BJ's Restaurants Inc (BJRI) 2007 Q1 法說會逐字稿

Good afternoon. My name is Nakita and I will be your conference operator today. At this time I would like to welcome everyone to the BJ's Restaurant's first quarter 2007 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer period. (Operator instructions).

It is now my pleasure to turn the floor over to your host, Mr. Jerry Deitchle. Sir, you may begin your conference.

Thanks, operator and hello everyone I'm Jerry Deitchle with BJ's Restaurants and welcome to our quarterly investment conference call which we're also broadcasting live over the Internet. Joining me on the call today is Greg Levin our Chief Financial Officer, Greg Lynds our Chief Development Officer and Diane Scott, our Director of Corporate Relations.

After the market closed today, BJ's Restaurants released financial results for the first quarter of fiscal 2007 that ended on April 3rd, 2007. If you haven't had a chance to see our press release today you can view it on our website at www.bjsrestaurants.com.

Our agenda for the call today is going to be as follows. First, as usual I'll provide a brief business and operational overview for the first quarter. I'll also give a status of the ongoing Current Key initiatives that we have under way during 2007.

Next, Greg Lynds our Chief Development Officer will provide an update on the status of our new development pipeline and Greg Levin will comment on our consolidated income statements, summary balance sheet and liquidity position as of the end of the first quarter and then after that we'll be happy to answer your questions.

We'd like to complete the call in about 45 to 50 minutes so we're going to get started right after Diane provides our standard cautionary disclosure with respect to forward-looking statements. Diane?

Our comments from 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 and uncertainties and other factors that may 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 only today's date, April 26, 2007. 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.

Thanks, Diane. With that out of the way as we indicated in our press release today, BJ's reported what we consider to be very good financial results for the first quarter 2007. In spite of the continuing head winds out there generated by the challenging sales and cost environment in general for most casual dining restaurant operators.

Compared to the same quarter last year our revenues for the first quarter increased about 33% to $71.2 million. Our net income for the quarter was $1.6 million or $0.06 per diluted share. In our earnings release for the fourth quarter last year we noted that during the first quarter of this year we were evaluating certain initiatives to further improve the quality, productivity, efficiency and capacity of our restaurant brewery and infrastructure support operation.

We also indicated that our evaluation could result in a onetime pretax charge in the range of $1.8 million to $2.8 million or about $0.05 per share. We did complete our evaluation of these factors during the first quarter and we did incur a non cash pre tax charge of about $2 million or $1.3 million net of tax or $0.05 per share just as we had suspected.

Accordingly, if we were to exclude the impact of that non cash charge from our results from the first quarter of 2007, then our net income for the quarter would have increased approximately 28% to $3 million and our diluted net income per share would have and $0.11. Greg Levin is going to cover the details of that non cash charge in his comments a little later in today's call.

A strong 33% increase in sales for the first quarter was driven by an approximate 24% increase in our total restaurant operating weeks and a 7.7% increase in average sales per operating week that in turn was favorably driven by a stronger than expected comparable restaurant sales increase of 6.9%. That strong 6.9% increase successfully hurdled a very tough comparison for the same quarter last year of 6.8%. When you add those two percentage increases to gather that's a 13.7% increase in first quarter comparable sales for the last two years, which we believe is pretty remarkable, considering how difficult the operating environment has been and continues to be for most casual dining restaurant operators.

Having said that, we believe there are some very specific reasons why BJ's has been able to drive solid sales increases in both our established and new restaurants during the past couple of years. We're going to talk about a little later in the call today.

At BJ's, we are sales builders first and foremost and that's always going to be our unwavering focus and mindset. We're very, very grateful for the fact that our restaurant guests have continued to reward BJ's with their loyalty during these challenging times for most consumers. They're the ones that have been enabled us to achieve our 42nd consecutive quarter of positive comparable sales comparisons during the first quarter.

Other than Olive Garden, a wonderful business, we are not aware of any other casual dining restaurant concepts that have the sustained comparable sales increases that BJ's has enjoyed over the past 10 years. What's also remarkable for BJ's is that our 6.9% increase in comp sales for the first quarter was driven not only by real growth consisting of both higher guest counts and a slightly favorable menu mixture, but it was also driven by modest menu pricing.

There are only really three ways that I know of to drive increased sales at established restaurants. You can drive for more guest traffic; you can increase menu prices and hope that guest frequency doesn't go down; or you can find ways to encourage your guests to trade up on their visits and feel good about it. BJ's was able to achieve positive results on all three of those sales drivers during the first quarter, which is not an easy thing to accomplish by any restaurant concept in any segment.

We also believe that it's important for our investors to understand the initiatives that we specifically undertake to drive sales increases because they tie directly to our ongoing strategic evolution of the BJ's concept and business model and what we as a leadership team believe is the best way for BJ's to capture additional market shares as we continue our expansion across the country.

It's been our observation over the many years that the higher quality, more differentiated and more approachable casual dining restaurants have the best opportunity to do well in both good environments and tough operating environments. In the tougher environments for consumer spending in general, we believe the consumers are probably more likely to cut back on their patronage of the more mediocre casual dining concept occasions before they're going to change their usage behaviors materially for the more approachable, higher quality and more differentiated concepts that offer a better overall dining experience and value for the money.

These have historically been BJ's strengths as a concept and we're going to continue to play to those strengths going forward. The BJ's concept is positioned right in the middle of the fairway, so to speak, for the consumer, but we're going to keep making BJ's even better and better for the consumer as time goes on. We believe that our favorable comparable sales results are principally attributable to a few general initiatives that we've been working on and continue to work on at BJ's.

First, the ongoing improvement in the overall quality of our popular differentiated restaurant concept and secondly the ongoing improvement in our overall operational execution within the four walls of each restaurant that particularly use our new quality fast tool sets that we've rolled out over the past year to 18 months. We've still got a couple in rollout phase right now.

During the past couple years we've worked very hard to further improve the overall quality of the BJ's dining experience in every respect. On the food side, we've made investments in many of our current menu items including our signature deep dish pizza to upgraded ingredients and presentations. On the service side, we've made investments to improve our ability to hire, motivate and reward better management and hourly staff members in our restaurant and to provide them with state of the art tools and systems.

On the facility side, we've made investments to adopt and execute what we call a like new, first class maintenance policy. We've also made investments in better quality equipment and furnishings, such as the new flat screen TV packages that we recently installed at every restaurant and our guests absolutely love it.

