Greg Trojan - CEO Greg Levin - CFO Rana Schirmer - Vice President-External Reporting Greg Lynds - Chief Development Officer Kevin Mayer - Chief Marketing Officer.

Mike Tamas - Oppenheimer John Glass - Morgan Stanley Will Slabaugh - Stephens Matthew DiFrisco - Guggenheim Securities Jeffrey Bernstein - Barclays Alex Slagle - Jefferies Jeff Farmer - Wells Fargo Nicole Miller - Piper Jaffray David Tarantino - Baird.

Good day, and welcome to the BJ's Restaurants, Incorporated Third Quarter 2017 Earnings Release 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..

Thank you, operator. Good afternoon, everyone, and welcome to BJ's Restaurants fiscal 2017 third quarter investor call. 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 the Q&A. After the market closed today, we released our financial results for the third quarter of fiscal 2017, which ended Tuesday, October 3, 2017.

You can view the full text of our earnings relate on our website at www.bjsrestaurants.com. Our agenda today will start with Rana Schirmer, our Director of SEC Reporting, providing our standard cautionary disclosure with respect to forward-looking statements.

I will then provide an update on our business and current initiatives, and then Greg Levin, our Chief Financial Officer, will provide a recap of the quarter and some commentary regarding the remainder of fiscal 2017. 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 involved 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, October 26, 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..

Thank you, Rana. As we indicated in our press release today, our results for the quarter were significantly impacted by the two devastating hurricanes in Texas and Florida. As most of you are aware, these two states constitute our second and third-largest markets and as such, our sales were disproportionately impacted.

We lost a total of 103 restaurant days due to closures, but also lost additional sales on the days leading up to each of these storms, and in many cases the days following, as we were not able to remain open for our usual operating hours, and the normal lives of many guests and team members were greatly disrupted.

Although the impact to operations from these storms was large, we fortunately did not sustain any major injuries or loss of life among our BJ's team members. Our restaurants sustained numerous instances of wind and water damage, but none were seriously impaired and all of our 34 Texas and 22 Florida restaurants are currently open at full capacity.

My heartfelt thanks goes out to our local communities and first-responders for supporting our teams and their families, and most of all to our incredible team members who pulled together to help each and our communities recover as expeditiously as possible.

As you know, these natural disasters came as we continue to battle challenged industry traffic which has persisted throughout the year and is being driven by the imbalance of capacity and demand growth in our industry, along with the market and ongoing shift in consumer shopping behavior.

For the industry, July and August were the most difficult back-to-back months of the year, certainly not helped by movie attendance, which was down nearly 20% during the peak summer season.

Despite the continuing headwinds in the industry though, we are seeing solid evidence that are sales building initiatives are taking hold and positively impacting our top line momentum.

For the quarter, our comparable restaurant sales outpaced the industry as measured by both Black Box and NAFTrack, using the same calendar days by 120 and 80 basis, respectively. And our traffic outperformed by an even wider margin of 140 and 200 basis points, respectively.

Notably our September sales adjusted for the hurricanes were roughly positive 1% with flat traffic, and our traffic outperformed the industry composites by the widest margin of the quarter during the month. And as our press release notes, our October momentum is even stronger, with 2% growth in both comparable sales and traffic.

Many of the sales initiatives discussed on recent calls are supporting these positive trends. Clearly our growth in off-premise is one of these. Off-premise sales grew approximately 17% for the quarter and are accelerating, driving both incremental sales and guest traffic.

Our focus on simplifying our take-out offerings and the ordering process both online and our app, along with our work to expand our network of third-party delivery partners, is driving this growth.

The implementation of our handheld ordering devices was completed in June, but the full training and front-of-house process reengineering was ongoing, particularly in the early part of Q3. Our food and drink delivery times have improved significantly and continue to drive positive guest feedback in the speed and pace aspect of our business.

Our Daily Brewhouse Specials are also continuing to build momentum for our early and mid-week dinner business, as the value and affordability offerings grow in awareness through positive word of mouth and social media. Our slow roast menu continues to drive healthy check growth as well.

Our Prime Rib Dinner remains one of our most popular items when it's offered Friday through Sunday. Our baby back incident rates are up over 25% and they are now our number two entree item. Our slow-roasted pulled pork sandwich incident rates are up 60% as well, all part of our highly differentiated quality protein platform.

As successful as these items have been, I mentioned on our last call that the marketing of our new slow-roast platform likely hurt top-of-mind awareness with our value-oriented guest.

We countered that with a focus during the summer on our new chicken sandwiches, as well as our Brewhouse Daily Specials, our lunch value items, and our enhanced Happy Hour offerings, including the very successful addition of a $6 Brewhouse Burger for Happy Hour guests, along with our 10 items under $10 offer in select markets.

Much of our media centered on our tradition beer, pizza, and Pizookie offerings. Our messaging around these core categories along with our improved value offerings is making the difference. We extended that strategy into October with our Pizookie Awareness Month, as we offered our iconic dessert at an incredible of $3.

We knew from offering $3 Pizookies as part of our Tuesday Brewhouse Specials that this attractive price point was striking a chord with our guests, and we decided to drive even greater incidence and new guest trial by extending it for the entire month.

We've seen a significant increase in Pizookie sales of greater than 60% and believe it to be part of the positive guest traffic results we've seen as well, in part, due to the impressive earned social media power of our Pizookie product.

So for the remainder of the year, we're focused on the operating fundamentals of great service being driven by our handheld ordering devices along with more exact and efficient labor scheduling.

We will continue to leverage the investments we have made in everyday value through our Brewhouse Specials, Happy Hour, and our 10 under $10 offer to drive traffic.

At the same time, we plan to utilize our slow roast and new large party items now as our check growth, and additionally we'll continue to capitalize on the momentum on our off-premise opportunity with our new digital ordering platform and expanded delivery network.

Although we are still working our specific plans for next year, I want to provide a few perspectives of how we're thinking about our business over the next 4 to 5 quarters. In many ways the formative question from much of the conversation revolves around the case of our new unit growth. As you will recall, we opened 17 restaurants in 2016.

As it became clear that the environment was becoming even more challenging, we decided to dial back our rate of growth, and we expect to finish 2017 with 10 new restaurant openings. The slower pace of expansion has allowed us to focus operationally on many of the new initiatives I've just talked about.

