2017 ANNUAL REPORT
TIME COUNTS AT
A BREWHOUSE
SIGNATURE BEERS ALWAYS ON TAP:
BREWHOUSE BLONDE®
LIGHTSWITCH® LAGER
HARVEST HEFEWEIZEN®
HOPSTORM® IPA
PIRANHA® PALE ALE
BJ’S OASIS® AMBER
2017 SEASONAL BEERS:
NUTTY BREWNETTE®
JEREMIAH RED®
BJ’S P.M. PORTER®
TATONKA® STOUT
BERRY BURST CIDER®
COMMITTED® DOUBLE IPA
MIDSUMMER’S ALE
BJ’S GOLIATH® IMPERIAL RED IPA
BJ’S OKTOBERFEST
POOK’S® PILSNER
MAD CRAZY MANGO® IPA
NIT WIT®
BJ’S PUMPKIN ALE
BJ’S GRAND CRU
16,500,000
PINTS OF BEER SOLD
PIZZAS SOLD
7,800,000
AS OF 2017 YEAR END:
RESTAURANTS
197
26
STATES
SELECTED FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share amounts)
2017
2016
2015
2014
2013
Revenues
Net Income (1)
Net Income Per Share:
Basic
Diluted (1)
Total Assets
$ 1,031,782
$ 993,052
$ 919,597
$ 845,569
$ 775,125
$
44,780
$ 45,557
$ 45,325
$ 27,397
$ 21,022
$
$
2.10
2.06
$
$
1.91
1.88
$
$
1.76
1.73
$
$
0.99
0.97
$
$
0.75
0.73
$ 684,958
$ 691,312
$ 681,665
$ 647,083
$ 610,879
Shareholders’ Equity
$ 258,729
$ 274,897
$ 316,483
$ 348,689
$ 401,436
# of Restaurants at Year End
197
187
171
156
146
Comparable Restaurant Sales Increase (Decrease)
(0.7)%
(1.3)%
1.7%
(0.8)%
(1.1)%
(1) Fiscal 2017 net income and net income per share include a tax benefit of $15.7 million, or $0.72 diluted net income per share, from the revaluation of
our net deferred tax liabilities as a result of the enactment of the 2017 Tax Cuts and Jobs Act. Excluding this benefit, net income and diluted net
income per share were $29.1 million and $1.34, respectively.
Certain statements in this Annual Report and all other statements that are not purely historical constitute “forward-looking” statements for purposes of
the Securities Act of 1933 and the Securities and Exchange Act of 1934, as amended, and are intended to be covered by the safe harbors created
thereby. Such statements include, but are not limited to, those regarding expected comparable restaurant sales and margin growth in future periods,
total potential domestic capacity, the success of various sales-building and productivity initiatives, future guest traffic trends and the number and
timing of new restaurants expected to be opened in future periods. These “forward-looking” statements involve known and unknown risks, uncertainties
and other factors which may cause actual results to be materially different from those projected or anticipated. Factors that might cause such
differences are discussed in the Company’s filings with the Securities and Exchange Commission, including its recent reports on Forms 10-K, 10-Q and
8-K. The “forward-looking” statements contained in this Annual Report are based on current assumptions and expectations and BJ’s Restaurants, Inc.
undertakes no obligation to update or alter its “forward-looking” statements whether as a result of new information, future events or otherwise.
320,000 LBS
OF PERUVIAN QUINOA USED
TO OUR SHAREHOLDERS:
TO OUR
In our annual letters to our shareholders, we have
In our annual letters to our shareholders, we have
consistently articulated our commitment to make BJ’s the
consistently articulated our commitment to make BJ’s the
best casual dining concept ever by focusing on food
best casual dining concept ever by focusing on food
quality, value, service and great guest experiences. To
quality, value, service and great guest experiences. To
accomplish this goal, we take a proactive approach towards
accomplish this goal, we take a proactive approach towards
implementing sales driving initiatives and improving our
implementing sales driving initiatives and improving our
already Gold Standard level of service and hospitality. Last
already Gold Standard level of service and hospitality. Last
year at this time, we were in the early stages of executing
year at this time, we were in the early stages of executing
our sales building and hospitality initiatives to overcome
our sales building and hospitality initiatives to overcome
the many challenges stemming from the macro- and
the many challenges stemming from the macro- and
industry-specific operating environments.
industry-specific operating environments.
We are pleased to report that the execution of these
We are pleased to report that the execution of these
initiatives helped us finish fiscal 2017 on a positive growth
initiatives helped us finish fiscal 2017 on a positive growth
trajectory. Last year, our 21,000-plus team members
trajectory. Last year, our 21,000-plus team members
learned and mastered new cooking methods, became
learned and mastered new cooking methods, became
proficient with taking orders on hand-held devices, and
proficient with taking orders on hand-held devices, and
re-organized their processes to bring efficiencies to our
re-organized their processes to bring efficiencies to our
growing off-premise revenue stream. These initiatives
growing off-premise revenue stream. These initiatives
brought our guests new menu items, additional value
brought our guests new menu items, additional value
offerings and a higher-quality dining experience, resulting in
offerings and a higher-quality dining experience, resulting in
a return to positive comparable restaurant sales and guest
a return to positive comparable restaurant sales and guest
traffic in the fourth quarter of fiscal 2017.
traffic in the fourth quarter of fiscal 2017.
The successful execution of these sales building
The successful execution of these sales building
initiatives, coupled with our 10 new restaurant openings,
initiatives, coupled with our 10 new restaurant openings,
resulted in BJ’s surpassing the $1 billion sales mark on
resulted in BJ’s surpassing the $1 billion sales mark on
December 23, 2017. We are extremely proud and humbled
December 23, 2017. We are extremely proud and humbled
by this milestone, particularly as it is one that only a select
by this milestone, particularly as it is one that only a select
few casual dining restaurant concepts ever achieve. This
few casual dining restaurant concepts ever achieve. This
milestone speaks directly to the strengths of our team,
milestone speaks directly to the strengths of our team,
the broad attraction to our concept and BJ’s ability to
the broad attraction to our concept and BJ’s ability to
provide guests with dining experiences that they value.
provide guests with dining experiences that they value.
For the full fiscal year 2017, BJ’s grew consolidated
For the full fiscal year 2017, BJ’s grew consolidated
revenue to a record $1.032 billion, a 3.9% increase from
revenue to a record $1.032 billion, a 3.9% increase from
the prior year. After excluding the $21.3 million in sales
the prior year. After excluding the $21.3 million in sales
for an extra week in the fourth quarter of fiscal 2016,
for an extra week in the fourth quarter of fiscal 2016,
consolidated revenues increased approximately 6.2%
consolidated revenues increased approximately 6.2%
compared to the prior year. Net income and diluted net
compared to the prior year. Net income and diluted net
income per share for fiscal 2017 were $44.8 million and
income per share for fiscal 2017 were $44.8 million and
$2.06, respectively, inclusive of a tax benefit of $15.7
$2.06, respectively, inclusive of a tax benefit of $15.7
million, or $0.72 diluted net income per share, from the
million, or $0.72 diluted net income per share, from the
revaluation of our net deferred tax liabilities as a result of
revaluation of our net deferred tax liabilities as a result of
the enactment of the 2017 Tax Cuts and Jobs Act.
the enactment of the 2017 Tax Cuts and Jobs Act.
Excluding this benefit, net income and diluted net income
Excluding this benefit, net income and diluted net income
per share were $29.1 million and $1.34, respectively. We
per share were $29.1 million and $1.34, respectively. We
also generated over $107 million in cash flow from
also generated over $107 million in cash flow from
operations and initiated our first quarterly cash dividend
operations and initiated our first quarterly cash dividend
in October as we returned over $69 million to shareholders
in October as we returned over $69 million to shareholders
last year through our ongoing share repurchase program
last year through our ongoing share repurchase program
and the new quarterly cash dividend.
and the new quarterly cash dividend.
Fiscal 2017 saw a continuation of challenges impacting
Fiscal 2017 saw a continuation of challenges impacting
both the restaurant and overall retail industries. Due
both the restaurant and overall retail industries. Due
to consumers’ changing shopping patterns and the
to consumers’ changing shopping patterns and the
continued over-supply of restaurants, casual dining sales
continued over-supply of restaurants, casual dining sales
continued their negative traffic and sales trends.
continued their negative traffic and sales trends.