On the execution side, we've made investments in KDS capability and automated web based labor scheduling systems. These systems have favorably impacted our ticket times, our table turns at peak meal periods, while simultaneously improving the overall quality of the dining experience as measured by our guest surveys.

Starting with a relatively low average check for casual dining concepts in the $11 range for BJ's, which I think is a significant advantage for BJ's, particularly during these times in this operating environment, we intentionally invested in better quality and differentiation to enable BJ's to play with strength as one of the most approachable and differentiated concepts out there in the bar and grill or traditional American segment and as a byproduct of that also increased the concepts price and power.

Once a concept has pricing power it's going to be really hard to protect its margins from the impact of normal inflation, not to mention all of the other cost pressures that come our way such as state minimum wage increases and commodity cost increases. As a result of the strong approachability and differentiation in value in the BJ's concept, coupled with all the initiatives that we've undertaken to improve quality and improve execution and coupled with our relatively low average check advantage in the $11 range, we have been able to achieve the benefits of slightly higher menu pricing when we really need it in this operating environment and at the same time not sacrifice any guest traffic.

Having said that, philosophically we cannot price our way to success nor can we save our way to success either. We've got to grow our way to success in a productive, efficient, leveragable and balanced matter. We're also going to continue to make additional investments to further increase the quality and differentiation of the BJ's concept while simultaneously maintaining the overall price point advantage on a relative basis compared to the mass market casual dining competitors that we face out there in the trade areas.

In short, that's a quick executive summary of the best way that we believe BJ's can grow profitable market share over the long run. Again, while we're very, very grateful for solid comp sales increase for the first quarter and while our comp sales comparison for the second quarter to date also remain solidly positive, but we always want to remind our investors that over time we do expect our comp sales comparisons to gradually began to track closer to our longer term run rate expectation in the 2% to 3% range or so, principally reflecting our normalized, effective annual menu price increases and doing our best to maintain guest traffic.

But having said that, depending on the progress of the sales building initiatives that we've targeted, that we're working on, everything else being equal, we do believe we have an opportunity to continue to do a little bit better on that particular measure. Greg Levin is going to comment on some of the recent sales trends from individual restaurants in his remarks a little later.

With respect to our newer restaurants, our initial sales volumes for our four openings during the fourth quarter of last year which we're in Bakersfield, CA, Arlington, Texas, Aurora, Colorado and Reno, Nevada they remain solidly in line with our expectations and along with our comp sales increase really help drive the overall increase in our average sales per week for the first quarter that was up 7.7%.

Speaking of our new restaurants, in mid March this year we opened our first restaurants in Eastern Time zone; one in Tampa, FL in Pinellas Park and the other in Columbus, OH at Polaris Mall. We really feel good about these openings. We believe these new restaurants give us a great entry point into both the central Florida and Ohio Valley market. We do have plans to open additional restaurants in these markets during the next couple years.

As most of you know, we just opened our second restaurant in Florida just over a week ago in Orlando in the Millenia Mall trade area. We believe that we're successfully on our way to further expand the BJ's concept in central Florida and the Ohio valley. We do have one more new restaurant scheduled to open in Tampa and at the Citrus Park Mall this summer. We also signed a lease for a new restaurant in Cincinnati, OH at Tri-Counties mall that should open during the first half of next year.

We did mention in our press release today that the initial sales volumes for our Tampa and Columbus restaurants are currently running in excess of $100,000 per week with no ongoing media advertising support, which is clearly stronger than any of us initially expected and is very encouraging to us. After just 10 days of operation, sales for our Orlando restaurant are already within striking distance of $100,000 per week, again, with no ongoing media advertising support. BJ's relies on AAA locations and AAA operational execution to build its reputation with consumers over time.

Speaking of new restaurant development, I'm going to turn the call over to Greg Lynds our Chief Development Officer for his perspective on our 2007 development plans. Greg, go ahead.

Thanks, Jerry. Good afternoon. As we mentioned in our press release today, our 2007/2008 new restaurant development pipeline remains in excellent shape. We continue to be very pleased with the quality of the new sites in our pipeline. Our internal goal is the same. It remains to be at least 18 months of forward visibility for specific new locations at all times. Our development team works hard to stay on target with that goal.

As Jerry mentioned today, we have opened three successful restaurants so far in 2007; in Columbus, OH on a pad at the Polaris Mall, and Pinellas Park, FL a suburb of Tampa in the large power center, and in Orlando, FL across the street from the Millennium Mall.

All of our remaining 2007 openings have been identified and secured with leases, purchase agreements or letters of intent. Seven of these restaurants are already under construction including in Palmdale, CA, Norman, OK, Oklahoma City, OK, Citrus Park, FL, McAllen, TX, Montebello, CA and lastly in Stockton, CA. We also plan to start construction on three more restaurants within the next 60 days.

As we all know it's difficult to precisely predict the actual timing of our new restaurant openings due to many factors that are outside of BJ's control including factors under the control of our landlords, contractors and municipalities. With that in mind as of today we currently expect to open a total of four restaurants in the second quarter of which one is already open in Orlando, FL and as many as three in the third quarter and as many as four openings in the fourth quarter. In order for us to maintain our 18 month visibility for our real estate pipeline, our development team is now concentrating on the 2008 and 2009 locations. So far to date we have 11 signed leases or letters of intent for potential new restaurants in 2008 and 2009. We currently are in negotiation for another 10 potential locations for future development.

For the next few years our primary growth goal is to increase our productive capacity 20% to 25% each year as measured by total restaurant operating weeks. Our internal real estate design and construction team continue to be staffed with strong professionals who have a solid network of outside engineers and general contractors that are all of national standing as our partners. With a solid team in place, I'm confident BJ's should have many years of solid new restaurant growth to come. Jerry, back to you.

Thanks, Greg. With only 58 restaurants open today in only eight states, we continue to believe there's room for at least 300 BJ's restaurants domestically and as Greg mentioned we continue to plan to increase our productive capacity as measured in total restaurant operating weeks by 20% to 25% for the next few years or so. Having said that, we're going to maintain the discipline to execute our growth plan in a very careful and controlled manner and with the right operational talent, support infrastructure, and modern tool sets in place.

Getting back to the business, 2006 was a year in which we focused most of our key initiatives on strengthening our ability to process the business currently being offered to us in a more productive, efficient and leveragable manner while simultaneously improving the overall quality of the BJ's dining experience. We believe the success of these initiatives is currently being reflected in our current strong sales volume.