It also helped drive more management tenure in our restaurants, adding more local knowledge and team member familiarity to our sales building efforts. For many of these same reasons we plan to dial back our pace of new openings in 2018, likely in the 4 to 6 unit range.

In additional to the operational advantages, the dynamics of the real estate and construction environment along with the incredibly tight labor market, makes this the prudent choice at this time.

Already historically high construction activity has been accelerated by the recent rebuilding efforts brought about this fall's hurricanes and has made trade availability and cost pressures more of an issue than in quite some time. In addition, the near full employment condition in many markets has made hiring qualified new team members a challenge.

Given these factors, we believe that deploying our critical human resources on executing our sales driving efforts in each of our soon-to-be 197 restaurants at year-end is the right choice at this time. And we'll do so while expanding our returns of capital to shareholders.

Slowing our growth will also help us battle the cost in margin pressures we are facing as a result of escalating labor rates and an uptick in commodity costs.

The cumulative effect of slowing our pace of growth will not only lower pre-opening expenses, but will also reduce the number newer immature restaurants that require more ongoing training and support as they ramp up to their full margin potential, all of which contribute to some margin degradation for us.

To put this into perspective, at the start of the second half of this year we had 17 restaurants in our system that had been opened less than 1 year. At the same time frame next year, the number of immature restaurants will decline to only 6.

Our continuation of a more conservative new restaurant development plan prompted our decision to reorganize our restaurant support center resources, enabling us to drive additional G&A efficiencies.

We remain as committed as ever to our companywide cost savings diligence and continue to drive savings in the areas of sourcing and supply chain, contracted services, as well as leveraging our G&A infrastructure. Our diligence on this front will enable us to price competitively and maintain our above-average margin and free cash flow rates.

Having cited the near-term advantages of slowing our growth given the circumstances and the environment, I cannot reiterate strongly enough that we remain committed to the significant mid and long-term growth for the BJ's brand and concept by achieving the opportunity to more than double our concept to over 400 restaurants.

Our successes in new markets this year in trade areas such at Fort Wayne, Indiana and Youngstown, Ohio reinforces our confidence in the attractiveness of our brand, and our concept and our ability drive organic growth for many years to come. And we intend to pick the pace of expansion when the time is right for our shareholders.

Our confidence in our core of existing restaurants and our balance sheet flexibility to resume more aggressive restaurant expansion when appropriate was a key factor in our initiation of a dividend at this time.

We remain focused on using cash flow to drive shareholder value by virtue of our stock buybacks and now our dividend, which delivers a yield of approximately 1.5% based on a $30 stock price.

Our strong annual free cash flow provides BJ's with liquidity to pay the quarterly cash dividend, continue our share repurchase program and move forward with our measured new restaurant expansion program as well as allocate capital to debt reduction and invest in other sales and productivity initiatives to further enhance long-term shareholder value.

Our focus on executing one shift at a time with a more seasoned team and fewer operational distractions, as well as a solid foundation of sales buildings initiatives that are showing encouraging results, is the right recipe for BJ's to overcome these challenging times.

We will continue to identify ways to make our concept less complex for our dedicated team members to deliver great food and inspiring service we're known for.

We are also deeply committed to ongoing innovation in order to appeal to younger influencers in today's marketplace, those looking for greater convenience, variety and control over their experience.

Our research indicates that the advantage we have as a concept on over-indexing in this more important and now more family-oriented millennial demographic, as well as guests who skew toward higher income. Simply put, we have an exceptional concept that's only getting better.

And honestly, we need to get better and even better to continue to be more open to ongoing evolution to combat the headwinds of today's market realities and continue to take share in this large and fragmented industry. In closing, our most important competitive advantage is our team members who staff our restaurants and our support center.

Based on their first-hand knowledge and experience, they continue to bring us new ideas on how we can better serve our guests an amazing experience at an amazing value. And this in turn has positioned us to generate new value for our shareholders.

Now I'll turn the call over to Greg Levin to give a financial recap of the third quarter and some commentary on the rest of '17..

All right. Thanks, Greg. Revenues for the 2017 third quarter increased approximately 5.7% year-over-year to $247 million, while net income and diluted net income per share were $2.4 million and $0.11, respectively. Our comparable restaurant sales and traffic for the quarter declined 1.7% and 3%, respectively.

As Greg Trojan mentioned, with 34 restaurants in Texas and 22 restaurants in Florida, our revenues, margins and earnings were impacted this quarter by Hurricanes Harvey and Irma. The hurricanes resulted in 103 days of closure and an additional 143 days during which our sales were severely impacted.

We estimate that the closed and limited sales days resulted in lost revenue of $1.7 million, which equates to 60 basis points in comp sales and traffic for the quarter. Said differently, excluding the impact from the hurricanes, our comparable restaurant sales and traffic would have been negative 1.1% and 2.4%, respectively.

We estimate the lost revenue of $1.7 million from the hurricanes impacted our operating income by approximately $1 million or $0.03 per share for the quarter, and impacted restaurant-level margins by about 40 to 50 basis points.

Additionally as we noted in today's press release, we incurred approximately $900,000 in direct cost during the quarter net of expected insurance recoveries from the hurricanes.

These costs primarily relate to property damage, food spoilage and labor as we incurred direct cleanup costs and determined it was important to pay all of our team members throughout the hurricane closure and dislocation.

We also incurred approximately $400,000 in one-time severance and other termination costs related to the organizational changes based on our current expected 2018 new restaurant opening schedule.

In total, these costs amounted to approximately $1.3 million, and excluding these items our earnings in the quarter would have been approximately $3.2 million or $0.15 per share.

If we also add back the income effect from the lost sales when our restaurants were closed or impacted, we estimate that diluted earnings per share would have been approximately $0.18.

August was our most challenging period during the quarter for comparable restaurant sales, as well as our restaurant margins which were impacted by both the negative leverage of the comp sales for the month, but also the additional training and implementation costs related to some of our investments in our sales building initiatives.

However, as we entered September, we saw an uptick in top line sales and finished September with comparable restaurant sales down less than 1% for the month.

But as we reported in our release, September's comparable restaurant sales excluding the closed or impacted days from the Hurricane Irma, would have finished positive at about 1% with flattish traffic. These top line sales trends have remained positive for the first 3 weeks of October, and I will review Q4 sales trends in more detail here shortly.

