BJ's Restaurants Inc (BJRI) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the BJ's Restaurants Incorporated fourth quarter and fiscal 2010 results conference call. During today's presentation all parties will be in a listen-only mode. And following the presentation, the conference will be open for questions.

(Operator Instructions)

I would now like to turn the conference over to our host, Mr. Jerry Deitchle, President and CEO . Please go ahead.

Thank you, Operator, and hello everybody. I'm Jerry Deitchle, with BJ's Restaurants. Welcome to our fourth quarter 2010 investor conference call, which we will also broadcast live over the internet. After the market closed today we released our financial results for our fourth quarter of fiscal 2010 that ended on December 28, 2010.

You can view the full text of our earnings release on our website at www.bjsrestaurants.com.

Joining me on the call today, in the order of their comments, are Wayne Jones, our Executive VP and Chief Restaurants Operations Officer, Greg Lynds, our Executive VP and Chief Development Officer, and Greg Levin, our Executive VP and Chief Financial Officer.

I will begin with our prepared remarks right after Diane Scott, our (inaudible) provides our standard cautionary disclosure with respect to the forward-looking statements.

Diane, go ahead, please.

Thank you, Jerry.

Our comments on the conference call today will contain forward-looking statements within the meaning of the Private. Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to 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 are only as of today's date, February 10, 2011. 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 the forward-looking statements contained within the Company's filings with the Securities and Exchange Commission.

Thanks, Diane.

As we noted in our press release today, our leadership team here at BJ's is very pleased to deliver a very strong financial performance for our fiscal fourth quarter of 2010. To quickly summarize our financial results for the fourth quarter compared to the same quarter of last year -- Our total revenues were up 18%, Our comparable restaurant sales were up 5.9%, Our average sales per restaurant operating week were up 5.2%, and our total restaurant operating weeks were up 12%. Our estimated forward restaurant cash flow margin, which is a non-GAAP measure that also excludes non-cash equity compensation , which is included in restaurant labor -- that metric was up about 150 basis points, to 20%. In our consolidated operating income margin, on a non-GAAP basis, excluding the $1.7 million loss on the disposal of our option-based securities investment portfolio, to the same quarter last year, was up 290 basis points.

And finally, as we noted in our press release today, on a non-GAAP basis our net income and net income per share for fourth quarter were up about 90% and 83%, respectively, excluding the previously mentioned loss on the option-based securities disposition for the same quarter of last year and a favorable tax rate adjustment in the current year's fourth quarter.

Please take a minute and refer to the non-GAAP to GAAP reconciliation with the press release for more information.

After considering all of our key performance metrics across the board we believe that BJ's performance for both the fourth quarter and the full year of 2010 were quite strong. Not only did we achieve our targeted capacity growth by opening 10 successful new restaurants last year, we also achieved four consecutive quarters of solidly positive comparable restaurant sales that resulted in a 5.6% increase (inaudible) key metrics (inaudible) full year. Taken together, our capacity growth and comparable restaurant sales growth enable BJ's to surpass the $0.5 billion sales milestone during 2010.

Just as important, our steadily improving operation of execution, coupled with our sales increases, enabled us to achieve better leverage to our bottom-line results for both the fourth quarter and the full year of 2010.

Greg Levin, our CFO, will comment in more detail about our financial results for the quarter a little later on the call today.

Despite the severe winter storm last week that impacted about a fourth of our total restaurants, particularly effecting our restaurants located in Texas, Oklahoma and in the midwest -- they caused some closures, some growing energy blackouts were experienced, we experienced some food delivery disruptions, and a few frozen and broken water pipes here and there. Despite all of that, we started off 2011 (inaudible).

For the first six weeks of fiscal 2011 our comparable sales comparisons have remained positive in the 5% to 6% range. While our sales trends continue to be solid, we always caution investors to remember that we are still operating in a very difficult and volatile environment for consumer discretionary spending. As the recovery of the economy, the job market, and consumer asset values continue to be slow choppy and geographically uneven. Foreclosure rates and employment rates are still quite high in many of the states that we operate, and many of the restaurants in them. Additionally, consumers are facing significantly higher food and gasoline prices, which may impact their visits to restaurants in general.

In light of all of these external factors, our sales volume still remains difficult to predict with certainty. So I think it would be wise if we all kept our expectations on the conservative side for sales. As Greg Levin will provide his perspective on our current sales trends (inaudible).

Before I turn the call over to Wayne Jones, our Chief Restaurant Operations Officer, and to Greg and Greg for their comments, I always like to take a couple minutes on our quarterly calls to reiterate our fundamental competitive strategy and our operating philosophy with our investors, our BJ's team members and our supplier partners that might also be listening today. So that everyone will be in full mind as to how we intend to keep growing our Company over the long-term run.

We continue to believe that the battle for market share will be a much more significant factor in the casual dining company going forward than it has been historically. Primarily because the casual dining segment doesn't have as strong of a macroeconomic tail wind that it enjoyed during the past couple of decades. Having said that, annual casual dining segment sales are still estimated to be north of $80 billion, and are expected by some observers to increase to about 3% or so annually during the next couple years, everything else being equal.

Now, annual sales growth for casual dining chains, excluding independent casual dining operators, is expected by some observers to be in the 4% to 5% range during the next couple of years. Now, that 4% to 5% increase in casual dining chain sales will likely be comprised of a 2% to 3% annual increase in capacity, and a 2% to 3% increase in sales on existing capacity.

So how does BJ's measure up to those expectations for our segment? Well, BJ's currently expects to continue increasing its capacity base, as measured by total restaurant operating, in the low double digits during the next couple of years. Additionally, over the longer run, we also expect annual sales increases on our existing capacity base to eventually settle in to the 2% to 3% range, assuming a constant operating environment. Therefore, it is BJ's plan to continue to gain market share at a much higher rate than the expected growth rate for the overall casual dining segment. BJ's current share of the casual dining segment sales is still less than 1%. So we believe we've got the majority of our growth ahead of us.

We also believe that the most successful marketshare taker in casual dining going forward will be those that either excel as low cost providers for convenience oriented replacement meals, or those that excel as dining out for fun destinations, provide a higher quality overall dining experience in value for the consumer. BJ's has chosen to more clearly compete as a higher quality differentiator in destination restaurants, with exceptional approachability and also with an outstanding value proposition for all consumers. However, we are also structuring our menu at our operations to enable BJ's to also to be an effective competitor for our share of convenience oriented meal placement locations, particular at lunch.

So our primary positioning as a higher quality destination restaurant also provides us with greater pricing power than our mass market more commoditized competitors. We have intentionally kept most of our pricing power in reserve during the past couple years, and as we move into the 2011, with expected higher food and energy costs on the horizon, we believe that we are in a good position to carefully deploy some of our pricing power to help protect our margin. Coupled with some cost saving initiatives which Wayne will comment on here in a few minute.