Additionally, this past year more traditional retail stores
Additionally, this past year more traditional retail stores
closed than at any time since the Great Recession. These
closed than at any time since the Great Recession. These
macro challenges led us to implement some of our most
macro challenges led us to implement some of our most
impactful initiatives to reignite comparable restaurant
impactful initiatives to reignite comparable restaurant
sales and continue differentiating BJ’s from the many
sales and continue differentiating BJ’s from the many
traditional mass casual dining concepts. These strategies
traditional mass casual dining concepts. These strategies
allowed us to again outperform the industry in comparable
allowed us to again outperform the industry in comparable
restaurant sales and traffic as reported by Black Box
restaurant sales and traffic as reported by Black Box
Intelligence surveys.
Intelligence surveys.
To reinforce and highlight our everyday value proposition,
To reinforce and highlight our everyday value proposition,
we introduced our “Daily Brewhouse Specials” last
we introduced our “Daily Brewhouse Specials” last
February. Our Daily Brewhouse Specials feature a different
February. Our Daily Brewhouse Specials feature a different
iconic food and drink combination Monday through
iconic food and drink combination Monday through
Thursday and were a key driver of improving guest traffic
Thursday and were a key driver of improving guest traffic
throughout last year. Specifically, our half-off large pizza
throughout last year. Specifically, our half-off large pizza
Mondays and our $3 Pizookie® Tuesdays were consistently
Mondays and our $3 Pizookie® Tuesdays were consistently
some of our best performing traffic days of the week.
some of our best performing traffic days of the week.
Throughout 2018, we will look to further refine, improve
Throughout 2018, we will look to further refine, improve
and add new and exciting items to our lineup of Daily
and add new and exciting items to our lineup of Daily
Brewhouse Specials.
Brewhouse Specials.
We also introduced new slow roasting oven technology at
We also introduced new slow roasting oven technology at
all of our restaurants last year. These ovens allow us to
all of our restaurants last year. These ovens allow us to
slow cook large format proteins, providing our guests
slow cook large format proteins, providing our guests
another reason to choose BJ’s for their dining experience.
another reason to choose BJ’s for their dining experience.
With this new oven capability, we are slow roasting prime
With this new oven capability, we are slow roasting prime
rib, double bone-in pork chops, ribs and turkey in our
rib, double bone-in pork chops, ribs and turkey in our
restaurants every day, further differentiating BJ’s food
restaurants every day, further differentiating BJ’s food
quality and innovation from other traditional mass casual
quality and innovation from other traditional mass casual
dining concepts that often bring in pre- or par-cooked
dining concepts that often bring in pre- or par-cooked
large format proteins. Our slow roast menu quickly
large format proteins. Our slow roast menu quickly
generated a loyal fan base which continues to grow, and
generated a loyal fan base which continues to grow, and
our Sunday prime rib special is now one of our best sales
our Sunday prime rib special is now one of our best sales
growth days of the week. By continually innovating around
growth days of the week. By continually innovating around
our slow roast ovens we provide our guests unique and
our slow roast ovens we provide our guests unique and
craveable menu items that they can only get at BJ’s.
craveable menu items that they can only get at BJ’s.
320,000 LBS
OF PERUVIAN QUINOA USED
As consumers continue to transition from traditional
As consumers continue to transition from traditional
brick and mortar shopping to e-commerce and mobile
brick and mortar shopping to e-commerce and mobile
shopping, there has been a growing preference for food
shopping, there has been a growing preference for food
delivery. We proactively invested resources in our off-
delivery. We proactively invested resources in our off-
premise channel during 2017 to grow this part of our
premise channel during 2017 to grow this part of our
business. We introduced new takeout packaging and large
business. We introduced new takeout packaging and large
party catering menus, while evolving our staffing model to
party catering menus, while evolving our staffing model to
improve the speed and service of our off-premise
improve the speed and service of our off-premise
business. We collaborated with several delivery partners
business. We collaborated with several delivery partners
to provide their service to our restaurants and leveraged
to provide their service to our restaurants and leveraged
our mobile app, website and other platforms to ensure the
our mobile app, website and other platforms to ensure the
off-premise dining experience from ordering to delivery is
off-premise dining experience from ordering to delivery is
simple and easy for our guests. As a result, we increased
simple and easy for our guests. As a result, we increased
our off-premise sales from approximately 5.6% of total
our off-premise sales from approximately 5.6% of total
revenues in fiscal 2016 to a run rate of over 7.5% in the
revenues in fiscal 2016 to a run rate of over 7.5% in the
fourth quarter of fiscal 2017. We expect to have delivery
fourth quarter of fiscal 2017. We expect to have delivery
in over 80% of our restaurants midway through this year,
in over 80% of our restaurants midway through this year,
compared to approximately 70% of our restaurants at the
compared to approximately 70% of our restaurants at the
end of fiscal 2017. We remain confident this service
end of fiscal 2017. We remain confident this service
extension can further drive top line revenues.
extension can further drive top line revenues.
Taken as a whole, the initiatives we put in place and
Taken as a whole, the initiatives we put in place and
executed in fiscal 2017 demonstrated our proactive
executed in fiscal 2017 demonstrated our proactive
approach in creating great dining experiences for our
approach in creating great dining experiences for our
guests while enhancing shareholder value. As we move
guests while enhancing shareholder value. As we move
forward into 2018, our menu innovation pipeline is in great
forward into 2018, our menu innovation pipeline is in great
shape as we plan further innovation with new slow roast
shape as we plan further innovation with new slow roast
products and Daily Brewhouse Specials. We also will
products and Daily Brewhouse Specials. We also will
continue to optimize our off-premise channel with
continue to optimize our off-premise channel with
additional delivery partners and creative menu options.
additional delivery partners and creative menu options.
Additionally, we are very excited about our upgraded BJ’s
Additionally, we are very excited about our upgraded BJ’s
Premier Rewards loyalty program. This new program
Premier Rewards loyalty program. This new program
simplifies our reward structure making it easier for guests
simplifies our reward structure making it easier for guests
to be rewarded for choosing BJ’s and dining with us. We
to be rewarded for choosing BJ’s and dining with us. We
are already seeing a very positive guest response to this
are already seeing a very positive guest response to this
new program which recently launched in all of our
new program which recently launched in all of our
restaurants this past February.
restaurants this past February.
In addition to our great menu offerings and Gold Standard
In addition to our great menu offerings and Gold Standard
service, we know that our physical space is a crucial part
service, we know that our physical space is a crucial part
of our guests’ overall experience. Our development team
of our guests’ overall experience. Our development team
continues to create new restaurant designs to ensure
continues to create new restaurant designs to ensure
that we remain relevant and appealing to current and
that we remain relevant and appealing to current and
future guests. Our new 2020 design includes a circular bar
future guests. Our new 2020 design includes a circular bar
with outdoor patio access. It also celebrates BJ’s craft
with outdoor patio access. It also celebrates BJ’s craft
beer heritage and core competencies without intruding
beer heritage and core competencies without intruding
on the classic family friendly positioning valued by our
on the classic family friendly positioning valued by our
guests. Last year, three of our 10 new restaurants
guests. Last year, three of our 10 new restaurants
featured the 2020 design and we are excited about
featured the 2020 design and we are excited about
opening more 2020 designs in our pipeline of new
opening more 2020 designs in our pipeline of new
restaurants for 2018.
restaurants for 2018.
We finished fiscal 2017 with 197 restaurants in 26 states
We finished fiscal 2017 with 197 restaurants in 26 states
and remain confident in the tremendous opportunity for
and remain confident in the tremendous opportunity for
ongoing expansion to at least 425 BJ’s restaurants over
ongoing expansion to at least 425 BJ’s restaurants over
time. However, we continue to execute our new restaurant
time. However, we continue to execute our new restaurant
growth plan against the core value to always be better,
growth plan against the core value to always be better,
not just bigger. Despite our strong finish to fiscal 2017, we
not just bigger. Despite our strong finish to fiscal 2017, we
believe prioritizing our resources toward sales and traffic
believe prioritizing our resources toward sales and traffic
building initiatives remains the prudent course of action
building initiatives remains the prudent course of action
given the continuing challenges facing the industry.
given the continuing challenges facing the industry.
Accordingly, our restaurant expansion plan of four to six
Accordingly, our restaurant expansion plan of four to six
new restaurants for 2018 provides even greater flexibility
new restaurants for 2018 provides even greater flexibility
to our already strong cash flow profile while allowing our
to our already strong cash flow profile while allowing our
teams to focus on operating the best possible restaurants
teams to focus on operating the best possible restaurants
for our guests and shareholders.
for our guests and shareholders.