Looking at margins, our cost of sales was 26.5%, which was up about 90 basis points compared to last year's third quarter. The increase was primarily due to higher commodity costs, menu mix related to the new slow-roasted items, and Daily Brewhouse Specials, and higher discounting from a year ago.

As we mentioned on the last call, our new slow-roasting items generally have higher cost of sales percentages, but generate more gross profit dollars to offset labor and operating and occupancy costs.

For the quarter, we experienced continued cost pressure in seafood and produce, resulting in an increase in our commodity basket of around 2% from last year's third quarter. Labor of 36.9% for the quarter rose 180 basis points from the year-ago period.

The increase was due to higher hourly labor, both in the kitchen and in the dining room and higher management labor as a percentage of sales. The hourly labor increase was due to higher hourly wages which are up about 5% quarter-over-quarter, and our continued investment in sales building initiatives.

Specifically, we invested more labor to our take-out business as we continued to grow take-out and off-premise sales. This resulted in about a 30 basis point increase in training costs quarter-over-quarter.

The rise in management labor as a percentage of sales was primarily due to the sales decline which led to negative operating leverage on our management labor.

Our operating occupancy cost increase 80 basis points to 22.4% from last year's third quarter and this was due to the diminished operating leverage related to the Q3 comparable restaurant sales results. Included in operating occupancy cost is approximately 4.6 million of marketing spend, which equates to about 1.9% of sales.

Excluding marketing, our operating occupancy cost in the third quarter averaged approximately 20,000 per restaurant operating week, which was consistent with last year's operating occupancy cost. General and administrative expenses of 13 million decreased by 20 basis points to 5.3% of sales compared to the same quarter last year.

The third quarter G&A came in lower than anticipated and this was primarily due to lower incentive compensation at the restaurant support center. As a result of the lower than anticipated results for the quarter, we ended up with a 1.6 million tax benefit.

Our capital expenditures through the first nine months of this year were approximately 57 million and we now expect our gross capital expenditure for fiscal 2017 to be in the 75 million range. This CapEx will cover the construction of 10 new restaurants, as well as maintenance CapEx and the investments in our sales building initiative.

In terms of capital allocation, we remain committed to a balanced approach to total shareholder returns as our cash flows and balance sheet strength afford us the financial flexibility to open new BJ's Restaurants, while simultaneously returning capital to shareholders.

As Greg Trojan mentioned, with the further increase in construction costs we are currently seeing in this environment, we want to be prudent to ensure that we are achieving the high capital returns we expect on our new restaurants and that they are capable of delivering.

In the meantime, our solid cash flow has enabled us to pivot at this time as on the near-term basis we will reduce the pace of new openings while initiating a quarterly cash dividend of $0.11 or $0.44 annually, which complements our ongoing share repurchase program.

During the third quarter, we allocated approximately 25.4 million toward the purchase of 800,000 shares of our common stock. Since the authorization of our initial share repurchase program in April of 2014, we have repurchased and retired approximately 9.1 million shares of BJ's stock for approximately 348 million.

And in doing so, we reduced our outstanding share count by approximately 30%. As of the end of the third quarter, we had approximately 52 million available under our current share authorized repurchase program.

With regard to liquidity, we ended the third quarter with approximately 28.7 million of cash, and 194 million of funded debt on our line of credit, which is in effect until November of 2021.

Our 250 million line of credit provides us the flexibility to continue our restaurant expansion program and fund our sales building initiatives while returning capital to shareholders through our share repurchase plan and our new quarterly dividend.

Before we open the call up to questions, let me spend a couple of minutes providing some commentary on the outlook for the remainder of 2017 and some preliminary thoughts on fiscal 2018. All of this commentary is subject to the risks and uncertainties associated with forward-looking statements as discussed in our filings with the SEC.

With respect to sales, as Greg Trojan noted in today's release, we are beginning to see benefits from our sales building initiative. Our slow-roast menu items and our Daily Brewhouse Specials are building a loyal guest following, and our off-premise sales continue to drive positive sales. Today we now have delivery in over 140 of our locations.

As a result, through the first three weeks of October, comparable restaurant sales and guest traffic are both up running positive 2%. Each week of October has been positive, with the first week strongest as we lap the impact from last year's Hurricane Matthew.

Geographically, we are seeing improvement in our sales in the Texas market, and not just from Houston, but from many areas in Texas including Dallas, San Antonio and Austin. As we noted earlier, absent the disruptions, this sales change seems to be a continuation from the trend we began seeing earlier in September.

In regards to restaurant operating weeks for the fourth quarter, I would expect approximately 2,520 weeks. Before I move on to the rest of the P&L, I want to remind everyone that last year's fourth quarter included one extra week, as fiscal 2016 was a 53-week year.

As you may recall, we noted that the extra week last year accounted for approximately $21.1 million in additional sales and about $0.11 in earnings per share.

The extra week benefited operating occupancy cost by about 60 basis points last year, and also allowed us to leverage many of the fixed cost and labor, primarily taxes and benefits and management incentive compensation. The extra week also benefited depreciation and amortization and G&A, as many of those costs are monthly type costs.

As such, please remember when building your models to adjust for the $0.11 in earnings per share from last year's fourth quarter and the impact the extra week had on our margins.

Moving on to the rest of the P&L, based on where sales are currently trending, we expect to continue to see pressure on food and labor costs, specifically expect cost of sales to be in the low-to-mid-26% range due to the investments we have made and the success we are seeing in affordability around our Brewhouse Specials, Happy Hour offerings, and some of our promotional items, like our 10 items under $10 and our slow-roast menu.

While these items have increased cost of sales percentage to some degree, they are also driving guest traffic into our business. In addition to the sales driving initiatives, I continue to expect commodity cost to be up around 1.5% to 2% in this fourth quarter.

With regard to labor, I continue to expect to see pressure from hourly wage increases and training-related to some of our sales building initiatives. Therefore, based on sales trends today, I would expect labor to be around the 36% range for the fourth quarter.

We are targeting operating occupancy cost in the upper 21% range to 22%, which includes $6.2 million in marketing spend. Please remember that both labor and operating occupancy cost as a percent of sales is highly correlated to weekly sales averages and comparable restaurant sales growth.

Our G&A expenses for the fourth quarter should be in the mid-to-upper $13 million range, as we continue to expect lower incentive compensation. Pre-opening costs should be approximately $900,000 for the fourth quarter based on two planned new restaurant openings.