BJ's menu and beverage offerings are right down the middle of the fairway for the American consumer, and that's exactly where we wanted to be. We're pizza, we're burgers, we're salad, pasta, sandwiches and specialty entrees. Appetizers, great draft beer, and more.

But we also intend to execute our wider variety of menu and beverage offerings in a much higher quality and more differentiated manner. We're using higher quality ingredients and higher quality, more detailed and contemporary presentation, with a focus both on our signature products and new products. We intend to deliver higher food and beverage quality to consumers in a higher quality and more contemporary restaurant building. And higher quality premier locations with higher quality restaurant management and higher quality operational execution.

That met, we intend to offer a higher quality and more contemporary overall dining experience to consumers for about the same average guest check charged by many of our mass market more commoditized competitors. That's our primary strategy, that's our primary engine for marketshare growth in our segment.

And going forward, we intend to keep strengthening our higher quality more differentiated competitive positioning by continuing to further deepen and widen the competitive around the BJ's concept. By embracing higher levels of operational complexity, (inaudible), and required financial investment -- both up front, as well as continuous reinvestment, than most of our competitors are either willing or able to embrace. We believe that our financial scoreboard for 2010 well reflects the fact that BJ's strategy as a higher quality differentiator in the largest, and arguably the most commoditized sub-segment of casual dining, the varied menu or grilling bar segments is beginning to hit its full stride.

The exciting part of all of that to our team here at BJ's is, we've only scratched the surface as to what the BJ's concept as a Company can ultimately become. We can be a much more effective competitor and marketshare taker than we are today, and that's our obsession as we move forward.

Now I'm going to turn the call over to Wayne Jones, our Chief Restaurant Operations Officer, for a few comments on our restaurant sales margin and key operational positions. Wayne?

Thanks, Jerry, and good afternoon, everyone.

During fourth quarter, our comparably strong comparable sales and (inaudible) operating margin performance were driven by a combination of factors, both merchandising related and operationally related. I will comment on a few of the more significant ones.

First, our successful new menu introductions during 2010, especially our new small-bite snacks offerings, on the lower price-end of our menu, coupled with our new chicken and pork chop entrees on the upper end of our menu, have both benefited the average spend per guest in our restaurants.

We added about 37 new menu and beverage items during the full year 2010, we also delete a few along the way. And all of our new offerings have literally driven incident rates in their respective categories. During the fourth quarter, by the same token, increased beer and alcoholic beverage purchases by our guests have also benefited our average check. Particularly driven by our popular seasonal beer offerings, Oktoberfest, Pumpkin ale and our Grand Prix. Along with introduction of our low calorie BJ's Lightswitch lager brew, and our updated wines for the program.

Our guest traffic and throughput continued to benefit and improved operational execution, driven by more complete management and staffing levels, and also what we internally call our (inaudible) operational initiatives. Last but not least, we've also improved guest traffic as a result of the success of our CapEx related initiatives. Particularly, our increased seating for parties for two, what we internally call our Deuce Seating Initiative. And our expanded guest beer tap initiative.

Only about two thirds over existing restaurants currently have these programs in place. We currently plan to gradually complete these program rollouts to the remaining one-third of our existing restaurants during the next two years. So there is more upside yet to come from these two initiatives. All new restaurants have these two programs in place when they open.

As we all know, the most effective profit margin protection program is always anchored by an effective sales building program. At BJ's we always focus on sales building first and foremost, and we have several sales building initiatives planned for 2011 rollouts. These include, among other things, a new Guest Loyalty program, a new catering program and new menu and beverage items. Including a selection of lower calorie entrees and a terrific new steak line. On a productivity and cost savings initiative front, we have several program rollouts plan for 2011, including a new automated (inaudible) system to reduce bread waste, a new computerized recipe (inaudible) to reduce cooking errors, a new automated bar display system to improve bar service speeds, and in our (inaudible) new, lower costing takeout packaging, and new labor scheduling metrics.

Last, but not least, we are continuing to make prudent investments to steadily advance the overall quality, capabilities and (inaudible).We have several talent development initiatives scheduled for 2011 for rollout, that are intended to further strengthen our ability to recruit, assess, train, develop, reward and retain the best restaurant management now available. In only all of the open BJ restaurants past, we can developed highly qualified and seasoned restaurant management teams to correctly and consistently execute our restaurants.

Back to you, Jerry.

Thanks for your update, Wayne. And thanks, more importantly, to our restaurant field supervision team and the operational team in each of our 102 restaurants. Their continued focus on profits and scalability in a more leveragable manner.

Now we have said many times to our teams that we cannot save our way to success. Nor can we price our way to success. We can only grow our way to success in a productive and efficient manner. As long as we have the sales, we will have the best opportunity to be more productive and efficient in our execution. Without incremental sales it's tough to improve margins unless you start subtracting from the quality of the concept and guest overall experience. Anyone can subtract from an established concept. Is much harder to add to one.

Now I'm going to turn the call over to Greg Lynds, our Chief Development Officer, for his update on our new restaurant development pipeline.

Greg, go ahead.

Thanks, Jerry, and good afternoon, everyone.

As Jerry noted earlier, our 2010 new restaurant development targets were successfully achieved. During 2010 we opened 10 successful new restaurants and achieve our targeted growth in total restaurant operating for the year.

In the fourth quarter we opened two restaurants, on October 5 we opened in the City in the Industry, and then on November 8 we opened in Shenandoah, Texas, a northern suburb of Houston. Geographically, during 2010 we opened all of our new restaurants within our existing 13 state footprint, and continue to strengthen our restaurant base in California, Texas and Florida. We now have a strong base of restaurants from coast to coast, and we are well positioned to continue building our brand in our four Western states, the state of Texas, the Ohio Valley, Florida and ultimately in other East Coast markets.

We're very pleased with the initial sales volumes and performance in our class of 2010 openings, we have worked hard over the past five years to better position BJ's with a higher quality, more differentiated casual plus dining concept, and our new restaurant design continues to strengthen its position. In 2010 we continued to enhanced and upgrade the interior and exterior of our new restaurants, by improving our music, our video and lighting packages. In addition, we are now building larger more efficient patios, and these new patios combined with our interior seating initiatives have resulted in improved operating efficiencies.

Overall our new restaurant development pipeline remains in excellent shape, and we are very pleased with the overall quality of the new site that we're seeing. As previously announced, the Company currently expects to open as many as 12 to 13 new restaurants during 2011. And similar to our 2010 development plan, where we opened six of our ten restaurants within our four California and Texas markets, our plans for 2011 calls for all new restaurants to be built within our existing 13 state footprint.

