitchen equipment side will come back in line and be much more -- and HVAC be much more methodical like it's been in the past.

I'm not sure where the city planning units are right now. That permitting, I think, and Greg Lynds is in the room, I think it's double. Does that sound about right, Greg?

Greg Lynds -- Chief Development Officer

Yes, depending on the area, definitely. Everyone is still working from home. So until people get back in office full time, that's going to make the biggest difference from a planned development and permitting standpoint.

Greg Levin -- Chief Executive Officer

So we -- so the goal is there to get back to 5% plus on unit growth. In regards to our restaurants going forward, they're going to be pretty similar to what we built over the last couple of years and what we call our Proto 2020. At the same time, we're continuing to look at ways to optimize the off-premise side of our business with some digital boards and easier ways for guests to come in and for us to run out the food. That's one area that we look at.

And we do also know from some of our research with our most valuable guests that energy around the bar statement is so vital to the BJ's that we're going to continue to make sure that we have a best-in-class kind of bar statement that really shows energy within our restaurants. And it's interesting. Our guests that we saw did not necessarily say we love the bar statement because we want to just go and hang out in the bar. It was more about that bar statement and the energy it drove throughout the entire restaurant.

And that's the real important aspect of it. We don't want to be a bar-only concept. We've never been a bar-only concept with alcohol about 20%. And but we love the energy and the visual that the bar provides for the entire restaurant.

James Rutherford -- Stephens Inc. -- Analyst

OK. And then my second question is on the recent sales trends. Thank you for all the detail that you did give us. I want to dig in a little bit on that $116,000 of average weekly sales here recently.

Because I don't know what you were doing in that week two years ago, just level set us, what kind of two-year comp does that imply? And if you could split that out, what's your dining room doing versus -- and what's your off-premise business doing kind of compared to two years ago?

Greg Levin -- Chief Executive Officer

Yes. I'll take the first part there and I'll let Tom hit the next. We said in our press release and our formal remarks, I think this is probably the best way to think about it. And that is our comp sales on a two-year basis have moved to trending slightly positive, is the way to think about it.

When we take out the weather that kind of came through in that first week of February. And then we're still in a mismatch on President's Day weekend. So it's hard to be exact week for week. But if we normalize and take out the Monday related to President's Day week, we compare a Monday Valentine's Day to a Friday Valentine's Day and so forth, it gets us into kind of a slightly positive comp sales.

I want to say somewhere is in the kind of 0.5% or so? I think that's right. Is that right, Tom?

Tom Houdek -- Chief Financial Officer

That's right.

Greg Levin -- Chief Executive Officer

And do you want to take the rest there?

Tom Houdek -- Chief Financial Officer

Yes. And that's through February. And to Greg's point, the $116,000, it's -- when we look at the 2019 numbers, it has the President's Day in there. So it's not a perfect way to compare.

But it's probably better to look at the totality of February, as we said, which was modestly positive comp. And we do see -- I mean, you had a question too on just dine-in and off-premise as well. We're seeing continued strength on off-premise. We're still seeing double or more than double on the off-premise side.

So we -- when we think of the sales recovery, it's -- on-premise is certainly the opportunity, and it's great to see these sales on off-premise staying where they are. So when we get restaffed and able to build that traffic back up, we've got a lot of opportunity there.

Greg Levin -- Chief Executive Officer

Yes. I think Tom's comp is the one that we tend to look at internally and that is how that dining room business moving forward. And it was moving in a nice direction in November that we put up the 2% comp, and these are moving there, and take this real step back in P12 and P1 with the omicron. And if we can hold on to this off-premise, which looks like we're doing, and now starting to grow the dining room again as things normalize, I think there's a good amount of upside for this business.

James Rutherford -- Stephens Inc. -- Analyst

Helpful. Thank you.

Operator

And we'll move on to Drew North with Baird.

Drew North -- Baird -- Analyst

Thanks for taking the question. I wanted to follow-up one more on the recent trend. I was hoping we could level set on the quarter-to-date comp overall in January and February on a two-year basis. It was helpful to hear all the perspective on the recent weeks on an underlying basis.

But I think it would also help us all align on the full quarter-to-date period as we think about the model for Q1.

Greg Lynds -- Chief Development Officer

Sure. In January, we were down 9%, and this is on a two-year basis. So this is a stack now to 2020. So versus 2020, we were down 9%.

