Gregory A. Trojan - BJ's Restaurants, Inc. Rana G. Schirmer - BJ's Restaurants, Inc. Gregory S. Levin - BJ's Restaurants, Inc..

Matthew DiFrisco - Guggenheim Securities LLC Nicole M. Miller Regan - Piper Jaffray & Co. John Glass - Morgan Stanley & Co. LLC Jeffrey Bernstein - Barclays Capital, Inc. Sam J. Beres - Robert W. Baird & Co., Inc. Brian Bittner - Oppenheimer & Co., Inc. Will Slabaugh - Stephens, Inc..

Good day and welcome to BJ's Restaurants, Incorporated Fourth Quarter 2016 Earnings Release and Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Greg Trojan, President and Chief Executive Officer. Please, go ahead, sir..

Thank you, operator. Good afternoon, everyone, and welcome to BJ's Restaurants fiscal 2016 fourth quarter investor conference call and webcast. I'm Greg Trojan, BJ's Chief Executive Officer, and joining me on the call today is Greg Levin, our Chief Financial Officer.

We also have Greg Lynds, our Chief Development Officer; and Kevin Mayer, our Chief Marketing Officer on hand for Q&A. After the market closed today, we released our financial results for the fourth quarter of fiscal 2016, which ended Tuesday, January 3. You can view the full text of our earnings release on our website at www.bjsrestaurants.com.

Our agenda today will start with Rana Schirmer, our Director of SEC Reporting, providing our standard cautionary disclosure with respect to forward-looking statements.

I'll then provide an update on our business and current initiatives, and then Greg Levin, our Chief Financial Officer, will provide a recap of the quarter and some commentary regarding fiscal 2017. And after that, we'll open it up to questions. So, Rana, please, go ahead..

Thanks, Greg. Our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements.

Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. Our forward-looking statements speak only as of today's date, February 23, 2017.

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, Rana. As you're all well aware, the back half of 2016 and Q4 in particular was a very challenging time for restaurants and retail in general.

Although, we're not satisfied with our Q4 comparable restaurant sales of minus 2.2% and our full year comp sales of minus 1.3%, BJ's has delivered a solid fourth quarter and full year financial and operating results.

We continued to take meaningful market share in our segment and outperformed both industry traffic and sales trends for the quarter and full year. These results highlight the value of our brand, the commitment of our team, our menu offerings and quality value proposition we deliver to our guests.

Today, we'll review the fourth quarter results, the elements of our plans to strengthen sales, our current expansion plans and the flexibility we have to operate through the current environment, while returning capital to our shareholders.

Looking first at Q4, our traffic for the quarter was 140 bps better than Knapp-Track and a 150 bps above Black Box. For the full year, we outperformed the industry traffic trends by 90 basis points and 100 basis points, respectively.

Our cumulative over-performance in terms of traffic versus the industry is about 270 bps over the last three years, marking an annual rate of about 90 bps per year. And keep in mind, that includes approximately 50-basis point drag we have on our traffic comps, as our new restaurants fall into our comp base.

During 2016, we opened 17 new BJ's Restaurants, predominantly in newer markets for our concepts. The success of these openings allowed us to capture even more market share and these markets not yet measure by comparable sales or traffic.

This strong relative performance speaks to the unique positioning of our concept at the polished or upper-end of casual dining, offering quality and menu diversity comparable with higher guest check concepts, but at price points closer to mass casual competitors.

Importantly, we expect that the current difficult operating conditions will continue to take their toll on weaker concepts, and we are positioning BJ's to be a significant beneficiary of the shakeout of weaker competitors and an improving environment based upon our continued innovation, our sound execution and our financial and balance sheet strength and flexibility.

Considering the top line challenges our operators faced in the back half of the year, they did an excellent job of controlling our expenses and delivering solid results in terms of margin performance and profitability. In the fourth quarter, net income grew 18% and diluted earnings per share rose almost 30%.

Included in this year's fourth quarter was a benefit of $800,000 related to our reversal of performance equity awards. Excluding this benefit, our net income and diluted earnings per share would have increased by approximately 12% and 23%, respectively.

For the full year of fiscal 2016, and excluding the aforementioned equity comp benefit and the $2.9 million gain from a lease termination in 2015, we were able to grow net income and diluted net income per share by approximately 4% and 13%, respectively.

Our model continues to drive significant cash flow, as we generated almost $140 million in cash flow from operations in 2016. Our solid competitive performance and cost management aside, our focus continues to be on creating stronger sales momentum on an absolute basis, regardless of the pressures of the marketplace.

I believe, given the advantages we enjoy as a more relevant contemporary concept, doing over $5.5 million per restaurant in AUVs that we have the ability to reverse 2016's 1.3% negative comp sales trend, despite the challenges presented by the environment.

Something to keep in mind, and that we don't talk about that much, is that our average guest is younger, and skews towards higher household income than the average casual diner. We indexed nine points higher in the 21 to 34 age group and four points higher in the 35 to 54 age group.

In order to better leverage these advantages, we have been testing and pushing ourselves to think innovatively to drive sales, and have specific initiatives we'll be implementing this year.

Before I address these though, it's important to reference our fundamental operational execution in our restaurants, because without the basic of delivering truly memorable food at a surprising value with hospitality and fun as a foundation, quality innovation and good ideas in the world are not going to matter.

Although, there's always room for improvement in every aspect of our execution, I'm pleased to report our operators had another great year as we improved the execution in our restaurants. Our NPS metric meaningfully improved in all key measurements with the biggest improvement coming in our value and food quality scores.

We recognized, however, that executing better in and of itself is not sufficient to offset the challenging sales headwinds we're facing. And as such, we have several strong sales building initiatives that we are rolling out, which in total represent very solid top line opportunities.

Significantly, I also think these strategies will serve to even further differentiate our concept from the world of mass casual dining.

Not coincidently, these efforts hit squarely on our longstanding macro sales building strategies, further differentiating our food quality and uniqueness, improving our speed of service, and further refining our brand messaging and media strategies, while improving our value to our guests and leveraging our broad menu in the takeout and delivery channel.

So, let me begin with our menu initiatives. Last year, we began testing new slow roasting oven technology in a number of select restaurants.

Our goal was to augment our pizza ovens and broilers, which by the way are wonderful workhorses for our salmon and chicken dishes, with additional oven capacity to slow cook to perfection larger format protein, like prime rib, turkey, pork shoulder, ribs, chops, et cetera.

The quality goal of these items is to at least match, if not improve upon, products found in restaurants with price point 50% to 75% higher than ours. We started by slow roasting our rib and pork shoulder products overnight and we debuted a slow roasted prime rib featured on Tuesday Nights in these select restaurants.