In today's economic environment we believe it's more important than ever to continue to cluster the development of our restaurants within our existing markets. This allows us to achieve better leverage of our supply chain, our field supervision, our marketing, and overall BJ's brand awareness. By reviewing our projected 2011 openings by quarter, we plan to open two restaurants during the first quarter -- one in Tyler, Texas and one in Sacramento, California; we plan to open three restaurants in the second quarter; four restaurants in the third quarter, and three or four restaurants in the fourth quarter.

All of our potential 2011 openings have been secured with signed leases or letters of intent. And five the restaurants are already under construction. As we've stated before, it is difficult to precisely predict the actual timing of our 2011 new restaurant openings, due to many factors that are outside of our control, including the weather, landlord deliveries, contract delays and municipality approvals. So, a quarterly opening schedule can fluctuate, and we'll keep everybody advised of all future changes on our quarterly calls.

In terms of our longer-term development plan, we continue to believe that we have room to open at least 300 BJ's restaurants of various site types and sizes across the country over time. At the end of this quarter we will have 104 restaurants open in 13 states. We have plenty of quality growth opportunities remaining in our four states, and we have now established a strong national brand presence, and national footprint from California to Florida and into the Ohio Valley.

Our team is currently evaluating a couple of new markets for potential entry into 2012 and 2013. And we will keep everybody advised as we firm up these plans.

As I mentioned in our last call, the new development opportunities in that we are seeing today are primarily within existing shopping centers that are being redeveloped as a result of big-box vacancies or other retail restaurant closures. The landlord community today is focused on enhancing value by redeveloping and adding leasable space to these existing centers, and we are very well positioned to take advantage of these -- of all the redevelopment opportunities.

In today's environment, our team is more focused than ever on remaining disciplined, and our approach to site selection and lease economics, so that our new restaurants will be well-positioned to take additional market share. Our development team knows that we can be in a largest and most competitive segments in casual dining, and the best way to profitably gain market share in this segment is to steadily increase the overall level of quality and point of differentiation, and at the same time broad approachability to the BJ's brand to our wide consumer demographic.

Our development team is ready for the challenge, and I'm confident BJ's should have many years of solid new restaurant growth to come.

Jerry, back to you.

Thanks, Greg.

We continue to believe that BJ's four-wall economics are sound, and they support a continued steady pace of new restaurant expansion. We're always going to pick quality over quantity when it comes to our new restaurant locations. We're going to continue to carefully balance our 6 pipelines for growth, and those six are capital, real estate, restaurant management, support infrastructure, brewing capacity and our supply chain infrastructure. So that we don't outrun our headlights. When it comes to setting optimal dates our high-quality predictable and leveragable expansion for BJ's.

Now I'm going to turn the call over to Greg Levin, our CFO, for his financial commentary on the fourth quarter. Greg, go ahead.

Thanks, Jerry.

I'll take a couple minutes and go through some of the highlights for the fourth quarter, and provide some forward-looking commentary for 2011. All such commentary is subject to the risks and uncertainties regarding forward-looking statements that are included in our SEC filings. Additionally, my commentary may also refer to certain non-GAAP financial measures that we use in our internal review of the business and that we believe our help provide insight into our ongoing operations.

As Jerry previously noted, total revenues for BJ's fourth quarter of 2010 increased approximately 18%, to approximately $132.9 million, from $112.6 million in the prior year's comparable quarter. This increase is a result of approximately 12% more operating weeks, and an approximate 5.2% increase in our weekly sales average.

As Jerry mentioned, our aggregate comparable restaurant sales for the fourth quarter increased approximate 5.9%. While we do not report monthly comparable restaurant sales, October, November and December were all solidly positive despite the record spending rain we had in California during the month of December.

Consistent with all of 2010, our restaurants outside of California, in aggregate, had higher comparable restaurant sales than our restaurants inside California. However California continues to be solidly positive, and was slightly below our total company wide comparable restaurant sales of 5.9% for the fourth quarter. Additionally, we continue to have some California restaurants whose comparable restaurant sales outperform the company average.

We also continue to see strong comparable restaurant sales from our newer markets, as well as from our new restaurants, as they come into the comparable restaurant base. For instance, our two Washington state restaurants, which were opened in 2008, have comparables restaurant sales in aggregate in the mid-teens or both the fourth quarter of 2010 and for the full year.

We believe some of the strength in our comparable restaurant sales in our newer regions is directly related to our clustering strategy. As Greg Lynds has just mentioned, our string of new restaurant development allows us to get economies of scale in management, supply chain, marketing, supervision and brand awareness. Which ultimately leads to better execution within the four walls of the restaurant and better offline sales.

Therefore, as Jerry and Greg Lynds noted, we will continue to be very prudent in our new restaurant development pipeline so that we can drive these economies of scale and preserve our favorable four-wall economics as we grow.

In the fourth quarter our weekly sales average increased by 5.2%, as compared to our comparable restaurant sales growth of 5.9%. As I have frequently discussed this past year, this difference was expected, as we began lapping over our strong initial honeymoon sales volumes from our third and fourth quarter of 2009 restaurant openings. As such, we continue to be extremely pleased with our new restaurant openings sales volumes. As a relatively the small restaurant company, our weekly sales average performance, as compared to our comparable restaurant sales metric, will be a result of many factors, of which one will be the geographic mix of our newer restaurants not yet in the comparable restaurant sales base.

I would therefore caution investors to not read too much into the initial sales volume of many of our newer restaurants, or changes in our weekly sales average as compared to our comparable restaurant sales metric, since we will always have a diverse geographic mix of new restaurants as we continue to build our national presence.

During the fourth quarter our estimated menu pricing factor was approximate 2.7%. In regards to the middle of our P&L, our cost of sales of 24.8% of sales was about 20 basis points lower than last year's fourth quarter, due primarily to additional menu pricing. On a sequential quarter basis, we did see cost of sales increased about 50 basis points. This increase is due to higher cost per for produce in the fourth quarter, due to the rains in the West coast and the freezing temperatures in the South and some slight shifts related to our menu mix, resulting from an increase in higher priced but lower margin entrees, and an increase in our snacks and small bites incident, due to the introduction of our new fall menu, which featured three new higher priced entrees, as well as a refresh of our snacks and small bites category.

Our new entrees included two chicken dishes, as well as a grilled pork chop, that are priced in the $12 to $14 range. These two items have a slightly lower gross profit margin, or percentage, but have higher absolute dollar profit contribution, allowing us to leverage our labor and operating occupancy cost. And therefore benefiting our overall restaurant cash flow margins.

