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OPERATOR
Good afternoon, ladies and gentlemen, and welcome to the Chicago Pizza & Brewery second-quarter 2003 earnings conference call. At this time, all participants have been placed on a listen only mode and the floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Mr. Rob Curran.
ROBERT CURRAN
Good afternoon. We would like to welcome you to our second-quarter 2003 conference call, which is being broadcast live over the Internet. On the call today we have Paul Motenko, our Chairman and co-Chief Executive Officer, Jerry Hennessey, our President and co-Chief Executive Officer, and Doug Mitchell, our Chief Financial Officer. The Company released earnings after the close of the market today and a copy of the results can be viewed on the main page of our web site, which is located at www.bjsbrewhouse.com. If anyone would like a copy or would like to be added to our distribution list, please call my office at 714-848-3747, extension 260 and we will forward a copy to you.
Our agenda for the call will be as follows -- first, Paul will provide a financial and operational review covering Chicago Pizza & Brewery's results for the second quarter ended June 29, 2003. After that, Doug will provide additional details on the quarter and Paul will follow that up with comments on current business trends and provide an update on fiscal 2003 guidance. Lastly, will all be available for a question-and-answer session.
Before we begin, I need to point out that certain information contained on this conference call may be considered forward-looking in nature and is subject to various risks and uncertainties. Should one or more of these risks or uncertainties materialize or underlying assumptions prove to be incorrect, actual results may vary from those anticipated. All forward-looking statements made today speak only as of today's date. We do not undertake any obligation to update any forward-looking statements and we refer investors and listeners to the full discussion of risks and uncertainties associated with forward-looking statements contained in our periodic filings with the SEC. I'd know like to turn the call over to Paul.
PAUL MOTENKO
As reported, our revenues for the second quarter were $25.4 million, an increase of 38.9 percent over the second quarter of 2002. The increase was driven by our six newest locations, which have opened since August, 2002, as well as a 2.1 percent improvement in same-store sales. Comp-store sales increases were primarily due to increased customer counts and a menu price increase we implemented during May, which Doug will give further clarity to during his remarks. We remain pleased with revenues at our Texas stores, which continue to trend at or above plan, and we have seen continued strong results from our California stores, which opened during 2002 and are currently not in our comp base.
Average weekly sales for all stores during the second quarter were approximately $64,000 versus $54,000 in the second quarter of 2002 on a 17 percent quarter-over-quarter increase in store weeks. To provide additional details for financial modeling purposes, we would note that our six Oregon stores open for the whole period, which include our three Pietro's, contributed $2 million to second-quarter 2003 revenues and our seven Southern California Pizza and Grill restaurants contributed $3.1 million of revenues in the second quarter of 2003 with the remainder coming from our 17 full-sized brewery and brewhouse restaurants, including the one new restaurant we opened in the second quarter in Addison, Texas. Average weekly sales for our full-sized brewery and brewhouse restaurants were $94,500 in the second quarter of 2003 versus 93,500 in the second quarter of 2002. Net income was at $1.1 million in the second quarter, or five cents per diluted share. We have now (indiscernible) the share increase from our warrant exercise, which happened during the second quarter of 2002. We believe that this should provide for better year-over-year comparisons of earnings per share, going forward.
We're proud of the success and the work effort put forth by our team members this quarter, and we feel very good about our brand's development. We also continue to feel very strongly about the expansion potential of our BJ's concept. At this point, I would like to turn it over to Doug to discuss our quarterly financial results.
DOUGLAS MITCHELL
As previously noted, total revenues for the second quarter increased nearly 39 percent to 24.5 million from 18.3 million in the prior year's comparable quarter. This increase is primarily the result of opening six new locations, including Westlake, California in August, 2002, Oxnard, California in September, Louisville, Texas in November, Cupertino, California in December, Clear Lake, Texas in January of 2003 and Addison, Texas in May, 2003. In addition, the Company posted a same-restaurant sales increase of 2.1 percent in the quarter. The comp-store increase is primarily due to increased customer counts and a menu price increase of under one percent for the quarter. We raised menu prices approximately 1.5 percent, which rolled out to the stores during May. Quarter-over-quarter revenue gains were partially offset by the closure of our Pietro's Portland restaurant on Lombard Street on December 31, 2002 and our BJ's Portland Oregon restaurant on Stark Street on June 15, 2003.