We sold the prime rib as a bundle with salad tied in our famous Pizookie for $26.95. We've since added double-cut pork chops, which I would put it up against anyone's product regardless of price point. In addition, we're adding prime rib and slow roasted turkey dip sandwiches to the rollout of these new ovens.

Our prime rib Tuesdays performed so well that we decided to move their availability to Friday and Saturday Nights and all day Sunday. Though, it's early, we really like what we're seeing from these products and tests.

As encouraged as we are about these specific items, the power of this cooking platform for future product development and, most importantly, further food quality differentiation is what is truly channelizing.

We plan to have these new slow roasting ovens in all of our restaurants by mid-April and the new menu items available everywhere for our celebration season beginning with Mother's Day on to our graduations and finally Father's Day. In addition to these protein innovations, we have taken the opportunity to rework our sides and snack offerings as well.

We'll be offering a number of new premium side options for a small upcharge as accompaniment to our entrée offering, as well as additional options as standalone snack. Examples include sausage (11:05), ginger creamed corn and cheese good mac n cheese, which we believe all of which appeal to a broad range of customers and preferences.

The trend towards smaller tasting experiences continues to grow and we think our dining and drinking occasions are well suited for these check building addition. We're also attacking our speed of service opportunity through the addition of new technology in our restaurants.

We have tested several iterations of handheld ordering devices over the past few years. And with the learning from these tests, we have developed an interface with our existing point-of-sale system using handheld tablet, which is resulting in nice improvements in our service level.

As many of you will recall, given the high volumes of our restaurants, we have an opportunity to speed up our experience at times when our guests are in more of a hurry, such as a lunch away from the office, a dinner before a movie, et cetera.

We're finding that our handheld technology, along with simultaneous modifications to our labor service model, are leading to nice reductions in order time and initial service to our table. Most importantly, this is translating into measurable improvement in our pace and overall recommend scores in our restaurants.

In addition, these devices provide our platforms to add EMV card processing in the near future, which will reduce our credit card chargeback exposure significantly, and add even more convenience to our experience.

We have begun implementing the new ordering devices and plan to steadily roll them out in our restaurants and be completed in early to mid-August. Driving and improving our value proposition has been key to outperforming the industry and traffic.

We were aggressive two years ago in adding middle of the menu and enlightened items at lower than average category price points and our Brewhouse Burgers, Entrée Salads, and Pita Tacos have all been very successful. Last year, our lunch value offerings added solid boost to our lunch business.

In addition, our measured but significant increase in promotional activity, primarily through our loyalty and digital media platforms, has also provided more values to meal lines. This year, we're expanding our value weaponry through the expansion of our franchise night model.

Last year, we rolled out a number of Daily Brewhouse Specials, a few nationally and several others on a regional level. This year, we'll be adding either our beverage offering to our current food specials or vice versa, where food offerings are going to be added to our beverage special.

These programs have driven solid traffic builds and we like that they give us another alternative for our value-conscious guests, which gives us a chance to drive trial and incidents across some of our most traditional and iconic menu options.

Another sales building initiatives we've been working on is growing our off-premise sales business through takeout and delivery. Our off-premise penetration runs about half the industry average at just about 5%.

We plan on leveraging our excellent mobile app technology and recent infrastructure improvements to our website to drive higher off-premise incidents. We're now testing delivery by connecting through an API program, which aggregates available drivers from a number of delivery services.

We're also improving our takeout packaging and large party and catering menu options. And, over time, we think the same breadth of the menu, which has driven much of our on-premise sales success, will lead to similar success and growth for BJ's in the takeout and delivery channel.

As excited as we are about each of these opportunities, the power of our great people in our restaurants delivering our quality and hospitality, along with our growing marketing scale and experience to drive awareness in both current and newer markets are important and consistent attributes to our sales building strategies and initiatives.

Another is our persistent focus on driving further cost efficiencies in our restaurants and our overall system economics. As many of you know, we have eliminated significant costs and brought great efficiencies to our operating infrastructure through our supply chain initiatives along with team member-led in-restaurant project queue improvements.

In 2017, we'll once again rely on savings from the work we performed last year in negotiating new contracts, eliminating waste, et cetera. And this effort continues, as this year we'll be stepping up our efforts in both supply and contract service procurement.

This is a never ending process, as we analyze and negotiate with vendors and suppliers to offset the increase in cost of doing business in our industry. As I've said before, these efforts help us build sales by enabling BJ's to offer a better value to our guests, while improving the economics of our business.

Lastly, let me comment on our development strategy headed into 2017. Late last year, we indicated that given the current environment, we intended to slow our pace of development for several reasons. And reflecting this, we have 10 restaurant openings in our plan this year.

Our new restaurant performance has been quite strong, with some of the best opening sales volumes we have seen in comparable markets in several years. We're very satisfied with how we've opened new restaurants last year, particularly considering how many opened in new and younger markets for us.

However, we believe it is prudent to slow development at this time for several reasons. First and foremost, it allows us to channel more of our internal energy around these great sales building initiatives that I just described and the great opportunities we have to grow our top line.

Secondly, the combination of our long-term expansion opportunity, strength of concept and strong balance sheet makes BJ's current equity valuation attractive, and represents opportunities to further returns of capital through buybacks.

Finally, I believe, in time, real estate values will improve with the demise of weaker performers in our space, thus presenting even better opportunities for BJ's. So, in summary, we view our moderate slowdown is bringing real benefits and only marginal opportunity costs.

I view the current industry challenges as a great opportunity for us to shine and to widen the gap between our concept and much of the competition in our space. The top line challenges, coupled with higher labor costs, has already experienced a slowdown in development and demise of several weaker concepts.

This dynamic will continue and over time, bring balance to the capacity and demand dynamics, which has put pressure on comparable restaurant sales, particularly in high growth U.S. geographic regions.

As I've said many times before, we're privileged to have one of the industry's most unique and beloved concepts, and, most importantly, our great team members behind us on the battlefield. Our opportunities are clear. We have the right strategies and initiatives in place to accomplish our objectives, and our financial footing is solid.

And our teams are up to the task of converting the current challenges into more opportunities for BJ's and our shareholders. So, now, let me turn the call over to Greg to provide a recap of the quarter..

All right. Thanks, Greg, and let me provide some additional perspective on the fourth quarter and 2016's operating results, after which I'll share our current perspective on expectations for 2017.