As Jerry mentioned, this is part of our new menu evolution. To not only make sure that we continue to offer menu items that are right down the middle of the fairway, but also offer higher quality, more complex menu items that differentiate BJ's \ from many of the other mass casual dining concepts.

Labor and benefits during the fourth quarter was 34.2%, which is 70 basis points lower than last year's fourth quarter. The 70 basis point improvement is a result of the solid comparable restaurant sales allowing us to leverage hourly labor, partially offset by higher equity compensation and manager bonuses resulting from our improved four-wall operating margin performance during the quarter. Operating and occupancy cost as a percentage of sales decreased 50 basis points, to 21.3%. This decrease is primarily related to less marketing spend in this year's fourth quarter. Specifically, in this year's fourth quarter we did only one freestanding insert in the Sunday newspaper, or FSI, as compared to three FSIs last year and one newspaper banner add. As we have mentioned in the past, while we do not (inaudible) marketing, we may at times increase or decrease our market spend based on the current economic environment.

Our general administrative expenses decreased approximate 10 basis points from the prior year, to 6.7% of sales. Included in G&A is $704,000 and $588,000 of equity compensation for 2010 and 2009, respectively. Or 0.5% of sales for both years. Excluding equity compensation, G&A increased approximately $1.1 million compared to the prior year. The increase in G&A is primarily related to our continued investment in our field supervision and support infrastructure costs, plus continued higher than anticipated consulting costs and incentive compensation. On a sequential basis, from the third quarter of 2010, G&A costs were up approximately $650,000. This increase is primarily related to increased field supervision and corporate support incentive compensation, as well as increased legal and consulting fees.

Our depreciation expense for the fourth quarter increased 10 basis points to 5.8% of sales, compared to the fourth quarter of last year. As a percent of sales, this increase is primarily related to the additional depreciation on our new and other capital initiatives, which we have proven to drive incremental sales and have a strong return on investment.

Our restaurant opening expenses were approximately $971,000 during the fourth quarter 2010. Which primarily relates to the two restaurants that opened in the fourth quarter, as well as some additional cost for restaurants that opened in late the third quarter, and pre-opening rent for restaurants scheduled to open in the fiscal 2011.

For all of fiscal 2010, our pre-opening costs related to the 10 restaurants we opened, plus some additional opening costs for the reopening of our smaller restaurant in Huntington Beach, California, which we remodeled earlier this year, was $5.2 million, which is right in line with our estimated opening costs per restaurant of about $500,000.

I do want to point out a couple of things regarding both our tax rate and shares outstanding. As I mentioned in our press release today, our tax rate for the fourth quarter was approximately 19.1%, which resulted in a full-year tax rate of 24.8%, as compared to our estimated rate of 27%. This decrease was primarily a result of additional income tax deduction we received that was related to disqualified dispositions from the exercise and disposition of incentive stock options in the fourth quarter, as well as some additional tax credits. As such, we benefited in our tax rate by approximate $677,000, or $0.02 per share, as to what we were estimating for this year.

However, that tax benefit was partially offset during the quarter by the larger than expected increase in our diluted shares outstanding in the fourth quarter, as a result of the diluted effect from outstanding equity awards under the treasury stock method of accounting. As such, our diluted shares outstanding went from approximately $28 million to $28.7 million in the fourth quarter. This had the effect of reducing our diluted earnings per share by approximately $0.01.

Our total gross capital expenditure for 2010 was approximate $68 million before any landlord allowances. We did receive approximate $6.5 million in landlord allowances and financing this past year. Reducing our net capital expenditures to around $62 million.

Before I turn the call back over to Jerry, I would spend a couple minutes commenting our liquidity position and also provide some forward-looking commentary for 2011. All of this commentary is subject to the risks and uncertainties associated with forward-looking statements as discussed in our filings with the SEC. In regards to our liquidity, we generated more than $60 million in EBITDA, which excludes the non-cash write-offs and the equity compensation of fiscal 2010. And we ended the year with cash, cash equivalents and investments of approximately $54 million. Our line of credit is for $45 million and does not expire until 2012. Of which zero is outstanding, except for approximately $3.6 million in backup letters of credit which support our insurance arrangements.

How do we begin our execution of our 2011 initiatives? We currently anticipate that our cash flow from operations, coupled with our cash, cash equivalents, and investment balances should be sufficient to fund our expansion plan, as well as our other capital initiatives for 2011. Currently, we anticipate that our capital expenditure plan for 2011 will be approximate $75 million to $80 million before any landlord allowances. This capital expenditure plan is based on the construction of 12 to 13 new restaurants, as well as our maintenance capital expenditure plan, and our list of sales and quality initiatives, our productivity initiatives, and our branding and infrastructure initiatives. We do anticipate receiving approximate $4 million to $5 million in landlord allowances this year.

From a revenue perspective, as Jerry mentioned, we continue to see solid comparable restaurant sales so far in the first quarter of 2011, trending up in the range of 5% to 6%. However, at this time was last year, our comparable restaurant sales for January 2010 were only up about 1% to 2%, and then significantly increased throughout the quarter, as we finished quarter one of 2010 at a positive 4.4%. In fact, our comparisons for all of 2011get significantly more challenging throughout the year, as we averaged 5.3% or better for each of the quarters two, three and four of last year. Additionally, while we are not a sports bar and do not heavily promote sporting events, our 103 inch plasma TVs in many restaurants, and our other large flat screen televisions, do allow us to benefit from certain sporting activities from time to time.

Specifically, in the first half of 2010 there was some macro sporting events that gave us some positive sales momentum, include the Olympics, World Cup and the Lakers Celtics finals. Therefore, as we have mentioned in the past, for a restaurant concept like BJ's that is already one of the leading public restaurant companies regarding guest traffic to and par for this course is being able to get your menu pricings to maintaining your guest count.

That being said, each year we continue to work on additional sales building initiatives and productivity initiatives, as Wayne discussed, and we believe over the long run there are still opportunities to drive additional guest to our restaurant. Therefore, for those of you building your models, I would error on the side of conservatism and build your models based more on our menu pricing and yearly comparisons . Currently we anticipate having 3% or so of menu pricing for all of 2011. However, certain quarters may have more less, based on what is rolling off in what is rolling on. Specifically, for the first quarter, we expect our menu pricing to be a little over 3% and our restaurant weeks to increase to approximately 11%, as we anticipate opening two new restaurants late in the first quarter.

Additionally, as we mentioned, fiscal 2011 will be a 53 week year for us, and therefore Q4 will be comprised of 14 weeks as compared to our traditional 13 week quarter. Furthermore, I would expect the our weekly sales average will be a little less than our comparable restaurant sales for the first half of this year, until some of our strong new restaurant openings from the latter part second half of 2009 enter our comparable sales base.