Cost of sales, which includes food, beverages and paper, increased to $6.7 million from $4.6 million during the comparable quarter of 2002. As a percentage of revenues, cost of sales increased to 26.5 percent for the current quarter from 25.3 percent for the comparable prior year quarter, an increase of 120 basis points. Sequentially, from the first quarter of 2003, cost of sales increased ten basis points. The rise that we've seen in cost of sales is primarily a result of conducting business in new markets, notably Texas and Northern California. In new markets, we haven't yet achieved the critical mass necessary to get food costs at rates similar to those experienced in Southern California, where we have a solid base of stores with improved economies of scale and purchasing power. We note that one of the benefits of our diverse menu, with over 100 items, is that we are not tied to any single commodity.
Labor and benefits costs were $9 million in the quarter, versus $6.6 million in the second quarter of 2002, a 90 basis point improvement as a percentage of sales at 35.3 percent versus 36.2 percent year-over-year and a 100 basis point improvement sequentially from 36.3 percent in the first quarter of 2003. The decrease in labor is primarily the result of management directed cost controls at the restaurant level, as well as the presence of more restaurants in (indiscernible) states.
Occupancy costs increased to approximately $1.9 million during the quarter from $1.4 million during the comparable quarter of 2002. However, as a percentage of sales, occupancy costs decreased 50 basis points to 7.3 percent from 7.8 percent quarter-over-quarter and improved ten basis points sequentially from the first quarter of 2003. While the increase in absolute dollars reflects six additional restaurants opened year-over-year offset by the closure of two lower-volume restaurants, the decrease, as a percentage of sales, is primarily due to the fact that four out of the six restaurants opened in the last year have ground leases with monthly lease payments below our historical rent levels.
Operating expenses increased to $2.9 million during the quarter, versus $1.9 million in the year ago quarter. As a percentage of sales, operating expenses increased 90 basis points to 11.4 percent for the current quarter from 10.5 percent for the comparable prior year quarter, an increase of 20 basis points sequentially from the first quarter of 2003. The increase is primarily due to higher utility costs, increased credit card fees, increased repair and maintenance costs for stores open a number of years and higher insurance costs. We recently renegotiated our credit card processing agreement and expect to realize some savings beginning in the third quarter of 2003.
General and administrative expenses increased to $2.2 million during the quarter from $1.7 million during the comparable quarter of 2002. As a percentage of revenues, although flat sequentially with the first quarter, G&A expenses decreased 70 basis points to 8.8 percent for the current quarter from 9.5 percent for the comparable prior year quarter. This decrease is primarily due to sales leverage, as absolute dollars increase from interest structure investments made in order to prepare the Company for accelerating unit growth.
Depreciation and amortization increased to approximately $1 million during the quarter from $600,000 during the comparable quarter of 2002, due to our investment in six new restaurants since August, 2002. Restaurant opening expenses increased to $291,000 during the quarter from $109,000 during the comparable quarter of 2002. This increase is primarily due to one restaurant opening in the current quarter versus no restaurant openings in the comparable quarter of 2002. Additionally, our current quarter includes costs of approximately $72,000 related to our Cerritos, California and our San Jose, California locations, which are scheduled to open in the third and fourth quarter of 2003, respectively. Our opening costs will fluctuate from quarter to quarter, depending upon the number of restaurant openings, the size and concepts of the restaurants being opened and the complexity of the staff hiring and training process. We expect expenditures related to the opening of restaurants in the back half of this year to increase over the front half of the year, as three additional restaurants are planned to open, versus two openings during the first half. We budget preopening expenses between $300,000 and $400,000 per unit, with units opening approximate to our home office in Southern California typically experiencing less pre-opening costs due to lower travel and lodging costs, as well as the potential for a portion of managers and staff to transfer from existing Company restaurants in the same market.
Net interest income increased to $96,000 during the quarter from $53,000 during the comparable quarter of 2002. The overall increase in interest income is primarily due to a decrease in interest expense related to the payoff of our term loan back in April, 2002, which had an outstanding balance of $3.1 million. The interest income component decreased this quarter, primarily due to low levels of cash to invest after the opening of six new stores and lower interest rates year-over-year. We would like to note, as mentioned earlier, that the Company closed its BJ's restaurant on Stark Street in Portland, Oregon, on June 15, 2003, as the lease was expiring and we elected not to renew. The book value of this restaurant asset (indiscernible) been included in the reserve for store closures and therefore, no loss was recorded in 2003 as a result of the closing.
The tax rate was 35.1 percent for the quarter, in line with the 34.9 percent rate in the second quarter of 2002. We continue to estimate our effective tax rate for the remainder of fiscal 2003 at 35 percent.