As we continue moving through 2007, we're continuing to focus our key initiatives on creating opportunities to build even more sales now that we're in a much better position to correctly and consistently process more business in our restaurants. As we mentioned before, all the great consumer growth companies in America are sales builders first and foremost and that is our mindset here at BJ's.

Here's an update on six of our more important sales building initiatives for 2007 that we're working on. First of all, building sales in our off premise channel. They only currently represent about 5% of total sales in our larger restaurants. We believe our off premise sales should be much closer to 10% in our opinion. We're in the process of re engineering our entire off premise sales channel, from packaging and merchandising and signage and technology and operational procedures in order to be in a position to commence a total relaunch of our off premise sales program by the beginning of October of this year.

Over the next few years, provided that we execute correctly, we would expect our off premise sales to gradually build to the 10% level and we would expect a good portion of those sales to be incremental, again, based on the actual historical results of the various curbside programs that are currently offered by our mass market casual dining competitors.

Secondly, building sales in our large party channel. Since our building layouts and our larger footprint restaurants and our substantial pizza, salad menu offerings really facilitate large parties better than almost anybody else in casual dining. We have now completed the upgrade of all of our large party buffet offerings, all of our related operational procedures and our new upgraded large party buffet program will be in place in all applicable restaurants in time to drive sales for Mother's Day and the upcoming graduation season. We can check that one off of our list and now all we've got to do is execute against it.

Number three, adding productive capacity to certain existing restaurants. We know that we can enclose certain outdoor patios and get year-round productive use of those seats. We know that we can add patio's to existing high volume restaurants in favorable climate areas. We only have four of those projects currently in design and we expect most of those to be essentially completed and developed by the end of the third quarter. So, we're working on four of those.

Number four, rolling out two additional quality fast tool sets. We have an automated table management system and a new guest service system and related productivity analysis in the process of rolling. As of today, we've completed about 25 installations of our automated table management system and we currently expect to complete all targeted installations by the end of the third quarter of that system.

Our new guest service system, which among other things, converts our busser position into more of a service assistant position to improve overall quality and table turns. That should also be rolled out to all applicable restaurants by the end of the third quarter.

Number five, further improvements to our overall quality points and differentiation. We're testing image enhancements to three older BJ's restaurants. We're also in the process of rolling out upgraded china, silverware, glassware, and napkins to our large format restaurants. We've completed the rollout of flat screen televisions to all restaurants. We're in the process of putting together a rollout of an updated logo and brand identity package.

We've just completed the rollout of an upgraded menu format. We have in progress the rollout of upgraded staff uniforms and later this year we have a plan to upgrade to both our non-alcoholic and wine/spirit beverage programs. All of these planned quality enhancements that I just mentioned to the concept are either done or in various stages of development, testing or rollout. We believe that most of them should be in place by the end of this year with the exception of a new logo and brand identity rollout which we'll probably extend into next year a little bit.

And last, implementing a coordinated national marketing calendar for company-wide food and beer promotions that are really more focused on top line awareness building. Our promotional calendar does not involve any discounting. It's 100% focused on top line awareness, building for our signature products, both in the electronic and print media. We do have this calendar in place now and it's undergoing an evolution. That's an update on our top six sales building initiatives that we have underway this year.

We've enjoyed ten straight years of positive comp sales momentum. I think it's absolutely essential to keep sales building at the top of our initiative list for 2007 because as long as we have the sales we'll have the opportunity to optimize the bottom line results for the business.

The other key initiatives for this year continue to be focused on talent building and margin building which among other things will include a rollout of a theoretical food cost system by the end of this summer. Again, I think we've said before while we do not believe that our restaurant systems currently have excessive amount of waste or yield issues, the new food cost system that we're in the process of getting ready to roll will help us to more easily identify specific issues quickly and will also help us to bring better discipline to our kitchen operation.

In addition to opening as many as 13 new restaurants this year, we've got a lot of very important initiatives that we're also working on that should advance our ability to be both great restaurateurs and great restaurant business people. Again, as we've always said in the past, while we're unable to precisely predict the amount and timing of any specific sales or operational margin improvement from each initiative, we are confident that taken as a whole all of our initiatives will give us the best opportunity to protect and preserve our four wall restaurant operating margins over time as we drive the business forward in market share.

Now I'm going to turn the call over to Greg Levin. He's going review our first quarter financial results in more detail. Greg?

Thanks, Jerry. Good afternoon, everyone. I'm going to take a couple minutes and go through some of the highlights for the first quarter and provide some forward-looking commentary for the second quarter and the rest of 2007.

As Jerry previously noted, our total revenue for BJ's first quarter increased just over 33% or approximately $71.2 million from $53.4 million in the prior year's comparable quarter. This increase was a result of 24% more operating weeks coupled with a strong 7.7% increase in our weekly sales average. The operating week increase is due to 10 new restaurants that we have opened since Q1 of last year and a full quarter operating weeks in the three restaurants that we opened in Q1 last year.

Our weekly sales average increase was driven by our comparable restaurant sales of 6.9% and stronger than expected sales from our new restaurants not yet in the comparable sales base. Just to give you a quick flavor of comparable sales for the quarter, we continue to see tremendous comp sales growth in our restaurants outside of California. Texas and Arizona both continue to be very, very strong markets for BJ's.

Our Clear Lake and Willow Brook restaurants both in the Houston, TX area had strong double digit sales increases during the quarter as did our Tucson, AZ restaurants. Our mature California restaurants continue to do extremely well with our Valencia restaurant, which opened in March of 2000, comping up over almost 12% for the quarter.

Additionally, it was also nice to see some of our newer restaurants with a strong comparable sales base with some pretty strong numbers. For instance, our Rancho Cucamonga restaurant, which opened in June 2005, just recently joined the comp group and had a double digit sales increase for the quarter. As Jerry mentioned, our comparable restaurant sales continue to trend solidly positive to date in the second quarter.

The strength of our comparable restaurant sales over the last few quarters is really a testament to the strength of our tool sets that have allowed us to process more business in an efficient and effective manner while improving the overall dining experience. The best return on investment that we can offer our shareholders is by driving sales productively. That is our focus at BJ's. We must continue to be sales builders first and foremost.