Total revenues for the 2016 fourth quarter increased approximately 14% year-over-year to $265.6 million, while our net income and diluted net income per share were $12.9 million and $0.55, respectively. As noted in this afternoon's release, this year's fourth quarter was comprised of 14 weeks as compared to last year's 13-week fourth quarter.

This extra week accounted for $21 million in sales for the fourth quarter of 2016. Excluding this extra week, sales for the fourth quarter of 2016 increased to $244.5 million, which is approximate 5% increase compared to last year.

The extra week, which is for the period from Wednesday, December 28, to Tuesday, January, 3, is a very high sales week for us, as it is right in the middle of the Christmas and New Year's break for many people. Our weekly sales average for this week was approximately $113,000 compared to $102,000 weekly sales average for the entire fourth quarter.

As such, we estimate the fourth week benefited our Q4 earnings per diluted share by approximately $0.10 to $0.11. Our fixed and semi-fixed occupancy and operating costs, as well as depreciation expense benefited most from this extra sales week and its relationship on our margins.

In regards to the comp sales, our comparable restaurant sales declined 2.2% on a 13-week basis, and 2% on a 14-week basis.

As we've already heard from many other restaurant and retail companies, December was a challenging month for the industry, especially how the holiday periods lined up this year with Christmas Eve and Christmas Day being on a Saturday and Sunday, respectively.

In fact, for BJ's, our comparable restaurant sales through the first 10 weeks of the quarter, which is from the period, September 28 through December 6, were only down 1.6%, or generally consistent with what we reported at the time of our Q3 conference call.

Looking at the industry data from both Black Box and Knapp-Track, it appears that our trends, while outperforming the indices, were pretty consistent with the casual dining industry, especially in December, which saw that market slowdown for casual dining, especially towards the end of the period.

Cost of sales for the quarter of 25.7% was 100 basis points higher than the year ago quarter, but pretty consistent with Q3's cost of sales of 25.6%, which was also in line with our expectation. The increase from the prior year was primarily due to the change in the way we internally allocate promotional cost between cost of sales and marketing.

As we've mentioned on prior calls, in the past, we've recorded to marketing a food cost charge related to promotional activities, which resulted in lower cost of sales and higher marketing expenses.

However, given our efforts to increase promotional activities, particularly due to activity in our loyalty program, it was prudent to change this practice. Our labor was 34.9% for the fourth quarter and that represented a 70-basis point increase from a year ago period.

And breaking down labor for the quarter, our hourly labor was up about 100 basis points from a year ago and that was due to higher hourly wages, in both the kitchen and dining room, and a negative leverage related to comparable restaurant sales performance.

That was offset by lower incentive compensation and some leverage from the higher sales volume week of that 53rd week or 14th week during the quarter. Our operating and occupancy costs decreased by about 50 basis points to 20.7% from last year's fourth quarter.

As I mentioned, occupancy and other fixed and semi-fixed monthly operating costs benefited the most from the extra week of sales. Based on our internal estimates, our occupancy and operating costs would have been about 50 basis points to 60 basis points higher than the reported 20.7%, if we excluded the benefit of the extra week of sale.

This would put our operating and occupancy costs in a low 21% to mid-21% range, which is pretty consistent with our current trends over the last several periods. Included in operating and occupancy costs is approximately $6.1 million of marketing spend, which equates to 2.3% of sales.

And by comparison, marketing spend in last year's fourth quarter was $5.3 million, which also amounted to 2.3% of sales. Overall, our restaurant level cash flow margins for the fourth quarter were 18.7%, including the extra week. Excluding that extra week, we estimate that our restaurant level cash flow margins would be in a low 18% range.

Please remember that our restaurant level margins include marketing spend, which many other restaurant companies include in their G&A. As such, excluding marketing spend, our restaurant level cash flow would be around 21% on a 14-week basis and 20% on a 13-week basis, which we still consider to be some of the top in casual dining.

Our general and administrative expenses of $14.3 million, decreased by 20 basis points compared to the same quarter of last year to 5.4% of sales. G&A came in lower than anticipated as we reduced Restaurant Support Center incentive compensation by approximately $700,000 and that's based on our 2016 performance.

And we also reversed approximately $800,000 of equity award compensation or equity award expense related to our 2014 performance share unit grant.

Our preopening expense was $1.7 million which was primarily related to the cost of opening five restaurants in the fourth quarter, plus some additional opening costs related to restaurants expected to open in the first half of 2017.

For all of fiscal 2016, our preopening costs were around $7 million for 17 restaurants and that brings our average opening costs in line to a little over $400,000 per restaurant. And we want to remind everyone that, that is down from about $500,000 per restaurant back in 2013, which on 17 restaurants represents about a $1.7 million savings.

Our tax rate for the fourth quarter was 21%, which was lower than anticipated, primarily due to a decrease in our uncertain tax benefit liability and valuation allowances. In terms of capital allocation, we continue to use our strong cash flow from operations to execute our national expansion plan, while opportunistically repurchasing shares.

For fiscal year 2016, cash flow from operations was approximately $138 million compared to our gross total capital expenditure for fiscal 2016 of $109 million, which includes the construction of the 17 new restaurants as well as maintenance CapEx and other sales building initiatives.

As a result, we generated almost $30 million of excess cash flow while growing our restaurant base by 10%. We also continue to be committed to enhancing shareholder value through our share repurchase program, which we believe complements the growth and returns we are driving from our ongoing national restaurant expansion plan.

In this regard, during the fourth quarter, we allocated approximately $47.6 million towards the purchase of 1.3 million shares of our common stock, bringing our total repurchases for 2016 to approximately $95 million for the purchase of 2.5 million shares.

The weighing of the repurchases and our share count is now more evident as the 14% rise in our Q4 revenue led to an 18% increase in net income and an approximate 30% increase in diluted earnings per share.

With regard to liquidity, we ended the fourth quarter with approximately $22 million of cash and $148 million of funded debt on our $250 million line of credit. At the end of fiscal 2016, our leverage ratio was slightly greater than one turn of debt-to-EBITDA at a 1:1 or 1.1:1 ratio.

As Greg Trojan mentioned, we plan to open 10 new restaurants for fiscal 2017, which will allow us to again generate significant free cash flow, which we will use to opportunistically repurchase shares.

Additionally, while we do not have a set targeted debt-to-EBITDA ratio, we believe that our strong cash flow from operations, coupled with our overall lower CapEx for fiscal 2017, that we have the room to increase our leverage ratio while maintaining a flexible financial structure.

In fact, in Q1 2017 to-date, or already this year-to-date, we have purchased over $21 million of BJ's shares using a combination of cash flow from operations and funded debt.