Turning to the balance sheet, we ended the quarter with $29.5 million in cash and short-term investments, or approximately $1.45 per share, and no funded debt. Shareholders equity was $68.6 million, or $3.37 per share. Total capital expenditures for the quarter ended June 29, 2003 were $3.5 million and were primarily related to the development of our Addison, Texas and Cerritos, California restaurants. Based on our current expansion plans, we anticipate the Company should be able to finance capital expenditure requirements for fiscal 2003 through operating cash flow and cash investments on hand. I would now like to turn the call back over to Paul.
PAUL MOTENKO
Now, let's talk about current business trends and our expectations for 2003. During period seven, our comp-store sales have been trending ahead of our level experienced in the second quarter. Based on results year-to-date and our expected restaurant opening schedule, we continue to reiterate our full year expectation of revenue growth in 30 percent to 40 percent range and reiterate our guidance of 21 cents to 23 cents in earnings per share. Two factors that could impact our earnings results would be the ultimate opening date of our Willowbrook restaurant and the duration of higher prices in the cheese market. We believe that if cheese prices remain at or above current price levels for a significant duration, we would anticipate being on the low end of our guidance range. In addition, the timing of the Willowbrook opening, which we anticipate to open this winter, could impact earnings as it relates to the timing of preopening expenses.
As previously announced, we are very excited by the recent hire of Greg Lynds as our Chief Development Officer. Greg joined us from Garden Restaurants, where he was responsible for the expansion of Garden's restaurant concepts in nine western states and Canada. Greg will be overseeing our future site-selection, lease negotiation and development process. As he has only been with us a few weeks, we want to allow him adequate time to evaluate our current plans and to add his input. Currently, we anticipate having further details in our future store expansion plans, primarily 2004, during our third quarter conference call. We would like to reiterate that we are comfortable that our current cash, combined with cash flow from operations, should fully fund our development plans. We do not foresee needing additional equity capital to finance our growth objectives, which includes a long-term goal of revenue growth greater than 20 percent.
Finally, I would like to add that over the past four days, we have been involved in the grand opening functions and our newest restaurants in Cerritos, California. We are very proud of the facility our development team has assembled and of the work done by our hiring and store-opening teams, as well as the fantastic charity functions organized by our marketing department. We have been very pleased with the turnout and have had some great guest feedback. We organized our private parties functions at Cerritos for the benefit of both the Cystic Fibrosis Foundation, as well as Miller (ph) Children's Hospital. If you find yourself around the Cerritos area, we would welcome you to visit this location, which opens to the public tomorrow. We are very proud of our team's accomplishments there. This concludes our formal remarks, so at this time, we will open up the call for questions.
OPERATOR
Thank you, sir. The floor is now open for questions. (OPERATOR GIVES CALLER INSTRUCTIONS). Eric Gould (ph) of Merryman Kernan Ford (ph).
THE CALLER
Good afternoon. Can you just maybe walk through kind of what you've learned, compared to the four restaurants that opened up at the end of last year versus (indiscernible) now three that's opened up this year in terms of your preopening experiences, especially with new restaurants (inaudible) Southern California versus one outside of Southern California?
PAUL MOTENKO
Last year, we opened four restaurants in the last four and a half months of the year and one restaurant in the first month of this year, so basically five restaurants in five months. Three of those restaurants were in markets outside of Southern California, and we experienced higher preopening costs than we would have normally budgeted, mainly because we were in very new markets for us. And the team that we assembled last year to implement our growth strategy had just started and were really not fully involved in the process.
This year, the situation has changed. The people -- most notably our Chief Operating Officer, VP of Human Resources and Director of Training -- have been fully involved in the process. We have developed some new preopening and training systems, which has been more efficient, and we are experiencing a level of preopening costs that are much more in line with our expectations, which are in the 3 to 350 range for restaurants within Southern California and the 350 to 400 range for restaurants in new markets. In addition, we expect that we will have lower turnover the the newer restaurants because of some of the systems that we've developed and have thus far had some success with that, which is very critical as we look towards the costs of operating a restaurant within its first few months.
THE CALLER
Two more quick questions -- how much of a drag, if you're willing to detail, was the Chandler, Arizona restaurant on same-store sales in the second quarter?
PAUL MOTENKO
Had it not been for Chandler -- had Chandler not been in the base, our same-store sales would have been around three percent.
THE CALLER
Okay. I know you mentioned -- (MULTIPLE SPEAKERS).