As Terry mentioned, our initiatives are not to save our way to success but to drive sales by being able to process more business in our restaurants due to productivity tool sets, improved employee retention, and training and hospitality initiatives. We believe that is the best way to achieve long term success for our employees, guests and shareholders.

Our 6.9% increase in comparable restaurant sales for the first quarter is either a combination of increased customer traffic coupled with approximately 3.2% of menu pricing for the quarter. For those of you monitoring menu pricing, we expect Q2 to have approximately 4% of menu pricing. As we mentioned on our fourth quarter conference call, due to minimum wage increases in most of the state's we do business, we accelerated the timing of our regularly scheduled semi-annual menu change from June to this past March. This new menu included around 2% of new menu pricing to help offset minimum wage increases and other low cost pressures.

Additionally, this new menu has a more contemporary look and design format which we captured last year and we believe really helps showcase our signature offerings such as our pizza and handcrafted beers.

In Q3 and Q4 of this year we should have approximately 3% of menu pricing as we wrap our menu pricing in early June. At this time will always consider additional menu pricing primarily with our regularly scheduled November menu update.

While we are extremely pleased with the strong initial openings of many of our new restaurants which resulted in the approximate 7.7% increase in weekly sales average, I do want to caution investors that many of our new restaurants continue to open at volumes typically greater than their expected mature run rate particularly in our home state of California. Additionally, we are extremely pleased with our sales volumes in our Columbus, OH and our Tampa and Orlando, FL restaurants we need to remind investors that these are new markets for us.

As with any of our new markets, we anticipate for modeling purposes that those restaurants will open up at sell volume below the volumes in our home court established market. We have had more time to build our reputation and brand. It usually takes a while for new restaurants that are not supported by a large media or marketing budget to gain traction to become part of the guest's regular dining rotation.

With only one new California restaurant opening up in the first half of 2007 in Palmdale, CA which we expect open in early May, we would anticipate our weekly sales average growth to be closer or slightly below our comparable restaurant sales growth for the second quarter. During the last half of this year we currently plan to have three California restaurants open.

Moving on to the middle of our P&L, our comp sales decreased by 30 basis points to 25.3% of sales in the first quarter compared to prior year's first quarter. The decrease is a result of menu pricing partially offset by higher produce costs and expected temporary inefficiency related to the gradual ramp up of the initial production activities in our new 15,000 barrel brewery in Reno, NV.

Just to give you a little more color on produce costs, we estimate that our produce costs as compared to the fourth quarter of 2006 were up 35 basis points resulting from the cold weather in California in early January. We also continue to see higher produce costs for citrus items such as lemons and limes as well as avocados and onions. Based on April numbers to date and our discussion with our supply chain group, I anticipate produce costs to stay relatively high through Q2.

With regard to our brewery operations, Reno is now our largest capacity brewery with about three times the productive capacity of our current large brewery here in California. For the first quarter, our Reno brewery produced at about 58% of capacity and we are still working through some of the temporary inefficiencies at the latest brewery.

To date in April, the Reno brewery is producing in the mid-80% range of productive capacity and we are on schedule for the brewery to be producing at its targeted production run rate by the end of the second quarter. In the early component of our business model, we believe that maximum economies of scale and maximum quality and consistency can be achieved by carefully concentrating our brewery operations in fewer higher capacity breweries like Reno, while at the same time developing strategic contract brewery relationships. This has been and will continue to be our brewing strategy during the foreseeable future.

Now back to our restaurant operations. I'd like to mention that as we continue to grow and open new restaurants, we like all of our casual sponsored premium dining restaurants with a more complex menu with many prepared from scratch menu items may experience pressure and cost of sales related to the timing of new restaurant openings.

As we have mentioned before, we do expect our cost of sales to be higher at our newer restaurants during the first 90 to 120 days of operation verses our mature restaurants as our management teams become accustomed to optimally predicting, managing, and servicing sales volumes typically experienced in our new restaurants.

In Q2 as Greg Lynds mentioned, we anticipate opening four new restaurants, plus we will have some inefficiencies related to the two new restaurants that we just opened in March of this year.

Our labor and benefits during the first quarter increased 150 basis points to 36% of sales from 34.5% of sales last year. This increase is a result of primarily two things; first, we incurred a 20 basis point increase in management labor compared to Q1 of last year resulting from our previously mentioned gold standard stock furnisher program which is for our restaurant general managers and executive kitchen managers. This program which consists of restrictive stock units has a five year performance requirement that will allow us to recruit and retain top talent for BJ's, allow us to improve our operational execution and lower management turnover expenses going forward.

For BJ's to become a national restaurant growth company, the most critical success pipeline is the recruitment, retention, and motivation of our restaurant managers. Taken by itself, we estimate the cost of this program to be approximately $16,000 per restaurant on an annual basis, which is less than the cost to recruit and train a new manager.

Second, as a result of minimum wage, our average hourly wage increased over 7% and this equates to the majority of the increase quarter over quarter. Looking toward quarter two, we anticipate that the additional menu pricing which we just implemented in March, will allow us to pick up about 40 or 50 basis points in hourly labor compared to Q1 and therefore bring total labor into the mid-35% range.

Our operating occupancy cost as a percentage of revenue decreased 60 basis points to 18.8% from 19.4% last year. The decrease is the result of our ability to leverage the fixed nature of many of these costs over our strong comparable sales; however, when analyzing these costs we continue to see increases in the many components of operating occupancy costs.

For instance, we have made a deliberate decision to operate our restaurants in a first class manner which has resulted in higher facilities and maintenance costs than in the past. We believe this mindset helps maintain BJ's differentiation compared with many of the mass casual restaurant companies.

Our general and administrative expenses in the first quarter 2006 were consistent with prior year at 8.8% of sales and is essentially in line with our internal plan. Included in G&A are approximately $50,000 related to the GSOP for our field supervision, which includes the area or regional director and our culinary training managers and there is approximately $100,000 in meeting expenses related to our relocation of our corporate offices to a larger leased facility to support our expanding restaurant and brewery operations. These two items represent about 20 basis points in G&A compared to last year.

On a go-forward basis, we'll continue to have the cost associated with the GSOP; however, our office relocation cost is a one-time expense. Excluding these aforementioned costs our G&A increase was the result of additional expenditures associated with the continued infrastructure investment in our business; both field supervision and corporate support, our manager and training program and additional travel costs related to new restaurant openings in new markets and field supervision.