In regards to cost of sales for 2011, and based on information available and our expectations as of today, we currently estimate the total cost of our food commodity basket to increase approximately 3% to 4% during 2011. This current estimate is based on negotiations with suppliers that have been completed to date, coupled with current and expected market conditions for certain fresh and other commodity items that the Company is either unable to, or has currently elected not to contract for longer periods of time. As of today, we have locked in approximate 80% of our commodities in contracts of six months or longer. The current significant commodities not under contracts are primarily cheese, dairy and some grocery items.

Additionally, while we do have semiannual contracts on about 75% of our produce, with the remaining 25% on the stock market, these conference are really collar agreements. In which we have floors and ceilings and therefore we can be exposed to movement in the cost of produce.

In fact, with the current freezing weather conditions in Mexico last week we expect certain produce items to hit those ceiling prices and say high for the first half of this year.

That being said, assuming our market basket of commodities increases 3% to 4%, coupled with our productivity initiatives and menu pricing, we anticipate cost of sales of approximate 25% for the full year of 2010, with some variations by individual quarter due to seasonality and the timing of new restaurant openings.

In regards to labor, we currently do not anticipate significant pressure in 2011 for both wages and salaries. However, separate of wages and salary, we will see higher medical insurance costs due to the requirement of Health Care Reform Bill, and we expect to see higher state payroll taxes, as many states have increased the payroll taxes to help fund their unemployment deficits. Much like last year, the higher unemployment taxes will occur in the first and second quarter of the year, after which time we will have hit many of the state tax caps or limits . Therefore, while I expect our labor on a full-year basis to be somewhere in the upper 34% range, I do expect Q1 of 2011 to be higher, which brings me consistent with the last two years, in which labor in Q1 was in the middle to low 35% range.

I anticipate that our operating and occupancy costs will be in the mid-21% of sales range for the full year of 2011, based on our current marketing plans and the current cost of energy. However, in the first quarter we anticipate our marketing spend, which is budgeted at approximately 1% of sales, to be closer to 1.2% to 1.3% as a result of the January menu print to comply with California menu and labor laws, plus additional banner ads and a supplemental FSI. Additionally in the first quarter we are going to roll out some updated bar ware as we continue to improve the quality and differentiation of the BJ's concept. Therefore, we will tend to see operating occupancy costs in the first quarter the mid- to upper-21%.

Our G&A expenses for the full year of 2011 in absolute dollar terms are currently planned to increase by around 13%, compared to 2010 in total dollars, including equity compensation. As I've already mentioned, we currently expect restaurant opening costs be about $500,000 per restaurant. However, we will incur pre-opening, non-cash rent as much as five or six months before a restaurant opens, and therefore pre-opening costs for in-quarter may not be indicative of a number of restaurants that opened in that quarter.

As such, I anticipate opening costs at approximately $1.2 million to $1.3 million in the first quarter, related to two new openings in the first quarter plus pre-opening rent for restaurants expected to open later in 2011.

We currently anticipate interest income and other income to be pretty consistent with this year's amount of $600,000. We currently expect our income tax rate for 2011 to be between 29% and 30%. And based on our current stock price, we estimated that diluted shares outstanding for 2011 will be in the $28.7 million to $29 million range.

Jerry, back to you.

Thanks, Greg. As usual a very thorough review.

So, to summarize the prepared comments, we were very pleased with our solid results for the fourth quarter in 2010, we're continuing our solid forward momentum so far in the first quarter of 2011, and we're looking for to executing another year of profitable expansion for BJ's during 2011.

In our view, BJ's ability to continue to take additional market share in the casual dining segment is steadily strengthening as time goes on. We're going to continue to make the right investments for our long-term success, investments in our team members, investments in our guests, investments in our operating and support infrastructure and investments in quality and differentiation of our brand. We believe that the best years of growth are still well ahead of us for BJ's.

So now we are going to open up the call for questions. Operator, go ahead.

(Operator Instructions)

Our first question comes from the line of Steve West, with Stifel Nicolaus. Please go ahead.

Yes. Hi, guys. [Matt] I'm here for Steve. First, wondering if you could give us a little quantification on the weather impact, both in the fourth quarter from the rain in California, and then maybe what you're seeing so far the first quarter to date? I know you commented that about a quarter of your restaurants have been impacted.

Yes, this is Jerry, Matt. With respect to the fourth quarter, I don't think we have any way of specifically quantifying what the impact of record rains in California were on our comparable sales here in California. We had a number of moving parts during that period of time with respect to our operating and merchandising and marketing initiatives, coupled with weather.

Nevertheless, we ended up, as Greg mentioned, with a solid comparable sales number for the month of December that I believe Greg mentioned was pretty consistent with what we saw in September and October. As far as what we saw during the winter storm week last week in our 26 or so restaurants in the state of Texas and Oklahoma and our mid-western restaurants, I think we have an estimate of lost sales in total of maybe $250,000. In terms of the estimate on our comparable sales for the first six weeks, that probably tallies out to be about a half of a percent.

So I think when the fourth quarter is completed, provided that we don't have any more unfavorable weather here, and you never know, I think this will be ending up to be a relatively small number for the current quarter.

Okay and then just following up about a little bit. Was there any distinguishable impact from having a Super Bowl in the Dallas market -- to the Texas stores at all?

No, not really. It was great to have it in Dallas. Of course the weather negated a little bit of the impact of whatever might've been favorably generated by all of the folks coming to Dallas. But, no, there wasn't a material impact in any way. There may have been a little bit more on our restaurant in Arlington, Texas, compared to maybe one outside of that trade area. But overall I'd say the impact was fairly minimal.

Okay. On menu pricing that you're expecting to pay, coupled with the amount of commodity contracts and agreements that you have in place, how does the price offset the inflation expected there, coupled with the new menu trends that you talked about on a percentage of sales or little bit impact from the two chicken dishes and the pork dish that you mentioned? How does that all mix together? Is the price going to be able to cover all of that and expected inflation? I know you gave an outlook for the commodity -- or the cost portion, but how does the pricing impact that, and would you possibly take more if we see commodities go higher?

Pretty big question there, Matt. I think as I explained in the prepared remarks -- that we will take some menu pricing, that we're expecting cost of sales to be somewhere around that 25% range. I think we just finished at 24.8%. Probably upper-24%, could be low-25%. It could, depending on the seasonality and variation there. I think we have a lot of initiatives in place that will help mitigate that, and the pricing is the last place we want to go to. We've got an automated prep system that we're putting in, and a recipe viewer system that has been very successful for us already in a few restaurants where we've been able to actually improve our waste factor versus our theoretical.