PAUL MOTENKO
The comparison is getting a little easier as we continue forward and as I mentioned, the same-store sales for our seventh period was higher than the second quarter. Part of that is attributable to the fact that Chandler did not have as negative an impact and we would expect, looking at the sales trends for the last year for Chandler, for it to have less and less of an impact in the future.
THE CALLER
Okay. The last question -- I know you mentioned you'll go through fiscal 2004 unit development plans on the third quarter call. Are you going to talk at all in terms your number of sites that have maybe been identified -- any leases or negotiation for 2004, or is it too premature right now?
PAUL MOTENKO
Well, I can tell you that we feel that based upon what we have in the pipeline right now with leases being negotiated and Letters of Intent, etc., we feel comfortable that the number of units we do next year will be more than the number of units we have done this year. However, it's a little premature to talk specifics at this point.
THE CALLER
Thank you.
OPERATOR
Dennis Joe (ph) of Sidoti & Company.
THE CALLER
Good afternoon. I was wondering if you could give us a little color on the units that have opened up in taxes and whether or not they're making their revenue targets.
PAUL MOTENKO
Yes, the Texas units are meeting or exceeding our revenue expectations, but I think it's important to comment that our expectations are that restaurants in Texas currently are not going to be at the same revenue level as our most recent experiences in Southern California. The strength of our brand in Southern California is such that it will take some time in new markets to achieve those levels. But based upon our expectations, which include a minimum cash-on-cash return on investment, we are definitely pleased with our results in Texas at this point.
THE CALLER
Okay. Then I was wondering if you could discuss the performance of the Arizona and Colorado units and when you think you might further expansion there?
PAUL MOTENKO
Both Boulder, Colorado and Chandler, Arizona have been units that have have had a negative impact on comp sales. Boulder has been particularly impacted with the economy and other issues recently; Chandler is more a situation of opening a new area with a new mall, having very strong opening sales and having a tremendous amount of competition come into the market because it was such a developing area. We looked for particularly Chandler to reverse the trend, as that market continues continues to develop and a number of new restaurant openings in the area declines. We feel that, over time, Boulder will start to turn around as well. We're looking for additional sites in both Colorado and Arizona and do believe those markets hold promise for us, but we are more primarily focused on Texas, Southern California and Northern California at this time. But opportunistically, we will look at units in those markets as well.
THE CALLER
Okay. Just one last question -- if commodity costs continue to hurt you in the second half, would you contemplate another price increase in the second half at some point?
PAUL MOTENKO
I doubt it. We typically raise prices once a year, which we did in the middle of May. A big part of the BJ's concept is value, and we feel that the new price increase of about 1.5 percent that we took reflects the increase in a variety of costs, which we have to deal with, but does not impact the value orientation of our concept.
THE CALLER
Thank you.
OPERATOR
Dennis Forrest (ph) of McDonald Investments.
THE CALLER
Revenues in the quarter -- you had said early on that the six Oregon stores opened the whole quarter two million, seven Southern California stores 3.1, and then I assume the rest came from full-sized restaurants. What about the Stark store that you closed?
COMPANY REPRESENTATIVE
Not included.
THE CALLER
You excluded those revenues, the whole operating results entirely?
PAUL MOTENKO
Just from that particular revenue number.
COMPANY REPRESENTATIVE
For forward purposes, Dennis.
THE CALLER
I'm sorry?
COMPANY REPRESENTATIVE
Stark Street obviously is included in our financial results for the quarter, but when I mentioned the revenue relative to the Oregon units, Stark Street was not included in that.
THE CALLER
Okay, good. And what was the restaurant weeks? I missed that. I think you said something about restaurant weeks early on in the call.
PAUL MOTENKO
I mentioned that it was increased 17 percent.
THE CALLER
Year-over-year? How many?
COMPANY REPRESENTATIVE
395.
THE CALLER
395 in the quarter. That excludes or includes Stark?
COMPANY REPRESENTATIVE
That includes 11 weeks of that restaurant.
THE CALLER
Terrific, thanks.
OPERATOR
Mike Smith of Fahnestock Oppenheimer.
THE CALLER
Good afternoon. Just a couple of quick questions -- how much has changed as a percentage of your sales?
PAUL MOTENKO
Cheese is eight percent of our purchases.
THE CALLER
Eight percent of your purchases, not eight percent of your revenues?
COMPANY REPRESENTATIVE
Correct.
THE CALLER
So about two or three percent of your sales. Let me ask you about whether you would increase these prices again to adjust for the -- are you seeing much elasticity with the price increase that you put into effect in May?
PAUL MOTENKO
No.