Our restaurant opening expenses were approximately $1.4 million during the first quarter of 2007 which was a result of two restaurants that opened in the first quarter plus pre-opening expense of about $275,000 for six restaurants expected to open later this year. Our pre-opening costs for restaurants for quarter one was greater than our targeted run rate of about $450,000 to $470,000 per restaurant. This was because the two new restaurants opened in the first quarter were pioneers in new and very remote markets for BJ's which required greater support than restaurants opening in existing markets.

It's important to note that the key to developing the models that we will incur pre-opening expenses, primarily (phantom) rent, for new restaurants as early as five months before our restaurant opens and therefore quarterly pre-opening costs may have later variability than the actual number of new restaurants opened in the quarter.

Looking toward the second quarter we anticipate opening as many as four new restaurants during the quarter and three new restaurants in the third quarter. As a result of having to account for (inaudible) in the construction period, I anticipate that we will incur close to $400,000 of additional pre-opening costs in Q2 related to phantom rent for restaurants that will open subsequent to the second quarter.

Also during the second quarter, we will plan to open one restaurant in Florida and two in Oklahoma and therefore we may see higher opening costs than our traditional run rate of $450,000 to $470,000 per restaurant.

As we previously mentioned in our press release today during the quarter we incurred at one-time, non cash pre tax charge of $2 million which is approximately $1.3 million net of taxes and had the effect of reducing diluted net income per share by $0.05. This one-time charge was related to the disposal of certain assets in connection with our strategic initiatives to further improve the quality, productivity, efficiency and capacity of our restaurants, brewing operations and support infrastructure.

Specifically, the disposal asset costs were related to the replacement of all of our old CRT televisions with new high definition flat panel televisions in all restaurants. In addition, as Jerry mentioned, we are upgrading all our china, silverware and glassware in all restaurants to a more contemporary package that significantly enhances the food and beverage presentation and therefore we incurred a write down on the value of our current small wares. We also accelerated the depreciation for certain restaurants which will get remodels later this year.

On the brewery side, we've decommissioned four of our older, inefficient, smaller legacy breweries to take advantage of economies of scale offered by our new Reno brewery. We believe that the economies of scale at our Reno brewery will allow us to reduce the total delivered cost of beer to our restaurants by approximately 20% once the Reno brewery is optimally and sustainably producing and its targeted capacity.

Finally in January, we relocated our home office to a larger leased facility to accommodate the support and unit for future growth of the company and therefore disposed of certain nonproductive support related assets. Excluding these one time non cash charges of approximately $1.3 million net of taxes, our diluted net income per share for the quarter will be $0.11.

Our effective tax rate for the quarter was 33.3% and we currently anticipate that our effective tax rate for 2007 to be around 33% to 34%. Our CapEx for the first quarter was approximately $15.4 million of which $1 million was related to the upgrade flat panel televisions in all of our restaurants and $1.4 million for the purchase of land.

We continue CapEx at around $60,000,000 to $65,000,000 for fiscal 2007. I believe shares were $26.8 million for the quarter and we continue to expect that our diluted shares outstanding for the quarter to be around $27 million.

Before I turn the call back to Jerry, I want to make one comment related to the second quarter. Over the next several months we'll be getting and implementing two major hospitality initiatives in our restaurants which Jerry spoke of. The first will be the actual rollout of the new china, silverware and glassware to our restaurants. We anticipate that each restaurant will incur about 30 hours of additional labor to set up and roll out the new small wares.

Additionally, in the second quarter we will begin implementing our Server Assistant Program. This program elevates the current busser position to be more involved with taking care of our guests. We believe that to continue our success, hospitality and service needs to be at the forefront of our initiatives. We anticipate the training for this program to be about 170 hours per restaurant.

All in all we are anticipating about 200 hours per restaurant in training hours to continue to move the BJ's dining experience cast out as the mass casual players. As such, we anticipate the cost of rolling out these two initiatives to be about a $125,000 to $150,000 range in Q2. With that, I'm going to turn it back to Jerry.

Thanks, Greg for a great review. We're going to wrap up our formal comments now. BJ's achieved very solid results for the first quarter in spite of continuing challenges in the general operating environment. Thanks to the hard work of all of our restaurant operators, we continue to enjoy very strong sales for both our new restaurant openings and our established restaurants.

For those of us in the restaurant business, we know that doesn't happen by itself. It's a result of a lot of hard work and a lot of things being executed correctly in our restaurants. Now having said that, we are never satisfied at BJ's with our operational execution in any aspect of our business because e can always surpass our previous best.

Our leadership team remains highly confident of our ability to continue executing our national growth plan while at the same time executing all of these key initiatives that we've been working on and working harder to achieve steadily increasing leverage in every aspect of our business as we grow.

As we mentioned earlier, our sales trends continue solidly positive for both our established and new restaurants. Again, like most other casual dining companies in this difficult environment we at BJ's certainly have our fair share of cost pressures to deal with. I've always felt that as long as you've got the sales, you've got the opportunity to manage those cost pressures as best as you possibly can.

Our new restaurant pipeline for the remainder of this year and next year is in excellent shape at this point. Greg Lynds and his team are already working on potential 2009 openings for us. We believe we've got a very comprehensive strategic and tactical plan in place. Ten percent of our job is putting the plan together; 90% of our job is executing the plan.

That's what we're going to continue doing in this tough environment. We're going to keep our heads down. We're going to consistently execute this plan and keep our unwavering focus on the longer term growth and success of BJ's and we look forward to reporting our results to you as the year unfolds.

That concludes our formal remarks. We'll open it up for questions. If we don't have time to get your question on this call, please feel free to call us at our offices. We're out here in California on Pacific Time so we'll be around for awhile. Operator, we're ready for questions.

(Operator instructions). We will pause for just a moment to compile the Q&A roster. The first question comes from Mr. Larry Miller with RBC.

Hey, guys. How are you doing?

Hi, Larry. What's going on? I

Not much. I just had a question. Jerry, you pointed really effectively you've done a great job managing the top line particularly in an environment where casual dining has really struggled. I was just curious, given the kind of cost factor as it is today is so onerous, what kind of same store sales do we need to run throughout margins? How do you guys think about that? Hopefully, the cost picture will normalize and we'll be to get some leverage going down the road. What do we look like today?

One thing - and this is Greg, Larry - thinking about minimum wage sitting at about, I think we said a little over 7% in our average wage there. You're always going to see some pressure in operating occupancy; landlords want to charge you more for (inaudible), et cetera. We're probably looking somewhere in the 4% range, 3% to 4%, I think, to maintain flattish margins.