In closing, our strategy continues to be predicated on
In closing, our strategy continues to be predicated on
delivering a higher quality, highly approachable, polished
delivering a higher quality, highly approachable, polished
casual dining experience to our guests. We will continue
casual dining experience to our guests. We will continue
improving our strong value proposition as a brand, creating
improving our strong value proposition as a brand, creating
more unique and craveable menu items and enhancing the
more unique and craveable menu items and enhancing the
ambiance of our restaurant dining experience. At the same
ambiance of our restaurant dining experience. At the same
time, we will stay disciplined in optimizing costs in our
time, we will stay disciplined in optimizing costs in our
business and reducing complexity to improve upon our Gold
business and reducing complexity to improve upon our Gold
Standard level of service and hospitality. We are confident
Standard level of service and hospitality. We are confident
that the plans and initiatives we have in place have
that the plans and initiatives we have in place have
established a solid foundation for further success as we
established a solid foundation for further success as we
continue taking market share in the casual dining space.
continue taking market share in the casual dining space.
We would like to thank our over 21,000 dedicated and
We would like to thank our over 21,000 dedicated and
passionate team members who make all of our plans and
passionate team members who make all of our plans and
vision for a great guest experience a reality each and
vision for a great guest experience a reality each and
every day. We would also like to express our deepest
every day. We would also like to express our deepest
appreciation and thanks to our loyal restaurant guests,
appreciation and thanks to our loyal restaurant guests,
our shareholders and our supplier partners for their
our shareholders and our supplier partners for their
continued support. We are as optimistic as ever about
continued support. We are as optimistic as ever about
the growing strength of the BJ’s brand and our ability
the growing strength of the BJ’s brand and our ability
to convert this brand strength into value for our
to convert this brand strength into value for our
shareholders. We firmly believe that the best years for
shareholders. We firmly believe that the best years for
BJ’s are still ahead.
BJ’s are still ahead.
Sincerely,
Sincerely,
BJ’s Senior Leadership Team
BJ’s Senior Leadership Team
April 2, 2018
April 2, 2018
CORPORATE INFORMATION
B O A R D O F D I R E C T O R S
S E N I O R L E A D E R S H I P T E A M
S H A R E H O L D E R I N F O R M AT I O N
G E R A L D W. D E I T C H L E
Chairman of the Board,
BJ’s Restaurants, Inc.
G R E G O R Y A . T R O J A N
Chief Executive Officer,
BJ’s Restaurants, Inc.
P E T E R A . B A S S I
Retired Chairman,
Yum! Restaurants International
L A R R Y D . B O U T S
Investor/Business Advisor;
Former Chairman and
Chief Executive Officer,
Six Flags Theme Parks
J A M E S A . D A L P O Z Z O
Chairman and Chief Executive Officer,
The Jacmar Companies
N O A H A . E L B O G E N
Managing Member and Chief Executive Officer,
Misada Capital Group LLC
W E S L E Y A . N I C H O L S
Former Co-founder and Chief Executive Officer,
MarketShare
L E A A N N E S . O T T I N G E R
Strategic Business Consultant;
Managing Partner, LMR Advisors
PAT R I C K D . WA L S H
Chief Executive Officer,
Town Sports International Holdings, Inc.
and Managing Member
and Chief Executive Officer,
PW Partners, LLC and
PW Partners Atlas Funds, LLC
G R E G O R Y A . T R O J A N
Chief Executive Officer
G R E G O R Y S . L E V I N
President, Chief Financial Officer
and Secretary
G R E G O R Y S . LY N D S
Executive Vice President and
Chief Development Officer
K E V I N E . M AY E R
Executive Vice President and
Chief Marketing Officer
L O N F. L E D W I T H
Executive Vice President,
Operations
B R I A N S . K R A KO W E R
Senior Vice President and
Chief Information Officer
K E N D R A D . M I L L E R
Senior Vice President, General Counsel
and Assistant Secretary
C H R I S T O P H E R P. P I N S A K
Senior Regional Vice President,
Operations
A L E X A N D E R M . P U C H N E R
Senior Vice President,
Brewing Operations
S C O T T A . R O D R I G U E Z
Senior Vice President, Culinary
and Kitchen Innovation
S H E A L . B O D E T
Senior Vice President, Financial
Planning and Analysis
7,800,000
7,800,000
PIZZAS SOLD
PIZZAS SOLD
C O R P O R AT E O F F I C E S
Restaurant Support Center
BJ’s Restaurants, Inc.
7755 Center Avenue, Suite 300
Huntington Beach, California 92647
(714) 500-2400
www.bjsrestaurants.com
C O M M O N S T O C K
The Company’s common stock is traded
on the NASDAQ stock market under the
symbol “BJRI.”
L E G A L C O U N S E L
Elkins Kalt Weintraub Reuben Gartside, LLP
Los Angeles, California
I N D E P E N D E N T R E G I S T E R E D P U B L I C
A C C O U N T I N G F I R M
Ernst & Young LLP
Irvine, California
I N V E S T O R R E L AT I O N S
Inquiries from shareholders, analysts or
prospective investors should be directed to:
Gregory S. Levin
President, Chief Financial Officer
and Secretary
(714) 500-2400
investorrelations@bjsrestaurants.com
T R A N S F E R A G E N T
Inquiries for stock transfer requirements,
lost certificates and changes to addresses
should be directed to:
Computershare Trust Company, N.A.
250 Royall Street
Canton, Massachusetts 02021
(800) 962-4284
www.computershare.com
A N N U A L M E E T I N G D AT E
June 6, 2018
At the Restaurant Support Center of
BJ’s Restaurants, Inc.
7755 Center Avenue, 4th Floor
Huntington Beach, California 92647
320,000 LBS
OF PERUVIAN QUINOA USED
7,500,000
PIZOOKIES SOLD
1,000,000 LBS
OF FRESH SALMON SOLD
$715,000
DOING MORE GOOD THINGS...
GIVING BACK TO OUR RESTAURANT
GIVING BACK TO OUR RESTAURANT
COMMUNITIES AND TO
AND TO OUR TEAM MEMBERS
CHARITABLE CAUSES AND COMMUNITY
EVENTS ACROSS THE COUNTRY
100+
800+
TOTAL TASC FORCE EVENTS
SINCE OUR INCEPTION IN 2006,
BJ’S RESTAURANTS FOUNDATION
HAS FOCUSED ON FULFILLING
ITS MISSION STATEMENT OF
DOING MORE GOOD THINGS
FOR MORE PEOPLE.
®
$350,000
BJ’S RESTAURANTS FOUNDATION
BJ’S RESTAURANTS FOUNDATION
$365,000
GIVE A SLICE FOUNDATION
GIVE A SLICE FOUNDATION
Since our inception in 2006, BJ’s Restaurants Foundation
Since our inception in 2006, BJ’s Restaurants Foundation
has focused on fulfilling its mission statement of Doing
has focused on fulfilling its mission statement of Doing
More Good Things for More People. With this goal firmly
More Good Things for More People. With this goal firmly
in mind for more than a decade, donations during 2017
in mind for more than a decade, donations during 2017
went to charities and community causes supported by
went to charities and community causes supported by
the volunteer efforts of our team members through our
the volunteer efforts of our team members through our
award-winning Team Action to Support Communities
award-winning Team Action to Support Communities
(TASC Force) program and to education foundations and
(TASC Force) program and to education foundations and
schools throughout the country. Over the years, more than
schools throughout the country. Over the years, more than
8,000 BJ’s team members have selflessly given their free
8,000 BJ’s team members have selflessly given their free
time to more than 800 various TASC Force events.
time to more than 800 various TASC Force events.
Through the kindness of our BJ’s family of team members
Through the kindness of our BJ’s family of team members
who voluntarily donate a portion (a slice) of their paychecks,
who voluntarily donate a portion (a slice) of their paychecks,
we help our team members in times of crisis and emergency.
we help our team members in times of crisis and emergency.
Firestorms and flooding throughout the country caused
Firestorms and flooding throughout the country caused
additional hardships this year for which the Company and
additional hardships this year for which the Company and
Give a Slice Foundation provided additional funding to help
Give a Slice Foundation provided additional funding to help
our team members in financial need.
our team members in financial need.
Robert B. DeLiema
Robert B. DeLiema
President, BJ’s Restaurants Foundation
President, BJ’s Restaurants Foundation
$715,000
$715,000
DOING MORE GOOD THINGS...
DOING MORE GOOD THINGS...