And again, we're -- in February, we're still -- the laps aren't perfect, but we're -- if you net out you remove the impact from the President's Day as well as some of the weather from earlier in the month, we're slightly positive.

Drew North -- Baird -- Analyst

And would you be willing to share the underlying -- or I should say, the reported, comp -- two-year comp instead of backing out the weather and the shifts just where we sit today?

Greg Levin -- Chief Executive Officer

I think a better way to look at it is -- because this might help a little bit more from a modeling standpoint, trying to get through it, is we did, what? $97,000 WSA in January.

Greg Lynds -- Chief Development Officer

$96,000.

Greg Levin -- Chief Executive Officer

$96,000. And we're now at about $106,000 weekly sales average in February. And we're probably internally more focused on growing the weekly sales average because that's how we leverage that business. So you can kind of blend those two together in -- I think in 2012, it's hard to tell because in 2020, it's -- 2020, the -- I guess if you went back to '19, we did about $110,000 weekly sales average for that quarter.

I think to date, if you kind of blend those two together, we're still probably down about five -- what are we down? About 5% a couple of weeks in?

Greg Lynds -- Chief Development Officer

Yes. That's right.

Greg Levin -- Chief Executive Officer

Yes. So it looks like it's about 5% that we're down on the weekly sale on comp all the way through February.

Greg Lynds -- Chief Development Officer

With a big impact from January. So that should tighten as we move through the quarter and --

Drew North -- Baird -- Analyst

Understood. OK. I wanted to also ask one on margin. You mentioned expectations for the restaurant margin to progress to the low to mid-teens through 2022 from 10% in Q1.

I guess, was that meant to signal the expectation for the full year or more so the exit rate on 2022? I think any perspective on kind of the cadence through the year while acknowledging the seasonality would be helpful.

Greg Levin -- Chief Executive Officer

Yes. It's a great question, actually. And we -- our goal is as we exit 2022 to be much more into the mid-teen range. That's where we're going after.

As we see sales recovering. We see some menu development commodities and supply chain normalizing, allowing us to go after a little bit more from a Project Q perspective. And then continuing to figure out areas of additional pricing based on the inflationary environment. But that's kind of our exit trajectory and then building on that.

Drew North -- Baird -- Analyst

Perfect. Very helpful. And lastly from me, just a question following up on unit development for the eight you're targeting for 2022. I guess what are you seeing in terms of development cost inflation? And how is that playing into the returns you expect from this class of units? It sounds as though new units are performing well from a sales perspective.

But are these inflationary pressures out there in the environment making you consider anything different for the pace of openings in 2023 and beyond?

Greg Levin -- Chief Executive Officer

So we talked about this on the last call. I don't think anything has dramatically changed that our restaurants have moved from somewhere in the kind of $5 million, $5.2 million range to closer to $6 million to build. A lot of that's inflationary. Some of it we do believe is transitory, but I'm not sure we're going to be back down to $5 million or $5.2 million because I just don't think you're going to see deflation back to pre-COVID levels in the building.

When we look at the restaurant level -- sales levels that are being produced out of our newer restaurants, our internal targets at a higher AUV so that our overall margins and returns are in the high teens for our restaurants. When we tend to look at it on a 20-year discounted cash flow basis, it's not going to make that much difference in regards to the cost of a $5 million, $5.2 million restaurant moving up to $5.8 million to $6 million from that perspective. So it hasn't changed our view on building new restaurants, but we'll continue to watch it. And if we didn't have such success out of our newer restaurants over the last couple of years, there's always that discussion like when we look at it differently, or is there something we need to change.

But the new restaurants have performed well. And while we're aware of the current increased costs in our business, it's not changing our perspective right now. We will as we do look for ways to value engineer our building and figure out how can we bring this number down despite inflation. That's very important for us as we want to bring out all inefficiencies we can within our business.

Drew North -- Baird -- Analyst

Thanks for all the color.

Operator

And we will now be taking our last question today from Joshua Long with Piper Sandler.

Joshua Long -- Piper Sandler -- Analyst

Great. Thank you for taking my question. I wanted to see if we might be able to just confirm what menu price was in the 4Q period and then also what you have kind of in place for the 1Q period.

Greg Levin -- Chief Executive Officer

So as I said on the call, we got the 1.4% that we put in, in November. And then we just put 2% here in kind of early ish February. So the way I would tend to think about it is we're somewhere -- based on where the most recent inflation has come up, we're somewhere in that 3.5% with that. Now there was -- I want to say in July of last year, we put kind of 2%, 2.5% in there.