That would be a combination, obviously, of menu price increases and some real growth which we've been able to achieve for the past couple years. We've been working hard to do that. We're also getting some increased economies of scale as we continue to grow our business and we have much more purchasing power.

Our practice over the past couple years has been essentially to take them out of those benefits and put them back into the concept to really make the concept better for the guest and begin to let this business really feed on itself; to really increase that distance between the quality and differentiation of BJ's from the mass market bar and grill segment that's out there because that's our principal competitive advantage.

I think Greg is right. It's probably going to take around a 3% to 4% increase in same store sales this year of which the majority of that would have to be pricing to be able to protect our margin. The good news is when you're starting off with a relatively low average check advantage that BJ's has enjoyed, we've got a $1 to $2 spread compared to the mass market casual dining set; most of them are above. As long as we can keep that relative spread, I think we are going to be in good shape from a competitive point of view.

Every 1% increase in menu pricing to our guest is about $0.11. Again, when that all adds up and you've got to be very, very careful about managing that because you can't expect guests to pay for our inefficiencies. Given the relative competitive position of BJ's and kind of where we are relative to the major competitors out there, I think we are in pretty good position.

Along those lines you've been making pretty substantial investments in labor over the past 12 or 18 months. How do you think about balancing the investments back in the business like you're doing today given the environment with the increases that we're seeing out there? In other words, is the right time to make investments in labor and not thinking about protecting margins? How you balance those two ideas?

I think we've been doing a pretty good job of balancing those two factors over the past couple of years that I've been involved with the business. That would be our intention going forward. We're not going to sacrifice one for the other. I think as we've made investments in the business, I think they've had nice solid returns; when you look at our sales productivity, when you look at our overall labor productivity.

If you set the minimum wage increase aside for a minute - I can't recall whether Greg did mention - our last menu pricing went in effect at the beginning of March. January and February we really didn't have all the required pricing in to cover some of the minimum wage increase and we wanted to really see not only what the absolute increase in the minimum wage would be, we kind of knew that but we really didn't know what the ripple effect would be upward in the non minimum wage categories. When we got a good feel for that then we went ahead with our menu price increase.

I think our margins going forward are going to get the benefit of a little more menu pricing. It is not our intention to be unbalanced in that respect. I think we continue to invest in better labor which has generated an absolute improvement in labor productivity. We measure labor productivity as the number of labor hours per 100 guests. That particular statistic which we focus on like hawks here has consistently gone down over the past year, year and a half as we've gotten not only better management in place, but we've improved all of our labor management tools. It is not our intention to sacrifice one for the other.

All of the investments that we've made in quality and tool sets and so forth, we believe have had a nice return for the business. There's been a little bit of noise in our margins with respect to the first quarter to a little bit of the late menu price increase that we talked about. We had some produce cost pressure from the California freeze in there. We have invested in our GSOP program which as Greg mentioned is a 20 to 30 basis point impact on restaurant labor just standing by itself.

We do expect to get a return on that 20 or 30 basis point improvement in the form of longer retention and lower turnover going forward. That's really our philosophy. I think we've done a pretty good job of managing all the pushes and pulls and protecting our margins in this environment.

Great. Just one final question and I'll hop off. Greg, you mentioned some of the California stores are doing really well. Some other restaurant companies have pointed to California and to a lesser extent Florida which were really strong markets over the last year so as being with some of the weaker markets. Can you give a sense of how California in total is doing relative to the whole comp base?

Larry, California is doing fine for us. We haven't seen any change in really any of our states over the last 12 to 18 months. Everything has been very consistent from California to Texas to Arizona and Nevada. All of them have done equally well for us. We haven't seen any soft spots in Northern California or Southern California. There might be instances of what I would call competitive intrusion, if anything, but other than that everything has been very consistent.

Just to follow up on that. In the first quarter we have a few California beach restaurants that obviously had one of the coldest winters on record year in California. So you saw a little bit of impact on those beach restaurants, but other than that the baseline California restaurants as Greg mentioned continue to hum along.

Thank you very much, guys.

You're welcome, Larry.

Your next question comes from Mr. Jeff Farmer of CIBC World Markets.

Good afternoon, guys. How are you? Following up on Larry's second question, I think you said both this year and last year you put a lot operational tool sets in place and beefed up your restaurant level management pipeline in comp packages. Did you expect the majority of this work is now probably behind you as you enter '08 and if that is the case, does this mean that next year there could essentially be what I consider margin expansion inflection point for you? That is assuming sales stay at the same level they are now?

Absolutely, Jeff. I think over the last two years we've really been working on the infrastructure as Jerry has really touched upon. It was our intent to be able to process the business that is being offered to us. That's means upgrading everywhere. We have put a lot of emphasis on the management pipeline in regard to who we're recruiting and bringing in, the tool sets there.

We put emphasis on the operating occupancy costs. We put emphasis on improving the quality of our ingredients. All those things have a cost. You think it pays for itself in regards to 6.8% or 6.9% comparable restaurant sales which I think is probably one of the industry leaders out there. I do think as you start to look into 2008 and 2009 really the foundation has been set for us. We need to continue to drive top level sales by having a better differentiated higher quality product because we've gotten out the system and people in place.

That is helpful. Switching to your new market openings. Are you doing anything differently with the local store marketing around those Florida and Ohio units?

No, we really haven't. About all we really do is we take usually the Saturday night before we open, we open the restaurant to a local charity and we let them build a restaurant up and we provide food and service and the beverages. They collect the donations. We try to spread the word around. We're really a word of mouth concept; AAA location, AAA operational execution.

Occasionally, we're able to get on morning television show with Ray Martin our Vice President of Culinary R&D or James Drake our Vice President of Kitchen Operations and do a little bit of a food demonstration on a local morning show and we're able to get that through our public relations sources. But other than that, we have no media advertising, no coupons, no grand opening advertising. We're just kind of open our doors and start to build our reputation and execute as well as we have. So, no, there hasn't been anything different. It's not that we're against it at all. We just haven't seen really need to require anything beyond what we're currently doing.

I think historically you haven't really seen a big honeymoon period in your new market openings? If that's the case, assuming it is the case, is it fair to say that the Florida and Ohio units have a good chance to hold on to their sales lines?