In total, since the authorization of our initial share repurchase program, which began in April of 2014, and including the $21 million that we've purchased so far this quarter of fiscal 2017, we have repurchased and retired approximately 7.9 million shares of BJ's stock for approximately $312 million.

This leaves us with approximately $38 million remaining on our current share repurchase authorization. Now, before I open the call up to questions, let me spend a couple of minutes providing some commentary on expectations for 2017.

All of this commentary is subject to the risks and uncertainties associated with forward-looking statements, as disclosed in our filings with SEC. As Greg Trojan noted, we are rolling out a variety of sales driving initiatives in the first half of this year.

As such, we will incur some training-related investment costs for these initiatives during the first half of this year, and then expect to see the benefits from these sales driving initiatives in our comparable restaurant sales base in the second half of 2017.

Specifically, as Greg Trojan mentioned, these initiatives include our new slow roasting ovens, which will be fully implemented by the end of April, and ready for the Mother's Day holiday in May, our handheld server tablets, which we expect to be fully implemented by August and delivery and new takeout offerings in all restaurants later this year.

Starting early next month, we will also begin promoting our expanded Daily Brewhouse Specials, featuring some of our most signature menu items at very attractive prices.

On top of that, we are continuing to roll out our new waiver service model, which should provide our operators with better information to properly staff our restaurants in 15-minute increment based on sales levels as well as other cost and productivity initiative.

Until these initiatives are fully rolled out, we believe it is important to be conservative on comparable restaurant sales for at least the first half of this year. Sales for the first seven weeks of this quarter have started off soft, as the historic rains in California have really impacted our 63 restaurants located in the state.

To-date, we're down about 2.5% in comp sales. Also, because last year was a 53-week year, our first week of sales for fiscal 2017 started on January 4, as opposed to the end of December for last year. As I mentioned, this is a strong week for us, both in terms of average weekly sales and positive comp sales.

If this week was included in fiscal 2017, that we were apples-to-apples comparison with last year, our sales to-date would be down about 1.9%. So, that shift in the 53rd week is having an impact of about 60 basis points on sales to-date in this first quarter.

Considering the impact of the rains in just a little bit more detail, we've had over 20 days of rain in Southern California this year, compared to only eight days last year.

Additionally, both Northern California and Central California have seen an approximate 50%-plus increase in the amount of rain days this year compared to last year, with Northern California having over 30 days of rain so far.

While it may be hard to comprehend, for those on the East Coast and elsewhere, rain in California frankly is what snow is to the East Coast.

Therefore, trying to normalize for the weather in California and pulling out only the severe rain days that we've experienced so far, we estimate that the rain in California has negatively impacted our comp sales to-date by about 50 basis points.

I want to remind everyone that this is just an estimate using our best guess, based on the days, when we experience severe rain. Therefore, if we exclude the severe rain days in California and we also normalize to include all of calendar 2017 sales into the first quarter, our comp sales will be down approximately 1.5%.

Finally, for those building your models, specifically for this first quarter, I would expect a greater spread between average weekly sales and comp sales because of the calendar shift that I just mentioned, which is resulting in Q1 starting in the first week of January.

As a result, we lose one of the highest weekly sales averages in fiscal 2016 as well as some impact from Easter and spring break being a little later this year than in the past.

I would therefore assume that this spread, which we have averaged about 100 basis points give or take over the last year, may be between 150 basis points to 200 basis points in Q1. Again, this is just a Q1 item, because of the calendar shift in regards to the weeks for the first quarter.

So taking that aside, I would expect approximately 2,435 restaurant operating weeks in this first quarter, which makes an approximate 9% increase from the 2,231 weeks in last year's first quarter.

Moving on to the rest of the P&L, I would expect cost of sales to be in the mid-25% range this year, based on the overall commodity basket to increase of about 0.5% to 1%. So, right now we've locked in about 60% of our commodities for all of fiscal 2017.

With regard to labor, we still will absorb an increase in California minimum wage, as well as additional minimum wage pressures in other states.

Aside from the minimum wage increases, we've seen an overall increase in wages for hourly positions and managers, and therefore I expect to see that additional upward pressure on hourly management wages in the 3% to 4% range this year.

That said, based on preliminary planning, we believe we can mitigate some of this labor pressure through prudent menu pricing, menu design and cost-saving initiatives currently underway.

In addition to some of the wage pressure as I mentioned, we expect to incur some additional training hours in both Q1 and Q2 of this year, related to our sales building initiatives.

Specifically, we expect to incur about 20 basis points to 30 basis points in training labor related to the rollout of our slow cooking ovens and server handhelds as our key members become proficient with both pieces of technology. In our view, these are investment costs to drive future sales.

Unfortunately, the accounting rules do not allow us to match these training costs with the future revenue. So, we will have a temporary increase in labor to get these investments rolled out to drive sales in the future.

Therefore, based on sales trends to-date, plus the additional training costs for our sales building initiatives, I would expect labor to be in the mid – at the mid-36% range in the first quarter and then slowly come down throughout the year as our training costs are behind us, and we implement our normal menu pricing and new menu update, and we get the benefit of some of our additional productivity initiatives later this year from our demand-based scheduling system that we are implementing.

Also, please remember that in the past, the first quarter of each year is our highest labor cost as a percent of sales, primarily due to higher payroll taxes and benefits that occur at the beginning of each year until we hit many of the state caps or limit later in the year.

Of course, labor as a percent of sales is highly correlated with weekly sales averages and comparable restaurant sales growth. So, labor as a percent of sales will be impacted by these factors as well.

With regard to occupancy and operating costs for the year, our expense management and margin enhancing initiatives have significantly reduced these expenses and our goal is to hold the line on these savings by using additional savings to offset some of the normal inflationary pressure we get each year.

As such, we are targeting total occupancy and operating costs to be in the low 21% range. Included in total occupancy and operating costs will be approximately 2% to 2.2% of marketing spend, which is pretty consistent with the level of marketing spend in 2016.

And like labor, operating and occupancy cost as a percent of sales is highly correlated with weekly sales averages and comparable restaurant sales growth. We expect G&A to be around $61 million in 2007 (sic) [2017], including equity compensation.

The year-over-year growth in G&A fiscal 2017 assumes full incentive compensation and a normalized equity award expense compared to fiscal 2016, when we reversed approximately $800,000 of equity compensation related to our 2014 performance share unit.

First quarter preopening costs should be in the $1.2 million range, based on really two restaurant openings. I do think there is a third restaurant, I think, is going to open on the last day of the quarter, so, two to three restaurant openings in the first quarter. Overall, we're targeting opening costs to be around $425,000 per opening.