I'm expecting our tax rate in the fourth quarter to be in the 18% range and diluted shares outstanding should be in the low 21 million range. Looking ahead to 2018, we are currently finalizing our financial plan which will be presented to our Board for approval in December.

So while we do not have an approved plan to review today, let me provide you with some of management's preliminary expectations for 2018. As we mentioned, we are now targeting four to six new restaurant openings. For modeling purposes, I would use five restaurants.

We currently anticipate opening 1 new restaurant in the first quarter and two to three new restaurants in the second quarter, with the remainder in the back half of next year.

Moving on to some other metrics for 2018, while we have not yet finalized menu pricing, based on our current thinking, I would expect it to be similar to this year which is for increases in the mid-2% range or so to offset inflationary pressure.

Please note that this is as of today and is based on anticipated commodity pressures, labor and other inflationary factors. Since we tend to roll out new menus in the winter, spring and fall, menu pricing could change at these times.

Also our forecast does not take into consideration any discounting, mix shifts or promotional activity which would offset some of our menu pricing or be determined based on the overall microenvironment.

With regard to our very preliminary commodity basket for 2018, we currently anticipate the cost of our aggregate basket to increase around 1% or so next year.

We expect to lock in most of our commodities for 2018 over the next couple months and will therefore have a better idea of our commodity pressure when we report our Q4 results in February of 2018. With regard to labor, we'll absorb another California minimum wage increase as well as additional minimum wage pressures in other states.

In addition to the anticipated minimum wage increases, we continue to see an increase in wage pressure in the restaurant business for hourly positions and managers. As such, I expect to see additional pressures on hourly and management wages going into 2018.

Despite these pressures, we still believe there is some potential for additional labor savings and improved productivity as we continue to drive efficiencies from our server handheld devices and our new labor productivity scheduler, which should be entirely implemented beginning in Q1 of 2018.

As always, the best way to leverage labor is to drive top line sales, and our server handheld devices and our labor productivity scheduler will always be balanced with our goals of ensuring that every BJ's delivers unparalleled guest hospitality and service. As we have said many times at BJ's, we are sales builders first and foremost.

And if we are going to err, we are going to err on the side of building sales so that we can deliver more profit dollars to the bottom line and leverage the fixed nature of many costs in our business.

With regard to operating and occupancy costs for next year, our goal is to hold the line on the saving we've already achieved in our model and use additional savings to offset some of the normal inflationary pressures we face each year.

While we have not finalized our marketing plan for next year, I expect marketing to be similar to the last several years, which is around 2% of sales. On the G&A line for 2018, our goal is to continue gain leverage as grow.

As we have said before, a portion of our G&A growth is growth related, whether that is opening teams, recruiting costs, travel, or managers in training. With the slowdown to 4 to 6 new restaurants next year, I anticipate we continue gaining G&A leverage in fiscal 2018.

Our income tax rate for 2018 should be in the 27% range, and we expect that diluted shares outstanding for 2018 will likely be in the 21 million range. Also we are assuming debt levels to be pretty consistent with this year's levels and therefore anticipate interest expense to be in the 5 million range for next year.

Our CapEx plan for 2018 has not yet been finalized and approved by our Board of Directors. But at this time, I would anticipate our gross capital expenditures for 2018 to be approximately $50 million to $60 million, assuming the development of 5 new restaurants, maintenance capital expenditures, and other sales and growth initiatives.

And this is before any tenant improvement allowance or sale leaseback proceeds that we may receive. We anticipate funding our 2018 capital expenditure plan from our cash in our balance sheet, cash flow from operations, our line of credit, landlord allowances and sale lease-back proceeds.

In conclusion, today BJ's is a solid cash flow generator with near-term balanced growth strategies and longer-term opportunities to double our base of restaurants.

We are executing well on our sales initiatives that are gaining transaction and can lead to better comps, as evidenced by our improving comparable restaurant sales in September and now October.

With the reduced pace of unit growth and using a midpoint for 2018 CapEx of $55 million, BJ's 2018 free cash flow should again be very significant, affording us the flexibility to expand our return of capital to shareholders through an accelerated rate of share repurchases at attractive valuation and a payment of quarterly dividend.

In summary, despite macro factors, BJ's is executing very well on all functions, including our operations, capital structure and guest service.

We remain confident that our ongoing initiatives to drive sales and growth across our platform, combined with prudent management of our capital structure and capital returns are a proven formula for sustained long-term growth of shareholder value, and we look forward to the balance of this year and next year, 2018.

With that, this concludes our formal remarks. Operator, please open the line up for questions..

Thank you. [Operator Instructions] We'll go first to Brian Bittner with Oppenheimer..

This is Mike Tamas on for Brian. Just a quick clarification and then just a couple of questions. One is what was the pre-opening for the fourth quarter? I apologize that I missed that, Greg..

It should be around $900,000. We have two restaurants, about $450,000 or so per restaurant..

And then just on the comps, you talked about September kind of getting better ex-hurricane, then October obviously plus 2%.

Can you talk about what that looks like versus the industry? Is the industry saying sort of a similar pickup or are you guys sort of seeing your outperformance gap widen versus the industry?.

I mentioned in my remarks, Mike that September was-- we beat for the quarter pretty handily on sales and traffic versus the industry. And September was the best month of the quarter. So that's what we've seen there. In October, I think we had some ebbs and flows on who's comping Florida hurricane more or less. So it's a little more difficult.

But it's clear that the general industry is picking up some momentum in October, which we view as a good thing..

And then just on the slowing unit growth into '18, I think you mentioned in the release and kind of in your comments, talking about potential for margin leverage.

Was that specific to '18 you think you can kind of leverage margins as you slow unit growth, or is that sort of a general comment beyond '18 as well?.

Well, it depends on what our pace of growth is as we move forward beyond '18, if I'm understanding your question.

It's helping, as we lap our growth in the second half of this year and certainly into next year, as I was saying, pre-opening and via tenet of expense structure of opening restaurants, but also the fewer sort of less mature restaurants in the system as a result of the last couple of years of development at a lower rate are going to help us.

But look, we're also when we think the time is right we, as we said in our remarks, are real confident around and even given the results of our new restaurant openings of this year and last year that we look forward to opening these 400 to 450 restaurants. So beyond '18 is more dependent on our pace of growth, obviously in the future..