So, we first want to go to efficiencies and productivities at BJ's before we go to the menu pricing. And frankly that's how we'll go. We'll continue to look at our menu strategy in regards to maybe higher priced menu items. That may, as we just discussed, have an impact on that gross margin. But ultimately leverage the labor and ultimately leverage the operating occupancy costs to continue preserving those unit economics in the 19% to 20% range.

Okay great. Thank you.

Thank you. Our next question comes from the line of Grant Robinson with Robert W. Baird. Please go ahead.

Hi, guys. It's Grant Robinson for David Tarantino. Congrats on a good year. Just wanted to dig in a bit on the mixed benefit you guys were theoretically seeing from the small bites and snacks this year. Wondering exactly if you could quantify what that mixed benefit might have been? And then, as you continue to go out you're going to be cycling it this year. Is that something that you think will go away with the tail wind? Or is that a multi-year contribution factor? Thanks.

This is Jerry. With respect to the specific economic impact on our menu of small bites and snacks, for competitive reasons we really don't want to get into that level of granularity. But we can say it has positively impacted our average check. Positively impacted the overall guest incident per 100 guests of total appetizers. So even though we have a little bit of trade out of charitable appetizer categories, we more than made up for it in terms of incident rates with small bites and snack category.

We introduced the small bites and snacks for the first time just about a year ago. And going forward we're going to continue to refresh that particular category of our menu, we have a couple of new ones coming on here shortly. We just actually cycled in three new ones last November that were extremely well received. And actually have continued to lift our overall incident rate for small bites and snacks.

And every one of our media advertising impressions, whether it's in newspapers, or freestanding inserts, or newspaper banner ads, or in our electronic and the social network marketing, we always lead with our small bites and snacks offerings. They continue to drive overall awareness and incident rate. The other thing that we're working on with respect to our menu is at the other end of the barbell, in the higher priced, for us, entree categories up in the, say, $10 to $15 range, which has really been underrepresented on the BJ's menu for some time.

We did make some moves on that here last November with two new chicken dishes and our pork chop dish. And as Wayne mentioned if you listened carefully to what he said, we have a very terrific new steak line getting ready to be rolled out here in the spring. In our testing, that was extremely well received by our guests, and also incremented the average check as well. So I think we have all of those coming at us to continue to help us build and protect our average spend per guest per restaurant.

Okay thank you. Next question?

Thank you. Your next question comes from the line of Brad Ludington, KeyBanc Capital Markets

Thank you. I wanted to hit on the deuce seating and guest tab remodels that you talked about. You talked about great success with that and everything else-- and you've still got, I think you said, two more years until that's built out? If this is very successful, is there any opportunities to accelerate those remodels and hit the system in one year?

I think what we want to do is pace ourselves on this one. We have so many opportunities to avoid capital in our existing restaurant base, and as we look at the amount of capital that we set aside for that specific deployment, and when we also looked at the amount of absolute resources we have internally to manage all of these wonderful projects, we concluded that to get 17 or so deuce seating conversions done this year, and 17 or 19 or so expanded guest beer tab conversions done this year along with all of the other things that we're doing for established restaurant base, we think that this is probably the best way to go.

We have a number of other capital expenditure initiatives on our existing restaurant base that we don't talk about, but I think are going to also help us build guest count and the traffic in our restaurants. So what we're trying to do is allocate a limited amount of capital resources in a very thoughtful way. If we do get a little more than planned capital resource, if our restaurant operating cash flows are a little stronger than perhaps we internally expected at this point in time, I'll be grabbing Greg Levin, our CFO, and asking him for a little more capital here, and we'll try to accelerate some of these deployments, because they do have a wonderful return on investment profile. So that's how we look at it.

Okay, thank you. And then just briefly also when you talked about the tenant allowances -- it sounds like they're going down this year versus what we've seen in previous years. Are landlords getting tighter on what they'll offer us? And, if that's the case, is that something you expect to continue in -- the out years?

Yes. This is Greg Lynds. Definitely we're seeing a tighter money supply from the landlords -- not as much tenant allowances available. Going forward into 2012 it is hard to tell. I think the (inaudible) are going to still be very return focused, and the larger institutional owners will have additional capital available. But certainly for 2011 it is a lot tighter than it has been in the past.

Okay thank you.

Brad, also one of the things to note here is we continue to do more conversions, what we've probably called conversions even though we knocked them down. And a lot of times on the conversion side, there's not really (inaudible). And I think we're doing about 50% this next coming year of conversions.

Right, typically if you're knocking down a bank or knocking down an old restaurant, we're purchasing it or leasing it at land value.

That helps. Thank you very much.

Thank you. Our next question comes from the line of Nicole Miller with Piper Jaffray. Please go ahead.

Nicole Miller, your line is open.

Our next question comes from the line of Matthew DiFrisco, with Oppenheimer. Please go ahead.

Hi, this is (inaudible) in for Matt DiFrisco. I just had a quick question about your labor during the quarter. Some of your competitors have mentioned a benefit from the HIRE Act. I just wondered if you did benefit from that in the fourth quarter? And do you think you're going to benefit from it going into 2011, allowing it to offset some of the higher medical insurance and payroll taxes that you mentioned?

Yes, we did get some of that benefit, for the HIRE Act in the fourth quarter. I don't have it -- frankly I don't have it included in the forecast going forward into 2011. It wasn't significant. Overall, when I look at it from looking at it from the productivity metric, which is really how we look at. We're looking at it more on a percent of labor, as you guys can talk about it. From that perspective it was pretty immaterial overall. It didn't have a huge impact in regards to our labor percent from quarter-over-quarter.

Having said that -- this is Jerry. It is something that we do ask our restaurant management teams to follow through with -- quite intensely, and it is part of their incentive compensation program in terms of the amount of HIRE credits that we're able to get at a specific restaurant. So it is something that we're working on. As Greg mentioned, it's not a very material level for us yet.

Yes. In fact I just pulled up here. It was less than 10 basis points for the fourth quarter.

Less than 10 basis points? Okay. One more question, I was wondering if you could comment on staff turnover -- how it compared to year-over-year?

Our turnover continues to be -- at least the management number continues to be in middle-teen area. We continue to do well for us. And we haven't really seen that number increase. So overall we feel pretty pleased. Going into 2010, originally, we were expecting turnover to be in the 20% to 22% range. It's been in the middle- to upper-teens and holding steady there going into 2011.

Great. Thanks guys.

Thank you. Our next question is from the line of Nicole Miller, with Piper Jaffray.