$1 BILLION
IN SALES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended January 2, 2018
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission file number 0-21423
BJ’S RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
California
(State or other jurisdiction of
incorporation or organization)
33-0485615
(I.R.S. Employer
Identification Number)
7755 Center Avenue, Suite 300
Huntington Beach, California 92647
(714) 500-2400
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, No Par Value
Name of each Exchange on Which Registered
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES NO
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). YES NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
Emerging growth company
(do not check if smaller reporting company)
Accelerated filer
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES NO
The aggregate market value of the common stock of the Registrant (“Common Stock”) held by non-affiliates as of the last
business day of the second fiscal quarter, July 3, 2017, was $801,592,757, calculated based on the closing price of our common
stock as reported by the NASDAQ Global Select Market on such date.
As of February 23, 2018, 20,504,188 shares of the common stock of the Registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the following documents are incorporated by reference into Part III of this Form 10-K: The Registrant’s
Proxy Statement for the Annual Meeting of Shareholders.
INDEX
PART I
ITEM 1.
BUSINESS ...........................................................................................................................................
ITEM 1A. RISK FACTORS ..................................................................................................................................
ITEM 1B. UNRESOLVED STAFF COMMENTS ...............................................................................................
PROPERTIES ......................................................................................................................................
ITEM 2.
ITEM 3.
LEGAL PROCEEDINGS ....................................................................................................................
ITEM 4. MINE SAFETY DISCLOSURES ........................................................................................................
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES ...........................................................................
SELECTED CONSOLIDATED FINANCIAL DATA ........................................................................
ITEM 6.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS .....................................................................................................................................
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .....................
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .....................................................
ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
ITEM 9.
FINANCIAL DISCLOSURE ...............................................................................................................
ITEM 9A. CONTROLS AND PROCEDURES ....................................................................................................
ITEM 9B. OTHER INFORMATION ....................................................................................................................
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE .............................
ITEM 11. EXECUTIVE COMPENSATION .......................................................................................................
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS ..........................................................................................
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES ......................................................................
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES ..........................................................
ITEM 16. FORM 10-K SUMMARY ...................................................................................................................
SIGNATURES .........................................................................................................................................................
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS .............................................................................
PART IV
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33
34
34
34
35
39
40
51
51
51
51
54
54
54
54
54
55
55
57
58
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BJ’S RESTAURANTS, INC.
PART I
Unless the context indicates otherwise, when we use the words “BJ’s,” “the Company,” “we,” “us” or “our” in this Form 10-
K, we are referring to BJ’s Restaurants, Inc., a California corporation, and its subsidiaries.
Cautionary Factors That May Affect Future Results
(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)
This Form 10-K contains “forward-looking” statements and other information based on the current beliefs and assumptions of
our management. Words or phrases such as “believe,” “plan,” “will likely result,” “expect,” “intend,” “will continue,” “is
anticipated,” “estimate,” “project,” “may,” “could,” “would,” “should” and similar expressions in this Form 10-K are intended
to identify “forward-looking” statements. These statements reflect our current perspectives and outlook with respect to our
future expansion plans, key business initiatives, expected operating conditions and other factors. We operate in a very
competitive and rapidly changing environment, and new risks emerge from time to time. Additional risks and uncertainties that
we are currently unaware of, or that we currently deem immaterial, may become important factors that affect us. It is not
possible for us to predict the impact of all factors on our business, financial condition or results of operations or the extent to
which any factor, or combination of factors, may cause actual results to differ materially from those contained in any “forward-
looking” statements. Given the volatility of the operating environment and its associated risks and uncertainties, investors
should not rely on “forward-looking” statements as any prediction or guarantee of actual results.
“Forward-looking” statements include, among others, statements concerning:
our restaurant concept, its competitive advantages and our strategies for its continued evolution and expansion;
the rate and scope of our future restaurant development;
the total domestic capacity for our restaurants;
dates on which we will commence or complete the development and opening of new restaurants;
expectations for consumer spending on casual dining restaurant occasions;
the availability and cost of key commodities used in our restaurants and brewing operations;
menu price increases and their effect, if any, on revenue and our results of operations;
the effectiveness of our planned operational, menu, marketing and capital expenditure initiatives;
capital requirement expectations and actual or available borrowings on our line of credit;
projected revenues, operating costs and expenses;
projected share repurchases or shareholder dividend frequency and amount; and
other statements of expectations, beliefs, future plans and strategies, anticipated developments and other matters
that are not historical facts.
Some, but not all, significant factors that could prevent us from achieving our stated goals are set forth in Part I, Item 1A of this
Annual Report on Form 10-K and include, but are not limited to:
Failure to maintain a favorable image, credibility and the value of the BJ’s brand and our reputation for offering
customers a higher quality more differentiated total dining experience at a good value may adversely affect our
business.
Any inability or failure to recognize, respond to and effectively manage the accelerated impact of social media may
adversely affect our business.
Any deterioration in general economic conditions may affect consumer spending and adversely affect our
revenues, operating results and liquidity.
Any deterioration in general economic conditions, which may also have a material adverse impact on our landlords
or on businesses neighboring our locations, may adversely affect our revenues and results of operations.
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Any inability or failure to successfully expand our restaurant operations may adversely affect our growth rate and
results of operations.
Any inability to open new restaurants on schedule in accordance with our targeted capacity growth or problems
associated with securing suitable restaurant locations, leases and licenses, recruiting and training qualified
managers and hourly employees and other factors, some of which are beyond our control and difficult to forecast
accurately may adversely affect our operations.
Any inability to access sources of capital and or to raise capital in the future may adversely affect our business.
Any failure of our existing or new restaurants to achieve expected results may have a negative impact on our
consolidated financial results.
Any strain on our infrastructure and resources due to growth, which may slow our development of new restaurants
may adversely affect our ability to manage our existing restaurants.
Any decision to either reduce or accelerate the pace of openings may positively or adversely affect our
comparative financial performance.
Expenditures required to open new restaurants may adversely affect our future operating results.
Our concentration of a significant number of our restaurants in California, Texas and Florida makes us particularly
sensitive to economic, regulatory, weather and other risk factors and conditions that are more prevalent in those
states.
Any negative publicity about us, our restaurants, other restaurants, or others across the food supply chain, due to
food borne illness or other reasons, whether or not accurate may adversely affect the reputation and popularity of
our restaurants and our results of operations.
Any adverse changes in the cost of food, labor and related employee benefits (including, but not limited to, group
health insurance coverage for our employees), brewing and energy may adversely affect our operating results.
Any inability of our internal or independent third party brewers to timely supply our beer may adversely affect our
operating results.
Periodic reviews and audits of our internal brewing, independent third party brewing and beer distribution
arrangements by various federal, state and local governmental and regulatory agencies may adversely affect our
operations and our operating results.
Government laws and regulations affecting the operation of our restaurants, including but not limited to those that
apply to the acquisition and maintenance of our brewing and retail liquor licenses, minimum wages, federal or state
exemption rules, health insurance coverage, or other employment benefits such as paid time off, consumer health
and safety, nutritional disclosures, and employment eligibility-related documentation requirements may cause
disruptions to our operations, adversely affect our operating costs and restrict our growth.
Heavy dependence of our operations, including our loyalty and employee engagement programs, on information
technology may adversely affect our revenues and impair our ability to efficiently operate our business if there is a
material failure of such technology,
Unsolicited takeover proposals, governance change proposals, proxy contests and certain proposals/actions by
activist investors may create additional risks and uncertainties with respect to the Company’s financial position,
operations, strategies and management, and may adversely affect our ability to attract and retain key employees.
Any perceived uncertainties may affect the market price and volatility of our securities.
Any suspension of or failure to pay regular dividends or to repurchase the Company’s stock up to the maximum
amounts permitted under our previously announced repurchase program, either of which may negatively impact
investor perceptions of us and may affect the market price and volatility of our stock.
These cautionary statements are to be used as a reference in connection with any “forward-looking” statements. The factors,
risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary
statements, written or oral, which may be made or otherwise addressed in connection with a “forward-looking” statement or
contained in any of our filings with the U.S. Securities and Exchange Commission (“SEC”). Because of these factors, risks and
uncertainties we caution against placing undue reliance on “forward-looking” statements.
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The risks described in this Form 10-K are not the only risks we face. New risks and uncertainties arise from time to time, and
we cannot predict those events or how they may affect us. There may be other risks and uncertainties that are not currently
known by us or that are currently deemed by us to be immaterial. However, they may ultimately have a material adverse effect
on our business, financial condition and/or operating results. Although we believe that the assumptions underlying “forward-
looking” statements are reasonable on the dates they are made, any of the assumptions could be incorrect, and there can be no
guarantee or assurance that “forward-looking” statements will ultimately prove to be accurate. We do not have any obligation
to modify or revise any “forward-looking” statement to take into account or otherwise reflect subsequent events or
circumstances arising after the date that the “forward-looking” statement was made. For further information regarding the risks
and uncertainties that may affect our future results, please review the information set forth below under “Item 1A. Risk
Factors.”