The other comment on there you can't look at the margin outside of comparable restaurant sales. So ultimately when you slow down growth you have less immature restaurants, as Greg Trojan mentioned. New restaurants are going to open up at a lower margin in that regard. So you don't have that tail from new restaurant.

But comparable restaurant sales generally are going to be driven by your comp restaurant sales overall. That's how you leverage your existing asset base. So when you think about that, not only from a modeling or from a business standpoint, yes, slowing growth is going to help.

But also you need that comp sales on the other side of it to leverage some of the normal inflationary pressures of the business..

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

Greg, first can you just talk about mix in this? Just confirm what mix was in this quarter and maybe where you see mix in the fourth quarter. It would seem like it's down or maybe it's getting worse, being more negative. And I understand that's one of the reasons why traffic has been stronger.

So can you maybe just specifically talk what it is, and is this the right kind of balance you're going to need to strike for the near term to drive traffic?.

Yes, there's a couple things there, John, in the mix. One is -- and you've probably heard other companies talk about it and we talk about it, I think, on a total company perspective. But as we tend to grow the off-premise business, the off-premise business tends to have a lower average check. You don't have the incidents around alcohol or beverage.

So when you start to think about that side of it, you're getting traffic out of it, which is helping us drive positive traffic in our business overall. But you end up getting that lower average check, so it tends to drop off the mix a little bit from that perspective.

So when we start to think about our average check year-over-year growth, while we have what I would say, a mid-2% pricing in there, our dine-in check is, at least for the third quarter, it was close to the 2% range.

And then as we reported, if you think about the traffic being down 3, and we end up with a 1.7 negative comp, in that regard you end up with kind of a 1.3 total average check. That other part is being driven really by the third-party delivery company. So that's kind of the numbers how it works. I think we struck a reasonable balance right now.

And I'll let Greg Trojan talk about this in a minute, between having that barbell approach where our slow roast is giving us some nice average check growth, especially around some of the weekends and special times.

And then we've got some good everyday affordability in the middle of the week, which is impacting, I would say, a little bit of the average check in the dine-in. But it's right now a pretty good balance. Because we're seeing that traffic growth in the dine-in as well as in the take-out side, at least going into Q4.

Greg?.

Yes, I think you hit on most of it. John, the only thing I'd add is there's quite a few gives and takes when you look at the check growth. Greg mentioned most of them.

I'd say what we're seeing -- and I'd say we think is a good thing, is as Brewhouse Specials are continuing to pick up some momentum, we're actually seeing a decrease in the rate of our discounting acceleration.

So discounting is still greater than last year, but at pretty significantly lower rate of increase, as we saw even in the first half of the year.

So that's something, one of the reasons if you remember us talking about Brewhouse Specials at the inception is, we think investing in everyday value in areas of the menu that folks can become familiar with. Happy Hour is another example of that where we've made some changes to our Happy Hour to make it even more of a greater value.

So we're seeing an offset from a check perspective, at least on an acceleration perspective on discounting. You ought to expect off-premise, as that continues to grow, obviously to be more of a negative.

But I think particularly in this coming quarter in the holiday and celebration season, we're going to be able to leverage the upside of slow roast, and also large party business where we've invested in new menu items and ordering capability, both in the restaurant and off-premise will help grow some checks.

So lots of pluses and minuses there, but by design we're overall trying to create a balance where we're driving some check, but we're also driving traffic through value..

And just so I make sure I understand, was mix in the dine-in, Greg Levin, is that what you were talking about as the 1.3, is it the positive 1.3 or negative?.

The 1.3 is positive overall. Our actually average check in the dine-in was somewhere around 2% over the last, or something like that..

Got it, and then how much lower than is the off-premise or delivery? I'm not sure if you were distinguishing between the two.

But how much lower is the off-premise check?.

Yes, John, we don't want to give all the specifics in regard to that. But generally speaking, we average about a 35 average ticket, which is about 2.-something guests. And I would tend to say that it's lower than that..

Okay, and just as it relates the lower unit growth, can you talk about the reasons again? I know operational -- focusing on operations is important. You also mentioned real estate and some other pieces around this.

How much of this has been driven by and maybe you can just recap where the unit economics are? Or how much of it is just you can't find real estate or construction, so it's like an availability -- you're ready to do it, but the availability of either real estate or construction is the limiting factor?.

It's not returns or real estate oriented.

It's really reasons number one, two and three in my mind, John, is our human resource deploying our people to keep more of them in, particularly obviously our managers in the restaurants longer, eliminating churn and turnover in that respect and fighting the battle of executing better in the restaurants that we have in this kind of environment.

So I think we look at the go-forward opportunity as one that's still going to be there. This isn't a land grab race in our category, probably obviously. And look, we'd rather be growing faster than not. Because that means the environment would be healthier. But we think it's the right thing to do at this point in time.

But it is not a lack of real estate availability. And frankly, we're having one of our better portfolio new restaurant sales rates this year. So we're happy with our new restaurants. I do think the other thing that we mentioned is opening restaurants and operating well depends on people as well.

And attracting and finding great team members in this environment is as hard as it's been in a while as well. So I think all of those together, but primarily it's pointing our existing resources at driving traffic and sales in our existing restaurants..

We'll go next to Will Slabaugh with Stephens..

I had another question on off-premise. I was curious if you'd share what the growth rate looks like now and then what percentage of sales off-premise is for BJ's at this point versus sort of where you think a reasonable goal is over time..

I know that I mentioned in my remarks, but there's a lot there. So I'll reiterate it. We saw in the quarter that a 17% increase in off-premise and I made the remark that that's accelerating through the quarter and into early Q4. So hopefully that answers that part of the question.

And we're still learning a lot there, but we're very pleased with the balance of what we're seeing both ordered from our platforms and through third parties..

And Will, it's still a low number overall. We talked about it being about 5.5%. It's barely hitting 6% right now. So I think there's still a lot of opportunity for growth in that area in that regard. But Yes, I mean we went 5.5% to let's call it 6%.

It's a nice increase in our business, but it's still not where we think it can be and frankly should be overtime..

Got you, and could you give us the update on delivery as well? I know you guys have tested that in multiple markets and multiple stores. So I'm curious sort of what you're initial reactions have been and as you've seen it evolve across markets that you've tested for a little bit longer.

Are there any new revelations that you've had?.