And we're expecting our tax rate to be in the 28% range in the first quarter and for the current year.

In regards to weighting in our recent repurchase activity, it will continually positively benefit the share count and I anticipate our diluted shares outstanding will be in the upper 22 million range for the first quarter versus 24.7 million at the end of Q1 2016 and just under 29 million when we embarked on our repurchase program.

Our CapEx for 2017 should be in the range of $80 million to $85 million for the development of 10 new restaurant maintenance capital expenditure and our sales and growth initiatives, including our new slow roasting ovens and handheld server tablets before any tenant improvement allowance or sale leaseback proceeds we may have received.

As with 2016, we anticipate funding our 2017 capital expenditure plan from the balance sheet cash, cash flow from operations, our line of credit, landlord allowances and sale leaseback proceeds.

Before we begin rolling out our new ovens and point-of-sale systems to our restaurants this year, we will expect to take a one-time non-recurring, non-cash write-down on our old convection oven and for the hardware of our old point-of-sale systems.

Since most of these initiatives will be complete in the first half of this year, I'm estimating that most of these non-cash, non-recurring charges will be incurred in the second quarter of this year. And as we go through those write-downs or write-offs, I'll inform the Street separately of what those costs are.

I think it's evident as we wrap up here from our 2016 results that BJ's is very capable of managing those items in our control to offset the challenging operating environment and deliver solid financial growth.

As we look to 2017, we are taking a thoughtful and analytical approach to our business, brand concept and the current environment, just as we did coming off of 2013, when the business was also challenging.

At that time, we took the right menu, efficiency and other measures, strengthened our business, financial results and returns for shareholders, and we are now rolling out what we believe to be one of BJ's strongest ever sales initiatives, based on – sales initiatives planned, based on the concepts that we've tested and proven.

The investments in sales building initiatives are enabled by our strong cash flow from operations and the strength of our balance sheet, as well as our decisions to moderate our pace of expansion, all of which contribute to our ability to return capital to shareholders and allow our key members to focus on taking care of the guests.

In closing, we remain confident that our initiatives to drive sales, productivity and efficiency, combined with a balanced approach, the new restaurant growth and prudent management of our capital structure, is a proven formula for sustained long-term financial growth and the appreciation of shareholder value. That concludes our formal remarks.

Operator, please open the line up for questions. Thank you..

Thank you. And we'll take our first question from Matthew DiFrisco with Guggenheim Securities..

Thank you, guys. I missed it. Just one bookkeeping question before I get into my other question.

With respect to the G&A, did you say what it was for the first quarter, what you were expecting?.

I did not. I would tend to think that it's going to be $61 million divided by 4. Matt, I don't think that it will be too far off..

Okay.

And then, I guess, can you comment on – the last time, I think you guys did some steaks it seemed like there might have been a little bit of up-selling or confusion with your consumer and it came across a little bit more as a premium product and you've done a lot of hard work to take some complexity off of your menu over the last year or so, I think now down to a little under 130 or so items on the menu.

How do you implement the slow roast product as well as is there anything coming off the menu to manage not bringing back in too much complexity or diluting your brand as far as the core items, such as pizza and deep dish pizza and the other products?.

Hey, Matt. This is Greg Levin. I'll take the first part and I'll turn it over to Greg to really talk about the new technology. But I'm not sure what you're recalling in regards to steak issues or steak complexity in the past.

We have had two steaks on our menu for many years and have consistently had about two steaks, which is a Rib-Eye and a Top Sirloin. And, frankly, their incident rates on our menu are some of the highest in the category. They do in our case – they're the two highest entrées outside of Chicken Parmesan in the entrée category.

So, steaks have always done well for us. We've never had a huge steak line. I don't know again if you're thinking of something from a different time, but generally we're doing well and they're well received with our guests and as I just mentioned some of the highest incident rates in the entrée category.

In regards to slow roasting and what we're doing, I'll let Greg talk about that..

Yes. So, Matt, we have been very careful in terms of adding more complexity to the back of it. It's a great question as you know, but these ovens are actually very less complex than the average complexity or labor content of the rest of our menu.

I'm not going to go into excruciating detail for obvious reasons here, but they provide a consistency, given the technology of level of sophistication that takes the guess work out of cooking these proteins in a way that our kitchens will tell you they're loving using these ovens and overall they would say that they're simplifying operations, not making more complex..

So, you're adding though more steak items on to your menu?.

Well, we're adding prime rib. We're not adding steak per se at this point..

Okay.

So, you're going to be adding more proteins on to your menu than what you've had without the oven?.

This is Greg Levin. A little bit, I mean, so for example, as Greg Trojan said, we're adding a prime rib. So, we have a beef dip sandwich on our menu, right now, we're going to replace our beef dip with the prime rib dip. So, to change their....

And that is also taking in-house and slow roasting in the restaurants some products that were not being processed to the fullest in our restaurants as these will be, so, we did our ribs before, but we think these make our ribs even better, even though we were obviously cooking those at our restaurants.

Our pork shoulder will now be slow roasted, both of those overnight and also a turkey breast product that we're starting out with the turkey dip sandwich, but we will use turkey in another applications as well and that -.

Okay.

And then just can you talk a little bit about the size or the scope of the test as far as both the handhelds and the ovens? How many stores have you tested this in and is there any intel that, I guess, is it correct to assume that the handhelds will be beneficial to the top line for better speed of service, quicker table turns in addition to moderate amount of labor savings?.

Yes. I won't go into exact numbers here. I'll start with the – and see that where we call it a slow roasted oven now in all of Texas and Florida, not with the full product lines rolled out, but in terms of our kitchens using that technology. So, it started as a test in a handful of restaurants towards the beginning of last year.

We gradually expanded that test and moved it to Texas – to a part of Texas then as I said, it's now expanded into all of Texas and to include Florida and we're rolling those ovens out as I mentioned nationally. In terms of the handhelds, those have been in a, I'd say, a double-digit number of restaurants for quite some time.

We started handheld testing frankly before May in the Anaheim Hills restaurant and have been looking at and testing different iteration of that technology for a number of years.

And as I mentioned in my comments, we are very pleased with both physical product and the software integration with our current point-of-sale and what we're doing from a labor perspective and we're seeing some really nice improvements, those again I mentioned in the time to order in particular.

So, if you elect to shorten your time in our restaurants, there is the option to do that. But, I'd say the biggest improvement is getting food or beverage to the table more quickly and then just an overall guest satisfaction.