FISCAL PERIODS USED IN THIS FORM 10-K
Throughout this Form 10-K, our fiscal years ended January 2, 2018, January 3, 2017, December 29, 2015, December 30, 2014,
and December 31, 2013, are referred to as fiscal years 2017, 2016, 2015, 2014, and 2013, respectively. Our fiscal years consist
of 52 or 53 weeks and end on the Tuesday closest to December 31. All fiscal years presented in this Form 10-K, with the
exception of fiscal year 2016, consisted of 52 weeks. Additionally, all quarters, with the exception of the fourth quarter in fiscal
year 2016, consisted of 13 weeks. Fiscal year 2016 consisted of 53 weeks, with a 14-week fourth quarter; therefore, all
financial references to fiscal year 2016 assume 53 weeks of operations, unless noted otherwise.
ITEM 1. BUSINESS
GENERAL
As of February 26, 2018, we owned and operated 197 restaurants located in the 26 states of Alabama, Arizona, Arkansas,
California, Colorado, Florida, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan, Nevada, New Jersey, New Mexico,
New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and
Washington. Each of our restaurants is operated either as a BJ’s Restaurant & Brewhouse®, a BJ’s Restaurant & Brewery®, a
BJ’s Pizza & Grill®, or a BJ’s Grill® restaurant. Currently, the BJ’s Restaurant & Brewhouse® format represents our primary
expansion vehicle. Our BJ’s Restaurant & Brewery locations are similar in size to our BJ’s Restaurant & Brewhouse locations,
except that they have a brewing operations attached to the restaurant. Our BJ’s Pizza & Grill® restaurants are smaller format,
full-service restaurants which reflect the original format of the BJ’s restaurant concept that was first introduced in 1978. Our
BJ’s Grill® restaurant is a slightly smaller footprint restaurant than our BJ’s Restaurant & Brewhouse® format, but still
features all the amenities of our Brewhouse locations. Our proprietary craft beer is available in all of our restaurants and
produced at several of our BJ’s Restaurant & Brewery® locations, our Temple, Texas brewpub locations and by independent
third party brewers using our proprietary recipes.
The first BJ’s restaurant opened in 1978 in Orange County, California, featuring Chicago style deep-dish pizza with a unique
California twist. Over the years we expanded the BJ’s concept from its beginnings as a small pizzeria to a full-service, high
energy casual dining restaurant with a broad menu including our BJ’s award-winning, signature deep-dish pizza, our
proprietary craft and other beers, as well as a large selection of appetizers, entrées, pastas, burgers and sandwiches, specialty
salads and desserts, including our made to order, warm pizza cookie dessert, the Pizookie®.
In 1996, we introduced our proprietary craft beers when we opened our first BJ’s Restaurant & Brewery® in Brea, California.
Today all of our restaurants feature our award-winning, proprietary craft beers, which we believe showcases the quality and
care of the ingredients we use at BJ’s. Our high-quality, craft beers further differentiates BJ’s from many other restaurant
concepts and complements our signature deep-dish pizza and other menu items. Our beers have earned over 180 medals at
different beer festivals and events, including 34 medals at the Great American Beer Festival and 10 medals at the World Beer
Cup. We also offer as many as 30 “guest” domestic and imported craft beers on tap, in addition to a selection of bottled beers
in our restaurants. Our large and unique beer offering is intended to enhance BJ’s competitive positioning as a leading retailer
of beer in the casual dining segment of the restaurant industry.
Our Internet address is http://www.bjsrestaurants.com. Electronic copies of our Annual Report on Form 10-K, quarterly reports
on Form 10-Q and current reports on Form 8-K are available, free of charge, by visiting the “Investor Relations” section of our
website at http://www.bjsrestaurants.com. These reports are posted as soon as practical after they are electronically filed with
the SEC. We caution that the information on our website is not part of this or any other report we file with, or furnish to, the
SEC.
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THE BJ’s RESTAURANT CONCEPT AND MENU
We compete in the casual dining segment of the restaurant industry, which is a large, highly fragmented segment with
estimated annual sales in the $100+ billion range. The casual dining segment has become a fairly mature segment of the
restaurant industry. According to some industry analysts and observers, the annual rate of sales growth for the segment has
been gradually decreasing as a result of increased competition from innovative quick-service and “fast casual” restaurant
concepts and other food-away-from-home retailers, a leveling off of certain favorable demographic trends (the number of two
wage-earner households, etc.), and a perceived over-supply of casual dining restaurants compared to demand. We believe that,
in addition to these factors, the segment has suffered from low levels of innovation and a general reduction in the overall
quality and differentiation of many of the larger, more mature mass market casual dining chains that collectively operate
several thousand restaurants.
In contrast to our mass market casual competitors, we believe that the BJ’s restaurant concept offers consumers a higher
quality, more contemporary and approachable “casual plus” (or “premium casual” or “polished casual”) dining experience. The
term “casual plus” typically refers to a competitive position that provides greater quality and differentiation when compared to
the more mature, mass market casual dining concepts with average customer checks of $13.00 to $19.00, but not necessarily as
extensive as the “upscale casual” concepts that typically have average customer checks in excess of $19.00. Accordingly, our
primary business objective is to continue taking market share in the casual dining restaurant industry by delivering on our
“Gold Standard of Operational Excellence” promise to our customers while continuing our new restaurant national expansion
program.
Our Gold Standard of Operational Excellence is our genuine commitment to take pride in passionately connecting with every
customer on every visit, through flawless and relentless execution of every detail, during every shift – to create and keep
fanatical fans of BJ’s. We believe that by delivering upon this commitment to our customers, we will have the best opportunity
to generate significant repeat business and capture additional market share in the casual dining segment of the restaurant
industry. Our Gold Standard of Operational Excellence is built on the following key pillars that differentiate BJ’s from other
casual dining restaurant concepts:
Broad and Distinctive Menu – We started as a small sit down pizzeria offering our own California twist on Chicago style deep-
dish pizza. Over the years we expanded the BJ’s concept and menu to include an array of menu options for any dining
occasion. Our menu items are created by our talented culinary team and prepared to order in our restaurants using high-quality
ingredients. This broad menu is an important factor in our differentiation from other casual dining competitors. We evaluate
our menu offerings and prices two to three times a year in addition to offering seasonal or limited time only menu items. In
2017, we rolled out new slow roasting oven technology to all of our restaurants allowing us to slow cook large format proteins
including prime rib, turkey and pork. Our new slow roast Prime Rib Special and our Double Bone-in Pork Chop have become
new signature menu items for BJ’s showcasing our higher quality, differentiated menu. Our menu entrées, excluding our
promotional specials, generally range in price from $7.25 to $24.95. Our average per-customer check during fiscal 2017,
including beverages, was approximately $15.75.
Award Winning, Proprietary Craft Beer - All of our restaurants feature our award-winning, proprietary freshly brewed (not
pasteurized) craft beers, which we believe not only differentiate us from many other restaurant concepts, but also enhance our
ability to provide greater quality and unique experiences to our customers. Approximately 7% of our total restaurant sales in
fiscal 2017 consisted of our proprietary craft beers. We also offer as many as 30 “guest” domestic and imported craft beers on
tap, in addition to a selection of bottled beers in the majority of our restaurants. Our broad and unique beer offerings are
intended to enhance BJ’s competitive positioning as a leading retailer of craft beer in the casual dining segment of the
restaurant industry.
A Culture Committed to Service and Hospitality – Great dining experiences start with great people. We have invested carefully
in making sure we recruit, select, train and retain employees that can take care of our customers and operate our large and
complex restaurants. In addition to hiring great employees, we have invested in productivity and hospitality systems in order
for us to deliver the Gold Standard of Operational Excellence that we promise our customers. These systems include a Net
Promoter Scoring system that evaluates several key elements of our service including pace, hospitality, value and recommend
scores, as well as a mystery shopper program and a customer loyalty program. In 2017 we invested in hand held ordering
tablets for our servers in order to improve the pace and productivity. We also believe it is important to give back to the
communities we serve and to do more good things for more people as exemplified by our BJ’s Restaurants Foundation (the
“Foundation”), which was established in fiscal 2006. We were recognized for this effort at the Global Best Practices
Conference, where we received the 2017 prestigious Heart of the Workplace Award for our significant commitment to and
investment in our employees and communities.