I would tell you, and I think I've heard this on other calls as well, and I'm sure you've talked to other executives out there. Even though we're using third-party delivery companies, it's more challenging than people think. You have to staff for it, which we talked about in that regard.

You're always concerned about your products going to somebody that's not a BJ's team member and doesn't represent your brand. And you tend to find good service providers in certain markets, and bad service providers in other markets, even though they might be under one umbrella as far as a third-party company can be from that perspective.

The other side of it, as you know, over time you do pay those commission costs. While we were able to negotiate what we think is a reasonable rate, and I'm sure everybody else has got a reasonable rate from that standpoint, it is a cost of doing your business and consumers are accepting it.

So we need to plan that business and I think it's showing some great growth. But it's always much more difficult than people think. I think from the outside, people believe you could just all of a sudden hire third-party delivery company and it's pure incremental and you don't have to do anything in restaurants. And you do. You have to staff for it.

So there's labor costs there. You have to bring in packaging. You want to make sure your packaging is sealed and that they're not opening it up. We monitor our delivery complaints and talk with our delivery service providers every day, and frankly we're got good ones out there. But like anything, it doesn't executed 100% of the time at 100% level..

Well, I guess-- the other question that just occurs to me related to that is I wouldn't say this is surprising. But we are seeing a fair amount of consistency geographically. One might think that given the density of California that most of these gains would be coming from our restaurants in California.

And that really hasn't been the case, and I think that's a good thing in terms of opportunity we're seeing. We're seeing it spread pretty evenly in terms of incrementality from a regional perspective. Obviously it varies restaurant to restaurant..

We'll go next to Matthew DiFrisco with Guggenheim Securities..

Greg Levin, you mentioned a little bit-- I always appreciate your detail on the line item for the income statement. So I don't want to punish you for it. But I guess could you give us a little bit more detail as far as the 36% relative labor in the fourth quarter.

I guess it just seems a little high considering the context of the current comp trends of around 2% or better.

And given that you had 36.9% with some hurricane and weather headwinds and some training costs, could you sort of articulate of that 36%, what might be training cost now in the fourth quarter that you might be incurring, and how many of those could we expect maybe to dial back if we start thinking going forward into 2018 in points of maybe leverage on a year-over-year basis on labor?.

That's a great detailed question. I don't know if I have all those specifics (inaudible). But I would tend to tell you that I think in my analysis and looking at how we think about Q4, I was kind of surprised, frankly, at some of the challenges on hourly labor wage rates in the fourth quarter.

Prior to that we were kind of more in the 4% range, and it spiked up closer to 5%. August was a big dip for us from that standpoint. So when I look at wage rates year-over-year, and I kind of try to put those in there and kind of model it based on where the 2% comp sales are, frankly it's kind of what plays out, to be perfectly honest.

I think there's the ability to get some leverage there, because still in our numbers are some efficiencies around the handheld. And frankly there's still inefficiencies around the new labor scheduler that's out there, as we continue to work some of those changes there. So our goal over time is get those in place.

The other thing which we talked about earlier in a prior call is as you start to build your third-partly delivery or delivery and off-premise, you have to staff for it. You have to have somebody packaging in that regard and getting that stuff out there. It's not like that it just magically happens and you don't have add labor to it.

I mean you think about great quick service restaurant companies, they tend to have somebody taking money, and then they have somebody giving you the food. So somebody thought about putting two people in take-out to move people through there faster. And we want to staff to make sure we are building scale ultimately.

And I think all of our metrics are showing that. So we're going to err on the side of building sales. If that means it's a little bit higher labor short term, we'll take that, and then eventually we'll continue to leverage that going into next year..

Okay, but is there anything out there as far as the training that you did similar to the handhelds that I guess was somewhat at first a little bit -- not only expensive, but also maybe curbing a little bit of the same-store sales potential as well in the previous quarter?.

Nothing in the fourth quarter, no..

We'll go next to Jeffrey Bernstein with Barclays..

Two questions, just one as I think about kind of your short-to-medium-term new growth algorithm. I know you don't provide specific EPS color, but if we assume flattish to low single-digit type comps and I guess you're settling in at maybe 2% plus unit growth.

What type of margin expansion opportunity do you think you can achieve if that was the run rate you were going to be using going forward from a revenue standpoint? And what would that translate to kind of short-to-medium-term type earnings growth? And how do you see that algorithm playing out if this was kind of the new norm for the next few years?.

Jeff, I don't have all those specifics. I think we still continue to work through our business and get ourselves back to where we've been historically in our business, and that's working our margins back to the 19% to 20% range. That's our target that we work on all the time.

We know at certain times it makes more sense to drive traffic into our business. Once we've got traffic in there and guests get to see how much they like BJ's, it gives us some ability to work other areas and leverage other areas, and we'll continue to go around that balanced approach.

The other side of it, to your question, is how do you get that 2% comp? If that 2% is coming in all in traffic, well, that's going to be more difficult in regards to leveraging margins from that standpoint if you think about margins on a pure percentage standpoint versus thinking about dollar profit as well as margins.

If the 2% is coming in from pricing, it's going to get leveraged a little bit differently. So there's all those challenges out there.

Our goal as we put together our plans and we start thinking about our business, is how do we get more guests into our restaurants by driving sales and sales initiatives? And then ultimately, what do we do in regards to driving our margins, and frankly driving our profit dollars down to the bottom line? We'd rather be driving more dollars down to the bottom line sometimes versus getting too caught up on actually what our margin percentage needs to be..

And then just as you think about the broader casual dining category, it seems pretty encouraging that you're seeing trends perhaps improve for the entire category over the past number of weeks. But you seem to be having success more so from a value-oriented focus.

So I'm just wondering how you see the environment, whether you're seeing it get more competitive where everyone's pursuing a similar strategy and that's what's driving the uptick, or are you seeing any change in kind of the competitive landscape in the past few months?.

Jeff, I think obviously it's hard to say. I think value has been obviously an important component of traffic driving for us and our competitors for a good number of years here in this era of economic uncertainty, and it's going to continue to be. So I don't think there's anything super new there.

I do think it's good news that -- listen, we like beating the industry as we did in Q3. But frankly it's even more encouraging that we're seeing it on a broader basis early on in the last early few weeks of Q4 from an industry perspective.

And one thing that we looked at over the last couple of months that may be encouraging is one of the bigger predictors of restaurant sales is what personal disposable income is looking like.