I mean, honestly, we've been surprised at the level of improvement in satisfaction scores that we've seen from the test thus far..

Okay.

And then I guess just to better understand your guidance and the quarter-to-date trends, it sounds like, would it be correct to conclude then regionally, California is a laggard because of the rain, or is it still a stronger region overall than Texas? I noticed you didn't call out the tax refund as an issue or the delay in tax refunds coming out.

Is that not an issue in your eyes?.

I do think the tax refunds are an issue from that standpoint. They fully bounced around over the last – once over the last four years or five years or so.

Last year, they came in early and I think that got people a little bit excited going into Q1 in all of casual dining before it started to taper off in the casual dining overall, especially when you look at Black Box and Knapp data for 2016.

Tax still does remain soft, I think you see that in the regional data from Knapp-Track and Black Box, in that regard, and I would tend to say that, I wouldn't necessarily call California a full laggard, but it's not where it normally is for us, but the rain and we're not trying to make excuses for our comp sales, we're trying to put some color around what we're seeing going into this first quarter and provide people with reasons as to what we're saying.

I'll give you an example, Matt. Last Friday, Southern California was down 16% in comp sales on a Friday day with the rains that came through here. I don't care how good we've done in comps or how bad we've done in comp sales. Southern California is never down 16% unless it's a holiday flip-flop.

So we just experienced some really soft days with some of these severe rains that have come through to begin this quarter..

Understood. Thank you for all the color..

You're welcome..

Welcome..

We'll take our next question from Nicole Miller with Piper Jaffray..

Thank you. Good afternoon. It sounds like towards the end of the prepared comments there you've talked about, with certain food items, you'd be offering beverage, and with your beverage platform, you'd be offering food.

I was wondering if you could expand on that commentary, and then also would you be adding the premium element to the beverage like you're talking about that you're addressing with the proteins? Thank you..

Okay. I will take that. So, Nicole, I'm happy to go through them. They are, we're calling them Brewhouse Specials and on Mondays that we're continuing our Half Off Pizza, half of our large deep dish pizza offering, and we're adding a $5 quality A Margarita to that mix on Mondays.

On Tuesdays, we've had a nice franchise built on what we call Wine Down Tuesdays, with a deal on wine on all day Tuesdays, and we're adding a $3 Pizookie offering on Tuesdays to that day's special.

Wednesday, we're rolling out $10 Loaded Burgers, with unlimited fries all day on Wednesday, and that's combining with late last year, we put forward a $4 BJ's Craft Beer in most of our markets, and I should do the marketing caveat of there are differences, slight differences or some differences across some of our markets depending on mostly legal restriction, but that being said, that's true in most markets.

And then on Thursday, we're doing a $13.95 Half Rack, or $18.95 Full Rack of our great baby back rib, and doing $5 Call Drinks on those nights. So....

Okay, and....

Sorry, go ahead..

Oh, I'm sorry. Didn't mean to interrupt..

I was just going to say, some of those existed before, but not in tandem. We saw them being successful both on a beverage and a food perspective. So we wanted to add some more momentum to those offers, and complement either the food or the beverage offering..

That makes sense. And it sounds like it should help mix shift. Just one last quick one. On your commodity basket, what pieces will be up, what pieces might be down, and then as you think about grocery store deflation to the degree that lessens throughout the years, do you think you have more pricing power that you can add to the menu? Thanks..

Yes, Nicole, in regards to our commodity basket, I think we're continuing to see some pressure in some of the seafood around salmon and mahi, and we're still seeing avocados high as much as we're expecting them to, I think, come down after some of the historic highs from last year, in that regard, and frankly cheese was extremely low last year, so we're expecting cheese to go up and in our general viewpoint of going into the share, we think about that 0.5% to 1% increase in commodities.

In regards to speaking about food away from home versus food at home, we have seen that taper off a little bit, but I think you're seeing across the restaurant industry, the issue with labor and we mentioned it seem kind of in the 3.5% to 4% increase in wage rates and others are seeing that as well and we're trying to be thoughtful in regards to how we take our menu pricing to offset some of that pressure.

When you've got a state like Arizona, that went from $8 to $10 literally on January 1, we've had to take some pricing there and we're seeing the same thing in some, what I would consider, the high minimal wage take. And I think our guests understand that because they hear the increases in minimum wage in those states..

Thank you..

You're welcome..

Nicole, just one other just quick addition on the pricing front that I'm not so sure it's still well understood for us, when we're looking at overall pricing, one of the things and we did talk about this last year, or I did, is that aside from our nominal pricing, we've – not just in things like Brewhouse Specials, but with our level of promotions have gotten more aggressive to offer deal-oriented guests more offers out there, right, and we increased our discounting, still we think much lower than the data suggests in our average competition, but we increased that on a percentage basis quite a bit last year.

And when you put all of that together with what we've done from a mix perspective, consciously to add value to our menu like last year, the Piadinas and Grilled Cheese, the year before that, Brewhouse Burgers. Our net effective pricing or check growth has been just barely above 1%.

And so I think one of the things that we have consciously been doing to continue to drive traffic and share is to take these cost savings that we've been successful at achieving and managing check in a way that we think will drive traffic..

Thanks, again..

Okay..

We'll go next to John Glass with Morgan Stanley..

Thanks very much.

First, Greg Levin, I'm sorry if I missed this, did you provide the pricing in mix or check for the fourth quarter and traffic?.

I didn't. Our pricing was around 3% from that standpoint, while I think as Greg Trojan mentioned, yes, I think he mentioned for the full year, our net check in the fourth quarter was only up 1.2%. So, that unfortunately puts traffic down in low 3% range.

If you think about – our absolute pricing was 3%, we gave some of it back, both on mix and discount in this year, our average check only grew 1.2% in the fourth quarter..

Okay.

And then just related to that, Greg, or either Greg, the enhanced Brewhouse menu, what do you think that does to check in 2017? Does it incrementally cause pressure or is it roughly similar to – how do you think about check in 2017 versus 2016?.

Well, look, I think there is an opportunity to both drive some positive check growth here, John, but also traffic.

And that's what we saw in our testing particularly at the primary products and really going up the others that the goal is, and we are seeing really strong, some of the best value scores, for example in this prime rib and you've been following us long enough, $26.95 isn't a price point we've touched before, right? And we weren't sure how our guests would react, but our value scores are through the roof on that product, because, A, that's such a high quality, but also we're giving people a lot of food, you get two sides and a Pizookie and a salad there.

So, that's the idea.