Sorry about that. Mute function problem. I wanted to go back to -- I guess the big picture, Jerry -- either an entirely new platform of innovation or just continued evolution of the brand. I'm trying to think big picture. I know it will never end, and that is a lot of the success of the brand. With the magnitude of our change, such that all of the incremental flows through, and I know all of it is being reinvested, but that dynamic might shift. So what I'm really trying to get at is, what is the long-term margin opportunity?

Within the four walls, Nicole, when you look at our margin performance today, I believe that a 20% cash flow margin, having subtracted depreciation we're probably be about 14% or 15%, we believe that those are top four wall margins for a pure Company-operated chain of our size and scope of operation.

So our thinking is, to the extent that we're able to achieve leverageable benefits for the four walls going forward, is certainly to let some flow through to the bottom line. But our tendency has always been to try to reinvest some of that, for the benefit of the concept, its quality and for the guests to keep this wonderful brand on a continuous run for many, many years to come.

In terms of the consolidated operating margins for the business, I think that we've made significant headway and particularly during the fourth quarter as I mentioned in my preliminary comments. Over the long run, for a pure Company-operated casual dining chain, I believe that we should be able to achieve operating income margins at the pre-tax level over the long run, you know approaching that 8%, 9%, 10% range. And we're a little bit short of that right now.

But in the longer run, based on my experience with building and growing these pure Company-operated casual dining businesses, you really get net leverage from two areas -- supply chain leverage and infrastructure costs leverage. Everything else that you work on within the four walls of the restaurant -- you continue to work hard on labor productivity, you continue to work hard on controllable costs. But I can tell you from all of the years that I've been in the business, those normally get consumed by normal inflation coming into the business or other cost pressures.

So over the long run, in a consolidated operating costs model, supply chain leverage and infrastructure cost leverage will be our major opportunities to gradually migrate that consolidated operating margin, up to that 8%, 9%, level over the next several years.

Within the four walls, though, I think we have to be very, very careful not to get too greedy here, and to always have a view that we are always going to look to improve the overall quality and experience of the BJ's concept for the guests. If we have the courage and commitment to continue to do that in a very thoughtful and balanced way, then we'll be able to predict this positioning that we have versus all of our mass market highly commoditized casual dining competitors and our particular space in a casual dining statement, and we'll continue to have one of the best engines for market share growth.

So it's all about carefully balancing all of those forces. And frankly and just one other comment, in all of my years of being involved in growing and expanding restaurant businesses, whether it was fast food or casual dining, the hardest thing that I have seen to have to do in restaurant expansion plans, is to preserve your initial favorable four wall margins that you achieved in your home court before you started your expansion program. That is very, very, very difficult to do. Very few chains are able to preserve their original four wall economics as they start on national expansion plans, as they start to get further and further away from their initial restaurant operations, as they get into new geography, as they bring new people into their organization. That is very, very difficult to do.

BJ's has been able to preserve our operating margins over the past six years and we increased the number of restaurants that we have open from the low 30s to over a hundred today. So that is our primary challenge, and again I probably gave you a little bit more detail or a longer answer than what you are looking for, but that's how we philosophically think about it in the business.

I think that's fair, and just a follow-up and my last question what about ancillary opportunities looking to the grocery aisle, for example, with some of your items -- the handcrafted beers, or it could even be food. Is that something that you would entertain?

It is. Those are some key initiatives that are on our list for this year. We've done some preliminary exploratory work, actually last year, with respect to looking at some of our premium proprietary crafted beer at that particular distribution channel. We've also had some conversations with potential brokers with respect to getting a few of our unique food products into the grocery and warehouse club aisles.

And prior to this year, I think we were a little too small to really get much attention from some of the larger institutional food service brokers that really work with other restaurant companies. But now we're of a size and scope of operation that we are beginning to build a national brand, so we're actually getting more attention from them. So, I think we'll make some progress on it this year, it is one of our key initiatives and perhaps next year we might be able to begin to see some of the economic benefit of that work.

Thank you.

You're welcome. Thank you, Nicole.

Thank you, and our next question comes from the line of [Mark Wayne] with D.A. Davidson.

Thank you. I'm just curious, as you continue to build up the management pipeline and you look a little further out to 2012 and 2013, with the opportunity to build up a real estate pipeline as well. I'm just trying to get a sense for what the rate of unit growth might look like in outer years? Thank you.

I think what we've said to this point is that in the next couple of years we want to grow our capacity base measured in terms of total restaurant operating leases in the low double digits. So this year our targeted growth is approximately 12% in total restaurant operating lease. Which translates, based on anticipated months of opening, to as many as 12 or 13 new restaurants.

For 2012, we haven't given a specific restaurant operating goal. But if you were to just do the math on total restaurant operating lease, it would probably suggest something around 15 new restaurants in 2012.

Again, capacity in terms of total restaurant operating lease is a function of two variables -- the number of restaurants you open, and how early in the year that you open them. So those are our targets for the next couple of years, and we'll see how our pipelines come together with respect to manpower and real estate viability. And then we'll go from there.

Thank you.

Thank you. Our next question comes from the line of Paul Westra with Cowen and Company. Please go ahead.

Good afternoon, everyone. Greg, just two clarification questions. I think you mentioned -- (inaudible) store margins this year when push came to shove after taking some price increases near the mid-19% level, is that correct? Is that the basic jist -- I'm trying to stomach the commodity inflation and prices to hopefully maintain margins on a year-over-year basis?

I'm actually scoring through my entire papers to see if I ever use of the word 19%. I think, based on everything that I've talked about, and I think I've laid out where we think cost of sales, labor, and operating occupancy come together, and I think if you put all that together our margins the way they were this year is probably something reasonable for next year.

On your tax rate -- I'm sorry -- what did you say on tax rate?

Our tax rate we're expecting to go up next year, it will probably be closer to 29% or 30%. Where we're expecting here in California to lose something called the EZ tax credit, or the Enterprise Zone tax credit. And that will take up our rate from what normally would be that 27% to the 29% to 30% range.

Right. Can you chat a little bit more about your new economics. I know you've been a little less (inaudible), but it sounds like you might be getting a little less on the rent factor? And can you talk about your average build out costs and obviously your performance has been spectacular so I assume you have been more than beating your planned bogeys?

Go ahead. On our restaurant build out costs, it's really been pretty flat. We've been able to add more quality into our restaurants, better finishes, better materials, and keep construction cost pretty flat over the last three years. We are seeing a lot of subcontractors right now that are very hungry. And our bids for 2011 look favorable compared to last year's. So, really no change from 2010 costs on our construction costs.

And I would just say, Paul, with respect to the rents that we are going to be paying for the AAA premium locations that we're competing for, the absolute ground rent that we're paying are pretty much in the same range that they've been in for the past couple of years. Give or take a little bit, wouldn't you say, Greg?