THE CALLER
Okay. Tell me, what was wrong with the BJ's in Oregon that you closed?
PAUL MOTENKO
It was a very low-volume store and the lease expired; we elected not to -- not to try to get an extension period on that lease. It was a very marginal performer within the area demographically that does not really support a BJ's restaurant as we know it today.
THE CALLER
Okay. Then, I guess a question for Doug -- how big do you have to get in places like Dallas, Houston and San Francisco to be able to lower the cost of goods?
DOUGLAS MITCHELL
We need about five or six restaurants to get the kind of purchasing power that we would hope to have and that we've experienced in Southern California. We, as you know, have three now; with Willowbrook, that would be number four, and we would certainly hope and expect to have additional units in Texas during 2004.
THE CALLER
I'm guessing that you're trying to get Willowbrook opened up before Thanksgiving?
PAUL MOTENKO
I don't know about before Thanksgiving, but we would like to have it open up before the end of the year.
THE CALLER
Thank you.
OPERATOR
Tony Brenner (ph) of Roth Capital Partners.
THE CALLER
Thank you. Two things really -- whether Willowbrook opens in the fourth quarter or not, you'll be absorbing almost all of those preopening expenses, which means you've got three stores opening in the fourth quarter this year, four stores in the last four months last year, and it seems like your openings are, for the last couple of years, have been very back-weighted, which severely impacts profits in the last couple of quarters of the year. Is this by design? I mean, will this be the pattern of openings, going forward?
PAUL MOTENKO
Certainly not by design. If we had it our way, we would front-load it more, and we're certainly working towards that. We feel that we have a better opportunity in the future with Greg Lynds joining our company and our real estate process, you know, hopefully being accelerated. You know, real estate sometimes happens when it wants to happen, but our objective would certainly be to evenly distribute or weight it more towards the beginning. However, we're not going to delay an opening because of that consideration. The sooner we generate revenue from our location, as far as we're concerned, the better.
THE CALLER
Is it possible that '04 would be at least evenly spaced out, if not front-loaded?
PAUL MOTENKO
Well, we hope but at this point, it's a little too soon to tell.
THE CALLER
Secondly, when you open a new store for a period of three months or four, some costs like labor and I guess food costs are inflated somewhat. Could you shed some light on just, over the course of the year, what kind of margin improvement at the store level you do see in new stores, compared to the first quarter after they open?
PAUL MOTENKO
Labor would reduce about eight to ten percent and food costs will go down about one to two percent.
THE CALLER
As a percent of sales in both cases you're talking about, right?
PAUL MOTENKO
Right.
THE CALLER
Thank you.
OPERATOR
Michael Novak (ph) of Frontier Capital.
THE CALLER
A couple of quick questions, please? Could you talk about any other key hires you have left for your management team?
PAUL MOTENKO
I think the key management team is relatively in place. In the future, hires will mainly be at the regional level; as we open additional units, we have a regional manager for the four to five stores, so I think at the executive level we are pretty well set at this point.
THE CALLER
In terms of the G&A dollars, would you expect them to pick up modestly on a sequential basis but at a much lower rate than the sequential sales growth?
PAUL MOTENKO
Yes, we certainly expect to continue to get leverage on our G&A over the years. I would say the way you represented it is pretty accurate.
THE CALLER
When you look at your different units, the ones that have been very successful versus the BJ's that haven't, what are the key factors that have determined that success?
PAUL MOTENKO
Well, you know, virtually all of our restaurants have been pretty significant successes, certainly the ones we opened in Southern California. You know, we have more comfort in knowing that they will be successful right out of the shoot. The restaurants historically that have not been successful, or as successful, have been up in Oregon where -- (indiscernible) was part of an acquisition we made in 1996. Most of those restaurants did not fit the demographic profile that we have now developed for our future restaurants in terms of their look; they're nothing like the new restaurants that we're building. Our Boulder restaurant, which has been relatively successful but it had some struggles, relatively speaking the past couple of years, is a smaller 5500 square foot restaurant and also doesn't really reflect the new units that we're doing (indiscernible) (inaudible) much more comparable to the (indiscernible) grill restaurants that we have in Southern California and beach communities.
But in terms of building the new restaurants, we've had a tremendous amount of success, especially the ones -- our new prototype we've built in the last six months or so has been incredibly well-received. As I had mentioned several times, three out of the five restaurants opened between August 2002 and January 2003 had the strongest openings in the history of the Company. So as we move forward, we hope to continue with very strong openings, also noting that our expectations for markets outside of Southern California in the short-term, until those markets mature, are that the volumes will not reach the kind of levels we've achieved in Southern California.