But to answer your question, it's our expectation that they certainly won't put the idea anyway and I can't imagine a scenario where they're going to put pressure on check that should help us build some check and offset, frankly some of the tepid check growth that we've had over the last few years, but through word of mouth, and it gives Kevin a lot to talk about in differentiating from a marketing perspective, we really want to drive traffic obviously..

Yes.

And, John, just real quick to put that in perspective as Greg was saying, we had Half Off Large Pizzas last year, we started out in Texas, and we saw incrementally those days with better traffic on a trend basis in Texas than what we've seen prior, and then we slowly rolled that out throughout last year, and it didn't have a huge impact on our average check, same thing with the rib that was started last year as well.

If you think about our Tuesday, by introducing a $3 Pizookie, frankly, at the end of the day, we hope that's incremental, and as somebody decides to add on a Pizookie to their already entrée and drive check average up.

So I don't think based on what we've seen last year and how we've laid these out that individually, they would actually take down our check..

Okay, helpful.

And then just finally, how do you think about development into 2018 and 2019, I know you have – you may have addressed this in the past, but just remind us how you think about it, with the reduction this year, does it slow the overall pipeline or what are your ambitions over the next two years, let's say from the development standpoint?.

We haven't made decisions there, but I can tell you, we are behaving, and Greg Lynds is here, his team is moving forward with the expectation that we will build more restaurants, not fewer, because we want that optionality and it's our expectation as things improve, that will dial-up unit growth, John.

But we don't know – obviously, we don't have a crystal ball and we're going to remain flexible, but that's the mindset, if that helps..

Okay. Yes. Thank you..

For our next question, we will go to Jeffrey Bernstein with Barclays..

Great. Thank you very much. Two questions, just one maybe thinking about the comp.

Greg Trojan, I believe you mentioned that in 2017 you can reverse – I believe how you framed it in terms of the down 1.3% comp you saw in 2016, but I know there was another comment that maybe comps from the first test might be slower before the initials kick in and then accelerating in the second half.

So I'm just wondering how do you think broadly about the 2017 comp, maybe what components you'd envision within that and where the industry is relative to that.

I'm assuming you are expecting to continue to take market share, but just wondering what you are thinking, the broader industry is going to be doing relative to whatever kind of rough commentary you want to give them, on what you might be doing?.

Well, look, again, we don't have a crystal ball on those things. I do think it's clear from the beginning of the year that things are off to continued tough environment and start for the industry. I do think – I can't tell you in terms of timing, but the fact that we are seeing things slowdown from a development perspective.

We are seeing some of these weaker concepts go away, that the pressure on comps from a capacity perspective is going to get better over time here for sure. And I think that we crossed the threshold on when that time is going to start occurring, so to speak. So, I do think, at some point, that will start – certainly start helping.

I do think if you look at some of the other core economic indicators out there and sort of the optimism around, sort of, the economic part of the platform that's going on, that's cause for some optimism as well. But our internal point of view on it is – look, we've got to take control, what we can control. The outside factors are what they are.

We take some pride in doing a good job relative to the industry as I mentioned and taking share. But at the end of the day, a negative 1.3%, we've got to figure out how to turn it into a positive.

And that's our expectation for this year, just in generally in terms of timing, since so many of these initiatives really get going at about the mid-year point and they are going to build from there.

We are expecting the back half to provide a lot more of that momentum and strength than where we are today, but I do think for all the reasons we've talked about, it is better than it looks right now, because of all the factors that we've talked about, but that's what we know.

And most of all, we feel really confident given these aren't ideas we came up with on December 15 and said, look, we need something to grow sales. I mean we've really been working on the majority of them a good part of last year and even before and we are going at them in a very focused way. We don't have 20 of these ideas.

You've heard the big ones and that's what we wanted to share. And we feel good about our focus and we feel good about our test results and how our restaurants are reacting and what we are hearing from our guests. So, that's as good as we can feel about those elements at this point..

Understood. And then just comment just about the unit openings, the 10 and 17, I am just wondering if you can parse that out in terms of new and existing and maybe just give us an update in terms of those new markets. I get the impression from your commentary that despite the slowdown in units, it is not indicative of how new markets are performing.

So, I'm just wondering, whether there is any color in terms of again how your stores are doing in new markets, where there's obviously limited brand recognition?.

Yes. I'll let Greg fill in, but just in general our weekly sales volumes and where we're both in comparable markets this is one of our better years that we have had over the last few. So, I feel really good about that. And in terms of 2017, I'd say these are more fill ins of the younger markets.

There is fewer sort of pioneering in the – yes, there is one, right, in that mix that I can think of. But most of them are – there is a restaurant nearby which is we don't want to leave one or even two restaurants alone out there for a lot of scale reasons, particularly people development.

So, although they're still younger markets, they are not the first to plant the flag in most cases..

Got it. Thank you..

We'll go next to Sam Beres with Robert W. Baird..

Hi. Good afternoon. Thanks for taking the questions.

In terms maybe one clarification, Greg Levin, how much nominal pricing before any mix shift, do you expect to have in the menu in 2017?.

So, nominal pricing will be 2.5% to 3%, somewhere in that range..

Great. Thank you.

And I guess in terms of the slower unit development in 2017, could you maybe just talk about how that's impacting your margin outlook for the year? I assume, with less pressure from doing efficiencies likely, some type of benefit, but do you have any perspective on how to quantify that or on what lines we might see some of those benefits baked in?.

Yes. Sam, I really don't. We know that looking at it in general as your cost of sales tends to get a benefit, as your new restaurants open. They open up with some pretty higher cost of sales in the first few months or so. And then, frankly, labor is the other one that you're going to get the benefit on.

One is sometimes you have to hold additional managers in restaurants until new restaurants open. You have to bring out people to open up new restaurants, as well as you appoint people out there, but you might be overstaffed in certain restaurants. So, it's really going to come through cost of sales and labor.

And my hesitancy is to kind of come up with the perfect number, is that we know labor is such a variable on comp sales. So if you told me that, look, we were going to maintain a 2% comp sales, then I would probably say that there is 30 bps to 50 bps in labor by itself that could come through.

And you would see that, on an absolute basis, that anywhere comp sales are sometimes depends on where you're showing your restaurant level margins. And then obviously as your preopening line, which is just a factor of $425,000 times X amount of restaurants being opened, but I don't have an absolute this is what it's going to be in that regard..

Great. Thanks. And then maybe just one last clarification.

Do you expect any impact on the Q1 and Q2 comps from the shift in the Easter and spring break timing?.