Yes that's correct.

Now the one difference, though, with respect to the impact of the tenant improvement allowances of our reported financial performance, whenever you take a TI then of course factor a return of that TI in the form of increased rentals, which impacts the P&L a little bit. If there isn't a TI, then we're going to pay less rent expense, which flows through to financial accounting margins, four wall margins if you will, on a reported basis. So there may be a little bit of a benefit from there, although we have to outlay more cash up front because we don't have the TI. So it's a little bit of a push and pull there with respect to cash flow and cash ROIs, and accounting margins.

And to add on to that a little bit, Paul, is the fact that by clustering and going into the mature trade areas, we've been able to not only deal with and maintain the construction costs and maybe even better rent in certain areas because you're not paying TI because the restaurant has opened better out of the gate, because they're in those mature trade areas versus a greener area. Plus we're getting brand awareness, and frankly we're getting better management expertise because we're clustering the restaurants.

So, overall those things have moved that top line, which is just frankly more important than the bottom line.

So I would just add to what Greg said. Most folks in our business look at the ROI equation and they forget that, hey, it consists of a numerator and a denominator. Some folks think that the way to improve our lines in our business is to reduce the denominator. And our thinking is ,no, the best way to drive our lines and improvement in our business is to drive the numerator of the equation, with having a right-sized denominator to begin with. That is exactly our focus here.

And my last question is. (inaudible) estates. Maybe that's not existing markets, but as you look through the years ahead, three to five or even more years out, do you always plan to have a vast majority of backfilling existing locations? Since you're building in the last couple of years in existing markets, which is great to mature the markets, can you run into a situation in a few years where you may have to have a significant amount of expansion in brand new areas?

This is Jerry, Paul. I don't think that is going to be the case. First of all, when you look at our 13 state footprint we are currently in, we believe that we could almost double the size of the restaurants that we have in those (inaudible). So, one of the things that -- as you put together a restaurant expansion plan, as I look back on my career and seeing a number of expansion train wrecks along the way, from other concepts, one of the factors that caused them to run the train off the track is that they took on too much new market risk relative to their overall bottle way too early. And that is something that we are going to avoid at all costs here at BJ's.

So with the ability to almost double the size of our existing base and our existing 13 state footprint, I think we're going to have the ability to manage the amount of new market risk we put on our entire business at any one point in time. And you won't have to overextend ourselves. Now having said that, as Greg Lynds mentioned in his comments, we are going to gradually take on new markets, keep our rate of expansion up, and we're already beginning to -- actually we're ramping up our work on a couple of new market entries for 2012 and 2013. And our focus on our expansion plan here at BJ's has always been to do it in a very careful, balanced, predictable way.

Thank you.

Thank you. And our final question is a follow up question from the line of Matt DiFrisco with Oppenheimer.

Thank you, I appreciate your giving us all this time tonight. Looking at those 12 openings, did you detail -- I jumped on a little later -- what regions they might be in? And, also, what type of store -- is it a retrofit, prior existing restaurant, or is it a brand new construction?

Yes, this is Jerry. I believe that our plan will consist of, I believe we've got, four restaurants -- four restaurants in California, four or five in Texas, one in Ohio and one in Nevada, and two in Florida. So that should add up to 12 or 13, I hope.

And 50% of them will be conversion. They'll be primarily existing restaurants in existing retailer that we knock down and built to the BJ's brand.

Our definition of conversion for BJ's is generally we get a bulldozer out and (inaudible) and build a new restaurant. Because the bones of existing restaurants frankly don't really support what we are doing with our facility.

Okay. Not to beat a dead horse, but -- it seems like we all have the same tone. We all are trying to why such a strong concept, strong appeal and strong comps and -- it doesn't really -- you don't have the normal road map of why people grow slower. I understand that the economy grew slower, and the average weekly sales took a step back, in '08 and '09. But you had a big recovery, and you're at record average weekly sales to end 2010 on a run rate. But should we read into this, that even though you have those 13 states, you're really growing only -- the majority of your growth still is coming in California and Texas. Are you concerned? Or is Ohio and other experiences something like making you not go back to that 20% growth rate? Or are those 13 states not equal? And you see the opportunity perhaps a little bit more risky outside of California and Texas?

You know, Matt, I would not read any of that into our particular development strategy. We're trying to be extraordinarily quality-driven with respect to our development strategy. We're focusing on achieving maximum leverage of all economies of scale, not only with respect to the supply chain but also with respect to overall consumer awareness and our management capabilities within all of our trade areas. We are just obsessed with a very careful predictable growth of the BJ's concept. You know, you are absolutely right that our strides and the sandbox that we play in is wide open for rapid growth by our concept. We are going to run our business as quickly as we possibly can, given that the proper balance and planning of our six pipelines for growth.

And so we are going to run it as quickly as we can, but we are going to do it with great quality and predictability and with leverage. We're going to resist the temptation of running -- of outrunning our headlights, so to speak, with respect to our pipelines of growth. And running our train off the tracks. So I do think your observation about the opportunities is spot on. We all feel it and we all see it. We are excited about it but we are trying to be very, very careful with the overall quality and predictability of our growth and we just do not want to outrun our headlights.

As soon as we get our pipelines ramped up, our six pipelines of growth -- our capital, our real estate, our brewing capability, our infrastructure, our support structure, our supply chain et cetera, then we will be able to consider increasing our rate of growth.

But as far as the geography of our business, we are extremely pleased with our results in the midwest. We are extremely pleased with the results in Florida. The issue there is that we are extraordinarily patient when it comes to picking sites. We want to grow and to add predictable earnings to our business. But the question is, do you want to have 300 restaurants or 500 restaurants that average $0.5 million in sales, or do you want to have 300 or 500 that average $3 million in sales?

Our target is to keep and preserve our current unit economics as we grow and to not see any deterioration of them just for the sake of growth, so it is a balancing act but I think that's the approach that we're going to take, it's definitely conservative, but at the end of the day it's going to be a high predictable quality and we're going to run it as fast as we can to maintain that predictable quality.

Yes, your track record speaks for itself. And this is also a northeastern guy with a bias, who wants to see one closer than having to get on a plane to see one. Looking forward to you coming to the northeast. I think you'd do great here.

Thank you Matt. Based on our collective experience with the other chains we've been with, we agree with you 100%. We can't wait to get to the northeast with the BJ's concept.

Thank you and Mr. Deitchle, I see no further questions in queue.

Thank you all for being on the call today. And if there are any other questions we will be in our office here in sunny, warm California .

Ladies and gentlemen, that does conclude today's conference. Thank you for your participation. You may now disconnect.