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High Energy Atmosphere and Facilities- As part of our competitive positioning as a polished casual dining concept, our
restaurants have finishes consistent with more upscale casual dining concepts. All of our restaurants feature high ceilings and
have a signature bar statement with large flat screen televisions that can be viewed from any seat. Additionally, we use a
variety of higher quality customer touchpoints, including distinctive glassware to fit the beer or beverage style and linen
napkins not generally found in casual dining. We believe our large restaurants with their signature bar provide our customers
with a higher energy dining experience.
RESTAURANT OPERATIONS
Based on internal and publicly available data, we believe that our larger format brewhouse restaurants, on average, generate
relatively high customer traffic per square foot compared to many other casual dining concepts. Therefore, we have
implemented operational systems and procedures to support our desire to run our restaurants “quality fast,” particularly at peak
dining periods, in order to effectively and efficiently serve every customer. The typical management team for a BJ’s restaurant
consists of a General Manager, an Executive Kitchen Manager and three to five other managers depending on the sales volume
of each restaurant. The General Manager is responsible for the day-to-day operations of their restaurant, including hiring,
training, and the development of personnel, as well as for sales and operating profit. The Executive Kitchen Manager is
responsible for managing food quality and preparation, purchasing, inventories and kitchen labor costs. All of our restaurants
prepare detailed monthly operating budgets and compare their actual results to their budgets. We also measure the productivity
and efficiency of our restaurant operations using a variety of qualitative and quantitative statistical indicators.
New restaurant managers are required to successfully complete an 11-week comprehensive advanced management training
program dedicated to all aspects of the operation of our restaurants including both restaurateuring and restaurant business-
related topics. Our restaurant management training program is directed by our Vice President of Operations Talent
Development and is closely monitored by our field supervision team. We continuously review our training curriculum for our
new managers and existing hourly employees and restaurant managers.
The General Manager of each restaurant reports to a Director of Operations or an Area Vice President, who reports to a
Regional or Senior Regional Vice President of Operations. Additionally, we have Directors of Kitchen Operations who oversee
the food quality and safety, kitchen efficiency and consistency in our restaurants and help educate, coach and develop our
kitchen managers. Our Directors of Kitchen Operations report to our Senior Vice President of Culinary and Kitchen
Innovation. Our Regional and Senior Regional Vice Presidents of Operations report to our Executive Vice President of
Operations who oversees all aspects of restaurant operations including kitchen and bar operations, restaurant facility
management, new restaurant openings and the roll-out of key operational initiatives.
We carefully select, train and supervise our restaurant-level employees (“employees”). Each restaurant typically employs an
average of approximately 110 hourly employees, many of whom work part-time. Our goal is to staff our restaurants with
qualified, trained and enthusiastic employees who desire to be an integral part of BJ’s fun, premium casual atmosphere and, at
the same time, have the passion, intensity, work ethic and ability to execute our concept correctly and consistently on every
shift. Prior experience in the restaurant industry is only one of the qualities management looks for in our restaurant employees.
Enthusiasm, motivation, dependability, integrity, and the ability to interact well and connect with our customers and correctly
execute our concept are some of the key qualities of BJ’s management and employees.
In order to maintain our high standards, all new restaurant hourly employees undergo formal training from certified Employee
Instructors at each restaurant. Our Employee Instructors oversee the training by position for each new hourly employee and are
also utilized to support our new restaurant openings. Our hourly team goes through a series of in-depth interactive and
automated training programs for their respective positions. Our future growth and success are highly dependent upon our
ability to attract, develop and retain qualified restaurant management and hourly employees. We attempt to accomplish this by
providing our employees with opportunities for increased responsibilities and advancement as well as performance-driven
incentives based on both financial and customer satisfaction metrics. We also support our employees by offering what we
believe to be competitive wages and, for eligible employees, competitive fringe benefits (including a 401(k) plan with a
company match, medical insurance and dining discounts). Additionally, our General Managers, Executive Kitchen Managers,
Directors of Operations and Directors of Kitchen Operations are eligible to be selected to participate in our Gold Standard
Stock Ownership Program that operates under the authority of our 2005 Equity Incentive Plan (“the Plan”). This program,
which is intended to be a long-term incentive program, provides for equity-based awards. Participation in the Plan requires
extended service in good standing with us (generally three to five years).
Our typical restaurant hours of operations are generally from 11:00 a.m. to 12:00 a.m. Sunday through Thursday and 11:00
a.m. to 1:00 a.m. Friday and Saturday. Our restaurants are typically open every day of the year except for Thanksgiving and
Christmas. Most of our restaurants currently offer either in-house and/or third party delivery service. Additionally, all
5
restaurants offer a call-ahead or online wait list, on-line ordering for dine-in or customer pick-up and reservations for large
parties.
RESTAURANT SITE SELECTION AND EXPANSION OBJECTIVES
Our BJ’s Restaurant & Brewhouse® format is expected to represent the vast majority of our planned new restaurant growth for
the foreseeable future. We may also open new BJ’s Restaurant & Brewery® formats or brewpub locations (“brewing
restaurants”) to maintain our beer supply as we open more restaurants or if on-site brewing is the only legally permissible way
to offer our proprietary craft beer in a particular state.
We seek to obtain high-quality, high-profile locations for our “casual plus” restaurants, which we believe have the ability to
draw customers from a larger area than most “mass market” casual dining chain restaurants. The size of our restaurant trade
areas vary from location to location, depending on a number of factors such as population density, retail traffic generators and
geography. We believe the locations of our restaurants are critical to our long-term success. Accordingly, we devote significant
time and resources to analyzing each prospective site. Since BJ’s has proven that it can be successful in a variety of locations
(urban or suburban shopping areas, retail strip centers, lifestyle centers, and entertainment centers – either freestanding or in-
line) and in a variety of income demographics, we can be highly selective and flexible in choosing suitable locations. We prefer
to open our restaurants at high-profile sites in mature trade areas with dense populations. We generally target geographic
regions that allow us to build multiple restaurants in those areas. This “clustering” approach provides economic benefits
including lower supply and distribution costs, improved marketing efficiencies, management supervision leverage and
increased brand awareness. As with most growing retail and restaurant chain operations, there can be no assurance that the
transfer of sales or “cannibalization” among our locations will not inadvertently occur or become more significant in the future
as we gradually increase our presence in existing markets to maximize our competitive position and financial performance in
each market.
During fiscal 2017, we opened 10 new restaurants and increased our overall total restaurant operating weeks by approximately
8% during the year. During fiscal 2018, we expect to open four to six new restaurants. Based on information currently
available, we expect to open two to three restaurants during the first half of fiscal 2018 and the remaining restaurants in the
second half of the year. However, there are a number of risks associated with opening new restaurants and entering new
markets, and it is difficult for us to precisely predict the timing of our new restaurant openings due to many factors that are
outside of our control, including those identified under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
We have signed leases, land purchase agreements or letters of intent for all of our potential restaurant openings for fiscal 2018.
We are currently negotiating additional leases and/or real estate purchases for potential locations for fiscal 2019 and 2020. We
typically enter into operating leases for our locations for periods ranging from 10 to 20 years. We obtain lease extension
options in most instances. Our restaurants can either be freestanding or in-line. Our lease payment terms vary from lease to
lease, but generally provide for the payment of both minimum base rent and contingent (percentage) rent based on restaurant
sales. We are generally responsible for our proportionate share of common area maintenance (“CAM”), insurance, property tax
and other occupancy-related expenses under our leases. We expend cash for leasehold improvements and furnishings, fixtures
and equipment to build out our leased premises. We may also expend cash for permanent structural additions that we make to
leased premises.
We may have some of the costs to open a restaurant reimbursed to us by our landlords in the form of tenant improvement
allowance incentives pursuant to agreed-upon terms in our leases. These allowances usually take the form of up-front cash, full
or partial credits against minimum or percentage rents otherwise payable by us, or a combination thereof. Generally, a landlord
will charge us additional rent for any allowances provided to us. We typically negotiate tenant improvement allowances of
approximately $80 to $200 per square foot; however, not every location we develop into a restaurant will have such allowances
available. During fiscal 2017, we opened 10 new restaurants, of which only six restaurants received tenant improvement
allowances. For these restaurants, our average tenant improvement allowance was approximately $110 per square foot. We
may also purchase the land underlying certain restaurant locations if it becomes available. However, it is not our current
strategy to own a large number of land parcels that underlie our restaurants. In many cases, we subsequently enter into sale-
leaseback arrangements for land parcels that we purchase.