Well, I mentioned it in our call that in general I expect Q1, for doing a modeling and whatever modeling number you put in there, I would expect our average weekly sales to grow 150 basis points to 200 basis points less than the comp sales. As far as the Easter being a little bit later in the year, so it's going to shift to Q2.

So we can get those spring breakers in Q2 and that should help us in Q2 and probably be a cash bolster in Q1 overall. You can pick up that Easter Sunday or something below that but that week leading into Easter Sunday will be softer..

Thanks..

We will go now to Brian Bittner with Oppenheimer..

Thanks very much.

Just circling back to the unit growth strategy and slowing it this year, how much of this is really maybe the equity markets not giving you the credit for growing right now in your right minds and maybe harvesting some more cash during this time and how much of it is really just maybe the execution risk with growing out of the pretty intense sales initiatives and just wanting to focus on that more than anything else? How do you think about the balance of those two and how you thought about the unit growth for 2017?.

Well, Brian, as I mentioned in my comments, it really is both. I don't really have a weighting, but those are both significant factors. I mean, we've been very explicit with our – the cash flow advantage and opportunity from building few restaurants. And we think also holding off on to, because the deals are going to improve are the three reasons.

But listen, we're going to be opportunistic about taking that cash and buying back stock, and we do think it will help us operationally and we think there'll be more better deals to do, six months, 12 months, 18 months from now as well..

And, Greg Levin, you kind of talked about the buying and some extra deleverage coming from implementing some of these things, the training costs and whatnot.

Are you able to say how much of that or how many basis points is, I guess, somewhat non-recurring as the training costs and the rollout of these initiatives end?.

Yes. I think I said in my call, maybe asking a different question, if you are, we can talk about it afterwards or maybe I can understand a little bit better. But I said in the call that we probably see about 20 basis points to 30 basis points in labor to rollout these initiatives.

We got to train people on the slow roasting technology which as Greg Trojan mentioned is a fairly simple technology, but it's something we got to train and we got to wrap the food on it, so we got to cook it. Wrapping means kind of tasting it and making sure they understand it.

And then, the handhelds, server handhelds are actually a little bit more challenging than you expect.

You think you could just give it to a server and you'd be gone and everything would be great, but one is the servers have to learn how to navigate through the system and then, we've got to make a couple of adjustments to the way we staff the restaurant as well which lead to basically improved order times and improved efficiency in regards to food and drinks being run out to you.

And that requires us to make some changes in the staffing model a little bit. That will take a couple of weeks for restaurants to really nail down. So overall, if these are going to be coming throughout the year, I see that 20 basis points to 30 basis points and then it drops off..

Okay. No, that answers [Technical Difficulty] (01:09:17). And then just the last question, so where are you at now on [indiscernible] (01:09:24) as the percent of the business. It just seems that there is a trend that can hold with kind of steps like yours that seem to have pretty good portability with some of your menu, obviously, some are not.

Is there an opportunity for you guys going forward?.

Well, yes. We're at about 5.5% off-premise, Brian, and we think given that the category is closer to 10%, there is clearly a big opportunity for us there.

We've been designing our technology, particularly our app, even a couple of years ago with this in mind to prove an API to be able to communicate with third-party delivery services and we're operationally testing that today as we speak, and from the technology perspective, it's working very, very well.

I'd say our real advantage in all of this and why we are excited about the opportunity is our broad menu. I think it goes beyond any particular category, whether you think pizza or burgers or whatever as we're a place you can go to, and order for a family and everybody has an opportunity to order something out there.

We've got to really look forward to and the diversity of our menu, and a lot of which travels really well, is a real advantage for us in this off-premise area. So -.

What do you think is the biggest reason why you're under index versus the peer group on off-premise....

You know what, I think it's just been a matter of focus and given our large sales volumes in our restaurants, it just was we're focusing on the business within our four walls, there is not a structural reason where we bang our head against the wall and it hasn't work and it's been, look, we have grown this business over time relative and to us, but there has not been the kind of focus on it that we're now putting on these two channels..

Yes, and the large sales side, I guess. It actually makes a lot of send. Okay. Thanks. Thanks for your time. Appreciate it..

You're welcome..

Thank you, Brian..

We'll take our last question from Will Slabaugh with Stephens..

Thanks, guys. Just a quick one on winning strategy.

It sounds like with the other news and some other kind of strategy you're talking about, you're going after quality and even maybe a little bit more premium, where many of your competitors have moved more toward heavily discounting core items, so I'm curious, if that response is something that we should expect to maybe take a while to bear fruit given the tough environment or this strategy that is coupled eventually as you talk about with more Brewhouse options, is something you expect to sort of bear fruit more immediately as well and it's sort of in your long-term play?.

No, great question, Will. And thanks for asking it, because I think what's really important and we can – as we're talking about initiatives like this, sometimes lose sight of balance here. When you think about all the things that we've done manualize to add value, over the last couple of years, and really three years, and you know them well, right.

It's the lunch items, and the Brewhouse Burgers and even this year all the – we're going to investing heavily in terms of value in these franchise nights that I just described as well.

So, I don't want anyone to take away from this that we're solely focused on growing the high end and prime rib and we're trying to turn ourselves into Houston, exclusively. But I'll tell you the success of these quality items that we have on our menu.

So the number two or three just to give you a sense and it's not as big a shift as people think that it is for our concept. I think those that don't know what it is, well, think of us as more pizza and perhaps bar and grill-oriented. We've been selling Atlantic salmon in cherry chipotle.

Salmons are number two or three highest cost of goods item in our entire concept. We're the best I think our second or third our rib, it's not pizza and burgers exclusively and we sell a lot of that as you know.

So this is not intended or do I think of it as the size mix strategic shift, this is something that Jerry started before me, moving us into the polished casual, higher side on the continuum and we have proven and our guests are telling us that they love that side of our menu.

But don't interpret that to be we're walking away from $7.99 tier dinners (01:14:19) and lunch specials that are really attractive and $3 Pizookies and all the other offerings that we have in our menu.

So, I appreciate you asking that question, because that balance it's one of the wonderful things about our concept and who we appeal to that we want to go after that value, that's why we've up-guard discounting and offering great values as well and top of all of that, but we also as I said we index really well on the household income front, and you walk into any of our restaurants, I don't care in what geography, and there are a lot of 1% or plus is that I think don't think twice about a $26.95 prime rib or a mid-teens price prime rib sandwich and all of it.

And there's an opportunity to offer great value to that guest as well, so we really are trying to do both. We're not walking away from the fundamental value proposition in all of this..

Very helpful. Thank you..

That does conclude today's question-and-answer session, and brings to the conclusion today's conference. We thank you for your participation. You may now disconnect..