Obviously, we're very, very encouraged. We're early in the game and we're very, very encouraged with our overall sales volumes. I don't think any one of us here would have thunk that (we would be doing more than 9$100,000) a week in these restaurants out of the chute, particularly in these trade areas. These trade areas are very competitive trade areas. We're doing very, very well. That goes back, I think, to what Greg mentioned earlier about all of the investments that we've made in BJ's over the past couple years to further improve the quality and differentiation and raise us clearly above mass market casual dining competitive set out there.

I dare to say that had we taken BJ's, which is a really good concept circa 2003 version into these markets at this time, I'm not sure we would have done as well as we're doing. We're very, very encouraged. Let's let the clock run a little bit further and we'll give you updates as we move through the next couple quarters. I've got to tell you we're very, very pleased with our sales in these markets out of the chute.

Final question for me. I think five of the 13 '07 openings will be in new States. Do you have an early read on that mix for '08?

Obviously, we do have our development plan kind of penciled out for 2008. Our goal over the next three years is to kind of split our development into thirds; a third in our home court of California, a third in states other than California that are west of the Mississippi, and a third into the central Florida/Ohio Valley market. As we pencil out 2008 and 2009 you're likely to see that 1/3, 1/3, 1/3 strategy. Would you agree with that, Greg?

Yes. That's our long term strategy and our team is focused on that goal of 1/3 throughout the country.

We believe that that's really a (thoughtful) way to approach our development to really minimize new market development risk along this business model at this time.

Thank you guys.

You're welcome.

Your next question comes from Mr. Destin Tompkins with Morgan Keegan.

Thank you. If I remember correctly when you guys released Q4 results you mentioned Q1 through the first six weeks was up 5%. I guess if my back of the envelope math is correct, that would suggest that the same store sales were up 8.5% over last seven weeks of the quarter; is that accurate? If so, what do think drove such a strong acceleration, other than maybe the menu price increase?

The fact that our quick commentary about our (inaudible). We don't give monthly counts. If you put them out there, it probably works out somewhat like you just said there. I see it as a combination of things. One is we had additional menu pricing that came in March. As we kind of talked about rolling out that new menu.

The other thing was January was a colder month in California and some of that cold month took away, as Gerry mentioned, from the beach restaurants. We got a little bit of acceleration going there and then believe it or not Easter was a week earlier and we got the first week of spring break in late March. We had a nice sales week in Q1 so to speak. We got a little bit of acceleration because of those items.

I would just add to that that we certainly had more of our new operational tool sets in place, more of our automated front desk systems which really speed up transactions during peak meal periods and a lot of our large format restaurants. The other thing, too, April has continued to be very, very strong to date as we mentioned earlier. I think we have a few things moving around in our favor. But overall the environment continues to be good for BJ's from a sales perspective.

Okay. Did you give what the traffic make up was of that 6.9%?

We didn't. We talked about the menu pricing being about 3.2% for the quarter. The difference really being traffic and the little bit of mix shift.

Okay. There wasn't much mix shift then?

There was a slight favorable mix shift, but most of it was traffic.

Okay. Two things I wanted to clarify; on the labor, the $125,00 to $150,000 of additional expense you expect in Q2, was that in addition to the mid-35% range you were looking for on the labor line?

I would hope we can get that mid-35% line with that in there.

Okay. Also on the pre-opening, you mentioned there was a $450,000 to $470,000 per store and then on top of that an additional $400,000. That wasn't included in those numbers, correct?

It was not. If you put the $400,000 in there and went with the higher $470,000 number on four restaurants, you'd probably be around your pre-opening number for the quarter. Pre-opening is so tough now with this pre-opening ramp. It really throws things off. When we look at it here we try to do our best and that's kind of where we're running.

Okay. Great. Thanks guys.

Since we had a technical foul up on the last quarter's call and for some reason didn't have any Q&A, we're going to hold it open a little while longer here. If there are any questions to make up for that technical glitch. So, we'll keep going for a while.

Also you have another question coming from Ms. Sharon Zackfia with William Blair.

Hi. Good afternoon. I'm glad you held the call open long enough for me. I have a couple questions. Since you took the price at the end of this first quarter, is premature to think you can get back out of neutral, less your contributional margins by June? Will it be more of a lag? I think, Greg, you started to address that, but I wasn't really clear.

I'm looking at where our restaurant margins were last year; kind of right around that 20%. We finished this quarter at 19.9% coming off of 20.5% from last year. I think we can get there. I think people have to take into consideration the GSOP plan. You're just going to add that 30 basis points in there. I think originally our menu pricing was really more against true dollars coming out of the minimum wage. I think that plays it. I think at the end of the day we're going to continue to be very focused on that 20% cash flow. I think that's kind of what we're targeting. Based on that, I think we'll be pretty close to that number.

Okay, but hopefully the first quarter is the low water mark on restaurant contribution margins?

Hopefully.

Okay.

Sharon, as I say internally, "Hope is not a plan of action."

I live on hope, Jerry.

On our side we can't. We've got to have action plans to deliver results and we're working hard not only with the menu price increase impact, but we're working to get these additional automated table management systems out there in the rest of the restaurants here in the second quarter. Those really do have a significant impact on labor productivity and ticket times. We're going to work on executing action plans.

As Greg mentioned, our overall target really is to preserve our operating cash flow margins at the 20% range or so going forward; to increase our operating weeks by 20% to 25% a year. We'll try to eventually see comparable sales again on our long term run rate basis settled into our menu price increase, maybe a little growth that's long term and leverage the heck out of our fixed infrastructure costs. Over time that's the model that others have had our business model have been able to achieve and that's our goal as well.

You kind of lead into my second question which is leveraging the heck out of the fixed infrastructure costs. You didn't do that on G&A this quarter. I know you have some GSOP in there. I thought this year we were going to start to see some leverage on G&A. Can you talk to us about when we're going to start seeing that leverage and how quickly you expect G&A dollars to grow this year? I know you've got a lot of initiatives going on.

We would expect our G&A dollars to grow less in the top line and we put up some pretty strong top line numbers, but even if you took it down to the restaurant week of 24% and a more normalized G&A, more normalized comp sales, I would say that's 27% revenue growth. Our G&A should be below that.

I think this first quarter we had some things moving with our move. We tried to isolate it as best we can to $100,000 amounts so to speak. We also had additional costs related to the first quarter that comes out moving things and getting ready for the next year. I think as we go through the rest of the year we'll start to see our G&A numbers trend down below what they're running, excluding the equity awards which come within that 70 to 80 basis points. I would expect that 8% number, that kind of cash number, to start dropping down into the middle sevens.