So all in, there's probably closer to about 5%. But for our business, we really started seeing the inflationary pressure start to hit in -- really in Q4 of the year and into Q1.

Joshua Long -- Piper Sandler -- Analyst

Got it. That's helpful. And then when we think about some of the research that you did very interesting. And just curious how you're thinking about that from, obviously, protecting the price point and the value piece, but then a lot of the discussion was around just having that kind of focused menu.

And so you've done a good job in terms of balancing the number of items on the menu as we went through the pandemic. You pulled that back a little bit. Just curious if now that you've done the research, if anything has meaningfully changed in terms of how you think about the size, scope of the menu, or if as you talked about in your prepared remarks, it's really about dialing in that kind of flavor profile and what the guest is expecting?

Greg Levin -- Chief Executive Officer

Yes. Josh, first of all, it's a great question. And I think there's a couple of different maybe answers or the way we are thinking about it. So going with where you're -- they may possibly thinking at first around kind of pricing and so forth.

As the guys said in the formal remarks, the breadth of our menu allows us to have price points at all different levels. And right now, even in an inflationary environment, we're trying to kind of go after a little bit of an intro price point with the lunch menu also pushing the daily Brewhouse Specials and looking at also increasing some value or portions in certain areas. We kind of want to take a little bit of a different approach that we're seeing from other players out there using the term of inflation out there, maybe less wings or less size of something else. We don't think that's the right strategy for BJ's.

That's not what our guests are coming for us to the restaurant. So we're going to continue to develop a menu strategy that's going to allow a really good entry-level price point, but we have this ability to allow our guests to indulge things like our prime-rib or our tri-tip or even like fish 'n' chips. And we're going to continue to create and craft menu items in that area that allows guests to up spend. The other side of it, and Kevin -- and our head of culinary, Kevin Mayer, who's here with me and our head of culinary working on is going through kind of a turf analysis from a category by category to see really what's the right amount of menu items.

And I like our breadth. I think we probably lean a little bit too heavy in certain areas. I will probably see pull back, but we want to see what the kind of turf analysis says. So, I could see us kind of more dialing in what I would call the core or what we call familiar items transformed to Brewhouse fabulous.

It's what we've seen in our data is our guests really recognize kind of the unique but very familiar offerings. And as a result, I think that's what we're going to see from a menu development perspective. I don't know. I'll look over here to Kevin, if there's anything he wants to add.

Kevin Mayer -- Head of Culinary

I think you covered actually.

Greg Levin -- Chief Executive Officer

He thinks I covered it. I think we're good there.

Joshua Long -- Piper Sandler -- Analyst

And last one for me. In terms of -- I imagine it's still early on the remodel perspective. You said you had some of the capex for the year, earmarks for that. But just curious on how you're thinking about maybe the size, scope or just what the initial path of stores might look like in terms of number or vintage that you might be targeting?

Greg Levin -- Chief Executive Officer

Yes. So we got probably about a third of our restaurants, from a vintage standpoint, that have the ability to kind of add some capacity into it, up to almost 24 seats in our restaurants. And those tend to be an older model, meaning an older version of our restaurants, so they need a little bit of an upgrade there to begin with. But they're high-volume restaurants.

And every time we know we've added capacity in restaurants we're able to generate top-level sales. We haven't defined the full dollar scope yet on those, but knowing that we're adding capacity and getting seats in there, we know that they're going to have a high ROI just because, again, we're going to be able to generate top-line sales from them.

Joshua Long -- Piper Sandler -- Analyst

Very helpful. Thank you.

Greg Levin -- Chief Executive Officer

You're welcome.

Operator

[Operator signoff]

Duration: 61 minutes

Call participants:

Greg Levin -- Chief Executive Officer

Rana Schirmer -- Director of Securities and Exchange Commission Reporting

Tom Houdek -- Chief Financial Officer

Brian Bittner -- Oppenheimer and Company -- Analyst

Alex Slagle -- Jefferies -- Analyst

James Rutherford -- Stephens Inc. -- Analyst

Greg Lynds -- Chief Development Officer

Drew North -- Baird -- Analyst

Joshua Long -- Piper Sandler -- Analyst

Kevin Mayer -- Head of Culinary

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