THE CALLER
In terms of cheese prices, how much are they up currently?
PAUL MOTENKO
They are up about 40 percent? 40 percent.
THE CALLER
Then I missed when you were giving the breakout on your comp -- what was traffic versus the menu price increase?
PAUL MOTENKO
The Comp -- the menu price increase -- the effect of the menu price increase in the second quarter was less than one percent, a little less than one percent of the 2.1 percent total (inaudible).
THE CALLER
And average ticket was steady?
PAUL MOTENKO
Yes.
THE CALLER
Thank you.
OPERATOR
Travis (indiscernible) of Red Chip Research.
THE CALLER
My question had to do with your labor costs as a percentage of sales. They were down this quarter and one reason was the management labor controls. I was just wondering what exactly that looks like at the store level.
PAUL MOTENKO
I'm not sure I understand the question.
THE CALLER
I guess what I'm just trying to say is what exactly are these labor controls that management has put in place?
PAUL MOTENKO
Oh, I see. As part of our point-of-sale system, we have a very sophisticated labor scheduler, which was installed in July of 2002 but was fully implemented more towards the end of the year. It allows our management to much more accurately schedule and monitor labor on an hourly and daily basis, and it's a very positive impact. Another major part of reducing labor costs, however, is being in Texas, which is a tip-credit state, and we pay our hourly employees $2.13 cents an hour in Texas versus $6.75 an hour in Southern California -- the tipped employees.
THE CALLER
Thank you.
OPERATOR
Graham Tenaca (ph) of Tenaca (ph) Capital Management.
THE CALLER
Paul, I'm just wondering what the beverage content was in the quarter and what the trends look like.
PAUL MOTENKO
Our alcohol percentages held pretty steady at about 22 percent, and the trend -- we don't see any change in that trend at the moment.
THE CALLER
I just wasn't sure -- I didn't catch whether you said there was a response or not to the price increase. In other words, I assume that you raised prices on certain items and not on others. I was wondering what the response was at the consumer level.
PAUL MOTENKO
We haven't noticed any response of any significance.
THE CALLER
Thanks.
OPERATOR
Eric Gould (ph) of Merryman, Kuran, Ford (ph).
THE CALLER
A couple of quick ones - are there any more stores up in Oregon that look like they could potentially be closed, or do you think it's all behind you now?
PAUL MOTENKO
The stores that remain in Oregon largely are profitable, generating positive cash flow for the Company. We're not specifically looking to terminate any of those leases at this point but our circumstances change; our thoughts might change, but at this point, we don't have any current plans to abandon any of those restaurants.
THE CALLER
One last one -- now that we are about six, seven-plus months past the restaurants that opened up the end of last year -- and obviously, those have been (indiscernible) doing fantastic (indiscernible) some of the highest levels you've had. May comment a little on the experience of the honeymoon period with those restaurants, versus some of the typical ones in Southern California prior to that period -- kind of what the trend has been versus those and kind of how that might kind of look, going forward.
PAUL MOTENKO
The restaurants did have a reasonable honeymoon period. The last few years has (sic) been fairly typical, especially in Southern California, but I don't think their honeymoon periods are any more significant than the last few years. The honeymoons in Southern California so far look like they or a little greater (indiscernible) their reduction in sales is a little greater than what we are experiencing in Texas -- as we would have expected. Since our brand is not as well-known in Texas, we don't have as significant a honeymoon period, but all of those restaurants continue to perform extremely well, and the percentage of reduction in sales is well within our range of what we consider acceptable, (indiscernible) been pretty promising. So, you know, we have no reason to believe that when these restaurants (indiscernible) Comp base, they will negatively impact comps at this time. However, obviously, it is pretty early to tell.
THE CALLER
Thank you.
OPERATOR
(OPERATOR GIVES CALLER INSTRUCTIONS). Gentlemen, there appear to be no further questions or comments at this time. I'd like to turn the floor back over to you for any closing remarks.
PAUL MOTENKO
Well, I want to thank you for participating in this call. We will have a replay shortly, which last for 30 days on the Internet and for three days on the telephone. Details can be found on our web site at www.bjsbrewhouse.com. If you have any further questions, please call us in our offices at 714-848-3747. Thank you very much for participating in the conference call. We look forward to talking to you again next quarter.
OPERATOR
Thank you, ladies in gentlemen, for your participation. This does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day. (CONFERENCE CALL CONCLUDED)