Is '08 a good year to start thinking about G&A growing closer to half as quickly as sales?

I think we're always going to want to invest in our infrastructure. I think that's extremely important. I know we talked a lot about leverage and I think that's something we want to get, but at the same time we feel we can get leverage by driving top line sales. And to drive top line sales we've got to continue to invest that back in our business. I think over time we'll continue to get better leverage there. We're continuing to build out the investment or the infrastructure, but I do think '08 becomes less of a year. I wouldn't necessarily want to put a "half as much" number out there.

I would agree with what Greg is saying. In my years of building businesses like this the G&A really consists of three separate components. You've got the management, recruiting and training component which generally grows at the rate of capacity. You have the field supervision component which you grow at a rate less than capacity growth provided you're caught up and BJ's has catching up to do over the past few years. We had a little bit of catching up to do earlier this year.

Then the last piece of G&A expense is the home office infrastructure piece; accounting, finance, purchasing, human relations and so forth. That clearly BJ's made significant investments in over the past couple years and that should be pretty well finished off in terms of having to go back and do some remediation on those particular parts of our infrastructure by the middle of this year.

Looking to 2008, I think both Greg and I would be very disappointed if we didn't start to see some nice leverage of G&A in our numbers for next year. You have to keep in mind where BJ's was a couple years ago and kind of where it's come. We're still a relatively small company and when you look at the five necessary pipelines for growth; if you were to take the clock back 2 ½ years and analyze those five necessary pipelines for growth, BJ's a very good company, a very good concept, but its five pipelines for growth weren't primed as well as they could of been.

We spent the last couple years priming those pipelines and that's required some investment and I think we'll be finished with those pipelines here pretty much this year and they should start pumping nicely from the leveraged perspective next year. I think that's a quick business analysis and how we see it.

I have one last question and then I'll let someone else enjoy the extended conference call. The pre-opening costs, you kind of went through explicitly what is happening in this quarter, but does that mean - is it really a timing issue or are we going to see inflated pre-opening when we look back at all of '07?

I think '07 will be a little higher than anticipated because of the new market.

A little bit higher - you have that $450,000 to $470,000 range. Are we looking at more at $500,000? Is it significantly higher?

I think based on what I've seen here on the two lessons that opened in the remote locations that $500,000 is probably a reasonable number for those two. I think as we start to build out like at Citrus Park or some of the other restaurants in the general areas that we build out that market, those numbers will start to come back down. Those first outliers, you're probably looking at about $30,000 more from that $470,000 high number.

Okay. Thank you very much.

Operator, we'll take one more question and then we'll take other questions in our office.

Sure. Your next question comes from Nicole Miller with Piper Jeffries.

Good afternoon. I appreciate all the color on the units in the region. Can you help us understand - not underperforming - but what's your worst performing region or worst performing units and why?

Wow! That's a great question, Nicole. Gosh, obviously we have opportunities to improve in every aspect of our business and every one of our restaurants. I don't think that there's anything particularly disappointing. Obviously, our Texas restaurants, which we've been very, very proud of over the past couple years with consistent high digit, double digit comp increases, we really want those to continue building their absolute sales volume.

Our California home court restaurants, the vast majority of those are averaging well in excess of $100,000 a week in sales. The Texas restaurants, the early Texas restaurants, that were opened three or four years ago, opened at volumes much less than that. They've been building very nicely as we improved operations and awareness over the past three years or so. We're really working hard to continue to drive those volumes upward.

I guess, personally, whenever those original Texas restaurants that BJ's opened back three years ago, when they start reaching California volumes, I think that we'll be very, very pleased and that's an area of focus or us. It's really a function of better operations and increased awareness in the market. The good news is the last couple of Texas restaurants that we've opened in El Paso, TX and Arlington, TX have been at the California volume level which is very, very encouraging because we picked better sites and we've operated them a little bit better. I guess that's how I would probably answer your question.

You love all of your children and it's hard to pick a favorite one or one that's not your favorite. I think we've really got to continue to drive productivity in some of the original Texas restaurants. We've also got to carefully watch and drive productivity in our brand new markets going forward. Greg or Greg, do you guys want to comment on that at all?

You know, Nicole, I think Jerry hit it right on. When we look at it, we look at the great sales that are coming in the Texas market. We know they're not necessarily at the California volume yet and I think when we think about the opportunity of this business that is getting those restaurants outside of California to California levels with brand recognition, with great hospitality, with great execution, with great service. I think that's how we look at it. I would say we're happy about the market but they can improve still.

Every restaurant can do better. That's one thing that we constantly pound into our restaurant operator's heads. We can always do better. You're never satisfied with the status quo and we're giving you all the tools that we can think of to really drive your business. If you're going to make an error, err on the side of sales building and they've clearly gotten that message. They know that that drives their new GSOP equity plan and that's the best driver of value for everybody. So that's kind of our mindset.

That's helpful. Thank you. I have one last question related to the mix shift. I know you said it was minimal. That question is really have you added any new products with pricing that would help you gain mix shift and if so, has that been offset in general by any trade down, whether from higher priced entrees or lower priced or some alcoholic beverages to non alcohol.

The only new work we've done on a limited basis has been working on some of our advertiser combinations. Greg mentioned earlier our new menu. We put a couple of photographs in on a selective basis which is really driven mix to the appetizer side, which we're very, very pleased with. That's a higher margin part of the business. But other than that, we've really kind of held off on new menu items until we felt like everything that we were currently offering was as good as it could possibly be. We're just about through with all that work.

We've got some initiatives underway regarding our beverage and we're doing a very strategic menu positioning analysis vis-a-vie our competitors on the food side that we're working on right now, kind of a GAAP analysis. We'll have, I'm sure, some new menu items later this year. We want to do it in a very strategic way. We just don't want to say, "Hey, let's put something on the menu because one of us happens to like it."

We want to have a very strategic framework to develop the menu. The menu must be developed strategically. It just can't be the result of a bunch of individual executions. A lot of concepts, that's what your menu strategy ends up being and that's not our approach here. That's kind of a long answer to a short question. I hope that helps.

Yes. Thank you so much.

Thank you and thanks everyone for being on the call today.

This concludes today's conference call. You may now disconnect.