TARGETED NEW RESTAURANT ECONOMICS
Our current prototype is approximately 7,400 square feet with seating for as many as 225 customers with a targeted gross
construction cost of approximately $4.0 million (before tenant improvement allowances, if any). Our construction costs for
new restaurants may vary significantly depending on a number of factors including, but not limited to their size, layout (custom
6
or prototype), type of construction labor (union or non-union), local permitting requirements, the scope of any required site
work, the cost of liquor and other licenses and hook-up fees, geographical location and facility type (for example, whether the
site will have the capacity to brew beer).
In selecting sites for our restaurants, an important objective is to earn a suitable rate of return on our investment. However, this
return often cannot be meaningfully measured until our restaurants reach their mature sales and profitability levels. Maturation
periods vary from restaurant to restaurant, but generally range from two to five years. As a result of our new prototype, we
currently target a blended 25% return on our net cash invested to build a new restaurant, and a blended 20% return on total
capital invested, which includes our net cash invested and a factor for the landlord’s invested capital (based on a capitalized
value of minimum rents to be paid to the landlord) for each group of new restaurants to be opened each year, measured once
the restaurants reach their mature level of operations. Our targeted returns on invested capital in new restaurants may change in
the future, depending upon competitive conditions in the casual dining segment, real estate market conditions, construction and
operating cost trends and other factors both within and outside of our control.
The return-on-investment targets for our restaurant operations do not include any allocation of opening costs, field supervision
and corporate support expense, non-cash items such as depreciation, amortization, equity-related compensation expense, and
income taxes, and do not represent a targeted return on our common stock. Additionally, the actual performance of any new
restaurant location will usually differ from its originally targeted performance due to a variety of factors, many of which are
outside of our control, and such differences may be material. There can be no assurance that any new restaurant opened will
have similar operating results to those of established restaurants. See “Risk Factors” in Part I, Item 1A of this Annual Report
on Form 10-K for a discussion of certain risks relating to the development and operation of our restaurants.
We generally target our new restaurants to achieve average annual sales at maturity of $4.5 million, and we generally target an
average “four wall” estimated operating cash flow margin in the range of 18% to 20% at maturity, after all occupancy
expenses. Not all new restaurants are expected to achieve our average return-on-investment targets. Some may be targeted to
achieve higher returns and some may be targeted to achieve lower returns, based on factors specific to each restaurant location.
These factors include, among other things, the level of overall consumer and market awareness for our brand in the location’s
general trade area; the specific occupancy structure and capital expenditure requirement for the location; the availability and
amount of tenant improvement allowances; and the expected operating cost structure in the trade area (i.e., minimum hourly
wages, local costs for fresh commodities such as produce, etc.).
It is common in the casual dining industry for many new locations to initially open with sales volumes well in excess of their
sustainable run-rate levels. This initial “honeymoon” sales period usually lasts several months before consumer traffic and
sales volumes gradually adjust downward to their expected, more predictable and sustainable levels. In fact, it may take two to
five years for a new restaurant’s sales to eventually settle at a more predictable and sustainable level. Every restaurant has its
own individual opening sales pattern, and this pattern is difficult to predict.
Additionally, all of our new restaurants usually require several months or longer after opening to reach their targeted
restaurant-level operating margin due to cost of sales and labor inefficiencies commonly associated with more complex casual
dining restaurants. How quickly new restaurants achieve their targeted operating margin depends on many factors, including
the level of consumer familiarity with our brand when we enter new markets, as well as the availability of experienced
managers and employees, and the time required to negotiate and obtain favorable costs for certain fresh food items and other
supplies from local suppliers. As a result, a significant number of restaurant openings in any single fiscal quarter, along with
their associated opening expenses, could have a significant impact on our consolidated results of operations for that period.
Therefore, our results of operations for any single fiscal quarter are not necessarily indicative of the results expected for any
other fiscal quarter or a full fiscal year.
RESTAURANT OPENING EXPENSES
Restaurant opening expenses (also referred to as “preopening” expenses) include incremental out-of-pocket costs that are
directly related to the openings of new restaurants that may not be capitalized. As a result of the more complex operational
nature of our “casual plus” restaurant concept compared to that of a typical casual dining chain restaurant, the preopening
process for our new restaurants is more extensive, time consuming and costly. The preopening expense for one of our
restaurants usually includes costs to compensate an average of six to eight restaurant management employees prior to opening;
costs to recruit and train an average of 150 hourly restaurant employees; wages, travel and lodging costs for our opening
training team and other support employees; costs to practice service activities; and straight-line minimum base rent during the
construction and in-restaurant training period. Preopening expenses vary from location to location depending on a number of
factors, including the proximity of our existing restaurants; the amount of rent expensed during the construction and in-
restaurant training periods; the size and physical layout of each location; the number of management and hourly employees
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required to operate each restaurant; the relative difficulty of the restaurant staffing process; the cost of travel and lodging for
different metropolitan areas; the timing of the restaurant opening; and the extent of unexpected delays, if any, in obtaining
necessary licenses and permits to open the restaurant. The acquisition of our necessary operating licenses and permits may also
depend on our landlords obtaining their licenses and permits, as well as fully completing their construction activities for the
retail projects in which our leased premises are located.
Our preopening expense for a prototypical BJ’s Restaurant & Brewhouse® location averaged approximately $0.4 million in
fiscal 2017. Preopening expenses are typically higher for non-prototypical, “custom footprint” restaurants and for a restaurant’s
initial entry into a new market. During fiscal 2018, we plan to open our first restaurant in the state of Rhode Island, where we
expect to incur initially higher preopening costs. We usually incur the most significant portion of direct preopening costs
within the two-month period immediately preceding and during the month of a restaurant’s opening. Preopening costs can
fluctuate significantly from period to period, based on the number and timing of restaurant openings and the specific
preopening costs incurred for each restaurant. We expense preopening costs as incurred in accordance with U.S. Generally
Accepted Accounting Principles (“U.S. GAAP”).
BREWING OPERATIONS
Sales of our proprietary craft beers represented approximately 7% of our total restaurant sales during fiscal 2017. In
substantially all of our restaurants we also offer a wide selection of other popular craft beers on tap. Accordingly, total sales of
beer represented approximately 11% of our total restaurant sales during fiscal 2017.
Our internal brewing operations originated in 1996 with the opening of the first large format BJ’s Restaurant & Brewery®
location in Brea, California, which included our first on-site brewing operation. The Brea BJ’s Restaurant & Brewery®
serviced not only that restaurant, but also several other California restaurants, using a “hub and spoke” production and
distribution model that is legally permitted in California with certain limitations and restrictions. To supplement our internal
brewing operations and as a result of the constraints imposed by various state “tied-house” laws, which regulate how alcoholic
beverages are manufactured, distributed and marketed, we also utilize qualified independent third party brewers to produce our
beer, using our proprietary recipes. In fiscal 2017, our four BJ’s Restaurant & Brewery® locations and two brewpub locations
produced approximately 25,750 barrels of BJ’s branded beer, and independent third party brewers produced approximately
31,250 barrels of BJ’s branded beer. Our brewing operations are typically staffed with a head brewer and an assistant brewer,
who report to a brewing director. Production planning and quality control are monitored by our corporate brewing operations
department which is led by our Senior Vice President of Brewing Operations. Additionally, our on-site and independent third
party brewing operations periodically send out samples of each batch of BJ’s branded beer to an independent laboratory for
quality control testing purposes.
As we continue to expand the BJ’s restaurant concept, our requirement to produce our proprietary craft beer will continue to
grow. As a result of that growth, we will continue to evaluate the benefits and risks associated with brewing our beer internally
and using qualified independent third party brewers, including factors such as availability of adequate production capacity,
quality control procedures, federal and state laws, consistency of corporate and brand strategy, and the operating and capital
costs associated with independent third party brewing versus the costs of brewing operations ownership. We currently believe
that a combination of internal brewing and larger-scale independent third party brewing represents the optimal production
method for our craft beers as we continue the expansion of our restaurants nationally. This approach allows us to get the
benefits provided by brewing beer in larger batches, yet also provides us the flexibility to allow our brewing operations to
focus on specialty, seasonal and research and development beers. We estimate our total proprietary craft beer requirement to be
approximately 66,000 barrels for fiscal 2018, with approximately 54% of that requirement expected to be produced by
independent third party brewers.