And we're actually in one of those times where that disposable income growth was not resulting in the early part of this year, as you know, in category improvement. And there was somewhat of an unusual lag.

So the optimists here around the table, you'd hope that we're seeing some of that take effect and actually filter its way down into our industry and our sector in this quarter and beyond. So that would be -- none of us knows that for sure, obviously. But that would be a good thing..

We'll go next to Alex Slagle with Jefferies..

I was wondering if you guys could provide some sort of insight on what the sales and traffic numbers that we're lapping in September and October look like, just to get an idea of what the underlying trend is..

Alex, we don't give necessarily all the specifics. We did say though that September of last year was one of our toughest quarters in the sense that we had our softest comparable sales a year ago in September. October started to get better, frankly, from that standpoint.

But when I look at what I would probably tell you is as I think about Q4 of last year, October was probably one of our easier comparisons. And believe me, nothing was easy last year. Because we finished Q4 down about 2% or so. But October was an easier comparison compared to November and December of a year ago..

But not by a lot. I would say it's -- we're looking at similar comps, and frankly October is a more difficult comp than September was. So there's--.

September, it was our softest a the year ago..

Right. I'd say October was therefore a more difficult comp year-over-year for us than September..

Okay, and then a follow-up on a previous question; I'm not sure how much you can provide, but maybe some sort of framework for how to quantify the potential benefit you might see on restaurant level margins in '18 just related to the reduced development on an apples-to-apples basis, I guess, if you were assuming some more comps..

Alex, I'm sure not sure that we have a specific number in that regard. As we go through our planning, maybe we have a better number from that perspective, as we'll plan all of our restaurants from a bottom-up and you don't have many new restaurants coming on board.

But to be perfectly honest, whenever we get asked that question and try and do that question, a lot of it comes down to where the comp sales is. And I know you kind of threw out, well, based on the 2% number. And I would tend to tell you that we haven't gone through and put together our 2018 plan yet. So I just I don't know what that number is..

That's fine, thank you. And then the CapEx at $50 million to $60 million, is that just growth CapEx before maintenance? I missed that..

No. That has maintenance CapEx in there. We've always said that maintenance CapEx is somewhere around $75,000 to $80,000 a restaurant. So if you just took 200 restaurants times $80,000, you're going to get $16 million in that kind of $50 million to $60 million there. You've got 5 restaurants at $4 million, so that's going to be $20 million.

That gets you kind of to $36 million. And then right now it's a great question. I'd just kind of thought of $20 million of growth investments. We haven't put together our plan for our Board. But we generally go through a plan there. We try to analyze an ROI for those growth investments and determine if they make sense.

So it's a pretty broad number right now. But generally speaking as we go through our plan, that number probably more than likely would come down. This year was a little bit heavier with handhelds and slow roast. But the $50 million to $60 million should be a gross number of everything for next year..

We'll go next to Jeff Farmer with Wells Fargo..

I know it's getting late, so I'll try to be quick with these. So a lot of talk about cost savings, Greg, but can you just provide a little bit more color on what you think the opportunity is on both the G&A line and then I think you mentioned the supply chain.

What are the low-hanging opportunities there?.

Well, on G&A, Jeff, we'll probably give you a better update in February. And I know that makes it difficult to some degree for you guys from a modeling perspective. But as you think about some of the things that we talked about in the past, and that is generally our G&A is made up of kind of three buckets.

One is field operations, which is somewhere in the neighborhood of about 30% of our G&A. You got 30% of it is myself, corporate staff, and you got 40% that's growth related. And usually your growth related at 40% is going to grow at the same level of top line sales or the same level as unit growth, so to speak.

So that's the area that we've got opportunity and that we'll go after. The rest is going to be growing at a significantly lower rate that's probably in the 3% to 5% range in that regard.

In regards to the restaurant [setting], there's things that we can continue to do that are around freight charges, as we continue to become more national and to other areas.

There's other things that we'll continue to look at in regards to operating occupancy, and we kind of go through and put those together each year as part of our project year-end cost savings initiatives that we have kind of lined up. But I'm not sure, again, that we specific dollars quite yet to put together.

But there is actually some decent opportunities out there..

So Jeff, as we become more East Coast oriented, and much of our growth over the last several years being focused away from obviously California and even Texas, we look at our supply chain distribution and freight infrastructure, and vendor locations and shipping whatever from the West Coast to the East Coast and the Middle Atlantic.

That can give you an idea of some of that supply chain efficiency that we're looking to continue to rebalance..

All right, that's helpful and then just last question, so I think it was last fall that you introduced the Brewhouse Specials menu or sometime late in '16 I think.

But I'm just curious what percent of sales mix that Specials menu represents today and does it continue to grow quarter-over-quarter for you guys?.

A, it is growing quarter-over-quarter. Because it's integrated into our foundational menu, we don't really look at it. I mean we do look at item incidence and growth there. But I don't have an overall incidence number for you there. We don't really think about it that way, honestly.

We're really looking at traffic and check dynamics by day part in those days, which are encouraging. But I don't know, Greg, if you have an idea there..

No. The only other thing I was going to say, Jeff, is the first part of it started last year, which was really the pizza specials on Monday and our baby back ribs on Thursday.

This year in March, I want it was say it was towards the latter half of Q1 is when we rolled out some specials around the Tuesday, which is our $3 Pizookie, which frankly incident rates are really high for our Pizookie, and traffic on that Tuesday seems to be generating a lot of business and a lot of buzz for us.

And we're seeing the same thing actually Monday with our pizza special. We added the burgers on Wednesday, and we added a bunch of drink specials as well earlier this week. So some of it's some of it's a year old. Other parts of it really start to come in the Q3 time frame.

And frankly even though we rolled it in Q3, we kind of pivoted pretty quickly, as you remember, to the slow roast. So I think now we've been able to talk about that more, get that out there with the everyday low pricing, we are seeing a nice increase in those incidents.

But to Greg Trojan's point, I can't tell you exactly what the incident rate growth is or where they are as a percent of sales..

We'll go next to Nicole Miller with Piper Jaffray..

Just two quick questions, you talked much earlier in the conference call about the slow roast platform maybe not resonating as much as with the value customer.

I was wondering if you could talk about how you define the value guest or how many of them there are, or how you look at them from a total sales perspective, and how does that compare to the past?.

Compare to the what, Nicole, sorry?.

To the past, how does that compare to one year ago, five years ago, whatever time period you would use?.

So let me just clarify something, and then I'll let Kevin answer your question. What I was saying was not that slow roast wasn't appealing to our value guests because I'm not sure we know that.

But I can tell you that the slow roast, the performance of slow roast in those category items does as well in more income demographically challenged trade areas as it does in none.

So what I was saying, Nicole, and I'm just clarifying here, is because our messaging was dominated by these new products, we weren't out there singing the praises of Brewhouse Specials on Monday, Tuesday, and Wednesday night as much.

So in terms of generating awareness and trial and frequency from those guests that are more looking for a value message that's where that trade-off was. So it's an important differentiation and thank you for asking the question that way.

Because I do think those slow roast items are doing well across the board in our restaurants' trade area and geographies. So I don't think that part is the case.

But I do think the latter is the case where as in Q3, certainly part of our uptick in momentum around that, you could describe as more of that marginal guest around where I'm going to go on a Friday night, talking louder about value, Brewhouse Specials and our core products have been part of the success there.

Any by the way, our Brewhouse -- our slow roast incidence is still doing well, not totally on its own, but without being the focus..

Nicole, it's Greg Levin. I think when we talk about that, the fact that I think a lot of people are seeing us in casual dining.

The challenge a lot of times has been our lunch business, in the middle of week and a lot of these slow roast items that we rolled, whether it's the prime rib or the pork chop, those are dinner items and they're also weekend type items.

So we weren't having a messaging out there in regards to, hey, come in and checkout BJ's Brewhouse burgers at x price. It was more about we're telling a message on something that's a little bit more expensive. And I think that's the disconnect versus a value guest saying, I don't want to BJ's..

Yes, that's a good point. This is Kevin. I think just to add on to that, I mean as Greg Levin just put it, it's probably a little bit day part driven in terms of that type of guest looking for value and convenience and speed, lunch being one of those day parts.

But when you look across our guest landscape, we've definitely seen -- call it an increase of younger, more affluent, more family type of guests over the last couple years. And looking at across the landscape, I think we're probably the second-youngest, which is mostly in millennial group, a little bit of a Gen-Xer.

So I think we're happy with that type of guest opportunity. And by the way on the weekends, they come in more for an experience. So they do bring their families in. They spend time at the restaurant. Those folks, while sure, they're always looking for value, they're also very much in the atmosphere and experience that BJ's provides..

That's extremely helpful, and just one last question for me; you've added some culinary innovation, obviously. They're been talked about today.

Could you just give us the top platforms by sales mix? And I don't know how you might define it, but slow roast, pizza, burgers, etcetera, etcetera?.

Wow, I don't how to answer that. I would probably say innovation this year has been probably been around slow roast, which has probably been a little bit more in the entree type category with our--.

Well, I didn't mean around innovation, Greg. I'm so sorry. I just meant total, like just your total sales, what are the things you sell the most of? Like, because you've had innovation, what are the-- Yes, sorry about that. I didn't ask that clearly..

It hasn't changed significantly, Nicole. You'd see the same-- when you define it in broader categories. I think we've seen, as we've talked about, one of the greatest increases in the enlightened category which continues to grow and be above 30 from an incidence perspective, but the top main items are still going to be sandwiches and burgers.

Pizza is still a significant part of our business, obviously. So the shifts have not been dramatic. I'd say the growth has been in entrees as a result of slow roast and our continued development and success of the center of the plate area of salmon, steaks, et cetera. Prime rib has been part of that.

But aside from that, there's the tried and true category, we haven't changed the nature of our concept. And it's been relatively stable, aside from those changes..

We have time for one more question. We will go to David Tarantino with Baird..

Just a couple clarification questions from me, first the sales improvement you've seen recently in September and October; has that been broad-based or has that been more concentrated in Texas? Could you provide more perspective around that?.

Thanks for asking. It has been broad-based. I think Texas, because it's been more challenged over the last couple of years, we're I guess a little more excited about. But when you look at the delta performance and what's driving the improvement, obviously we can't drive meaningful momentum changes without California and Texas being along for the ride.

But we're seeing it across our system geographically..

Great, that's helpful, and then Greg Levin, I don't know if there's any way to do this.

But I know several people have asked and it would be helpful if you could provide some sort of matrix around what it would take to hold restaurant margins flat or improve it next year from a comps perspective or from a traffic perspective or however you want to talk about it..

Yes. It's a great question and I think as we go into our planning time right now, we'll continue to work through that once we've got all the state minimum wages lined in there from that standpoint. I think you're seeing a lot of people in the industry right now being challenged a little in labor.

I think we're starting to finally see a little bit of a slowdown in union growth and other things that might be helping the labor number. But I tend to think that's probably going to be the biggest challenge for the industry and for us in that regard. I don't exactly know where it is.

I think if you went through our P&L and broke it out by cost per week, and I know we talk about that; you'll see the spike in labor. And the majority of it is the hourly wage rates from that standpoint. On our hours we continue to do a good job managing it the right way from that standpoint on sales building.

From that standpoint it's about the service and hospitality. And I think ultimately, David, as we come through and put together our final plans, hopefully I'll have a better number to share with the Street as we think about it when our Q4 plans get put together.

But I think we're happy with we're seeing that we're driving comp sales right now, and ultimately by driving the comp sales and getting more traffic into our restaurants, I think that gives us a better position to be in to leverage the labor and leverage the fixed nature of our P&L versus trying to save your way to success entirely..

Yes, makes sense, I guess just to follow up on that, I mean given all the puts and takes, you've got the inflation you mentioned. But you also have some offsets with the slower unit growth and productivity savings.

So do you think next year is going to be harder than usual to leverage restaurant margins or easier than usual and maybe just directionally if you could help with that?.

Yes, I think a couple things here. You can probably gear up from my commentary a little bit on Q4. We're very happy with the top line sales and I think that's the most important aspect of our business. But it will be a little challenging in Q4 just with some of those pressures we're seeing there.

I think as we get into next year, I think there's a good opportunity. Because to a large degree a certain amount of the cost of sales will be in there. And I think we've got the ability to get some better leverage in there. And I think a lot of the training and initiative costs are in the labor side of things.

And therefore if we can generate a reasonable comp sales from that perspective, I think we can get ourselves in a position to begin to flatten that and begin to leverage that..

That's it for today's call. We thank you for your participation. You may now disconnect..