We also produce our proprietary non-alcoholic craft sodas that are sold in our restaurants. Our craft sodas include root beer,
ginger beer, cream, orange and black cherry soda.
MARKETING AND ADVERTISING
We believe that the most effective method, over the long run, to protect and enhance our customer visit frequency is to spend
our marketing dollars on the plate and provide better food quality, service and facilities for our customers. However, due to
sluggish retail sales growth coupled with the maturation of the casual dining segment of the restaurant industry, we have been
prudently increasing our marketing expenditures to improve awareness and brand equity in the markets where we operate. Our
marketing spend generally takes the form of limited television for those markets in which we have enough restaurant
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penetration, as well as print, radio, digital and social media programs. We also utilize our loyalty program, BJ’s Premier
Rewards®, to engage with our customers and monitor their frequency and purchasing behavior.
Our marketing related expenditures were approximately 2.0%, 1.9%, and 2.2% of revenues for fiscal 2017, 2016, and 2015,
respectively. We expect our marketing expenditures in 2018 to continue to be between 2% to 3% of our revenues. However,
depending on the current operating conditions for casual dining restaurants, we may decide to increase or decrease our
marketing expenditures beyond our current expectations.
CHARITABLE ACTIVITIES
At BJ’s we believe it is important to give back to the communities we serve and to do more good things for more people. In
fiscal 2006, we started the BJ’s Restaurants Foundation (the “Foundation”), a 501(c)(3) qualified non-profit charitable
organization, principally dedicated to supporting charities that benefit children’s healthcare and education, with a primary
focus on the Cystic Fibrosis Foundation (“CFF”). Our Chairman of the Board of Directors and four of our current executive
officers currently serve on the Foundation’s seven-person Board of Directors. Our commitment to supporting humanitarian
causes is exemplified by our “Cookies for Kids” program, whereby we donate a portion of the sales of our signature Pizookie®
dessert to CFF. In addition, we arrange for the collection and donation of other funds to CFF through our restaurant preopening
training programs. These programs, combined with other programs administered by the Foundation resulted in the donation of
$0.4 million to CFF during each of the last three fiscal years.
We also focus on supporting our local communities by providing food and other resources for many worthwhile charitable
causes and events. The Foundation’s Team Action to Support Communities (“TASC Force”) program recognizes and supports
the volunteer efforts of our restaurant employees across the country as they help to give back to the communities in which our
restaurants do business. The TASC Force program received the prestigious Restaurant Neighbor Award in the large business
category for 2009 from the National Restaurant Association. The TASC Force teams have helped fulfill the wishes of special
needs kids, placed flags in a national cemetery by the graves of fallen soldiers, painted over unsightly graffiti and helped clean
up beaches, parks and school grounds. In addition, the TASC Force teams have hosted blood drives, worked with Special
Olympics, painted houses for elderly citizens, supported Habitat for Humanity and No Kid Hungry, re-built playgrounds,
worked at food banks, participated in fundraising runs and walkathons and delivered food to families in need.
INFORMATION SYSTEMS
We believe it is extremely important to provide our operators with state of the art, secure technology so that they can better
serve our customers and our employees in a productive and efficient manner. These technologies include an automated kitchen
display system (“KDS”) and bar display system (“BDS”), a web-based labor scheduling and productivity analyzer system, a
theoretical food cost system, an automated front desk table management system and, in 2017, hand held server tablets. Each of
these systems is integrated into our Point of Sale (“POS”) system which is used to record sales transactions, send menu orders
to our kitchen, batch and transmit credit card transactions, record employee time clock information and produce a variety of
management reports. Our KDS is an automated routing and cooking station balancing system which improves cooking station
productivity, synchronizes order completion, provides valuable ticket time and cooking time data, and allows for more efficient
levels of labor without sacrificing quality. Our BDS is an automated routing and beverage station balancing system which
improves beverage station productivity by further leveraging our automation capability. Additionally, our web-based labor
scheduling and productivity analyzer automates the labor scheduling for the managers and employees and produces a number
of real-time key performance indicators and productivity reports for our management team, including controls and alerts to
assist in complying with federal, state and local labor laws. Our theoretical food cost system and automated food prep system
allow us to better measure product yields in our kitchens and help reduce kitchen errors and eliminate excessive waste. Our
automated front desk table management system helps us to better optimize the overall seating efficiencies and “table turns” in
our restaurants. We also utilize a centralized accounting and human resources system that collects data from our restaurants in
order to produce operational and scorecard reporting as well as a data center technology services with cloud based technologies
to provide scalability and bursting capabilities which support growth and enable rapid technology deployments. Our electronic
human resources workflow solution streamlines and expedites the process of onboarding new employees, while insuring
accuracy and facilitating the collection of richer data. Our tablet-based inventory technology streamlines our inventory
counting process while insuring accuracy. Our BJ’s mobile application, which allows our customers to use their smartphones to
order ahead, add their name to our waitlist, pay at the table and manage their loyalty account, among other things, has been
well received by our customers. We will continue to develop restaurant and support technologies that help improve the
customer experience, employee effectiveness, financial management and cost control. All new technology is thoroughly tested
before any company-wide rollout is implemented.
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SUPPLY CHAIN MANAGEMENT
Our supply chain department, working together with our culinary research and development team, is responsible for the
selection and procurement of all of the food ingredients, beverages, products and supplies for our restaurants and brewing
operations. Additionally, the supply chain department manages procurement agreements in the areas of energy, transportation
and general corporate services. We seek to obtain the highest quality menu ingredients, products and supplies from reliable,
sources at competitive prices. Ingredient specifications are mandated by the supply chain department in order to consistently
maintain the highest quality ingredients and operational materials. We continually research and evaluate various food
ingredients, products and supplies for consistency and quality and compare them to our detailed specifications. In order to
maximize operating efficiencies between purchase and usage, each restaurant’s Executive Kitchen Manager determines daily
usage requirements for food ingredients, products and supplies for their restaurant and places all orders with vendors approved
by our supply chain department. Our Executive Kitchen Managers also inspect our deliveries to ensure that the items received
meet our quality specifications and negotiated prices. For many of our menu ingredients, we have arranged for acceptable
alternative manufacturers, vendors, growers and shippers in order to reduce risk in our supply chain.
Where economically feasible and possible, we attempt to negotiate contracts for key commodities used in the preparation of
our food and beverage offerings, based on our expected requirements for each fiscal year. If our attempts are successful, most
of our contracts typically range in duration from three to twelve months. Although we currently do not directly engage in future
contracts or other financial risk management strategies with respect to potential commodity cost fluctuations, from time to time
we may opportunistically request that our suppliers consider doing so to help minimize the impact of potential cost
fluctuations. Suppliers will typically pass the cost of such strategies along to us, either directly or indirectly.
We use Distribution Market Advantage (“DMA”), a consortium of large, regional food distributors located throughout the
United States to deliver the majority of our food products to our restaurants. In July 2017, after conducting a market evaluation,
we entered into a new five-year agreement with DMA. The new agreement expires in June 2022. Jacmar Foodservice
Distribution is a member of DMA and is the primary distributor of food and operating supplies for our California and Nevada
restaurants. See Note 11 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-
K for related party transactions. We have a non-exclusive contract with DMA on terms and conditions that we believe are
consistent with those made available to similarly situated restaurant companies.
Additionally, in 2006, we entered into an agreement with the largest nationwide foodservice distributor of fresh produce in the
United States to service most of our restaurants and, where licensed, to distribute our proprietary craft beer to our restaurants.
This distributor currently delivers our proprietary craft beer to approximately 50% of our restaurants. If our relationship with
this distributor were discontinued, we would pursue alternative distributors. However, it may take some time to enter into
replacement distribution arrangements, and our costs for distribution may increase as a result.
The overall cost environment for food commodities can be extremely volatile due to domestic and worldwide agricultural,
supply/demand and other macroeconomic factors that are outside of our control. Additionally, the availability and prices of
food commodities can also be influenced by increased energy prices, animal-related diseases, natural disasters, increased geo-
political tensions, the relationship of the dollar to other currencies, consumer demand both domestically and worldwide, and
other factors. Virtually all commodities purchased and used in the restaurant industry, including proteins, grains, oils, dairy
products, and energy have varying amounts of inherent price volatility associated with them. Additionally, during periods of
rising costs for diesel fuel, our major distributors have the ability under our agreements to pass along fuel surcharges to us that
are triggered when their cost per gallon of diesel fuel exceeds a certain level. While we attempt to manage these factors by
offering a diversified menu and by attempting to contract for our key commodities for extended periods of time whenever
feasible and possible, there can be no assurance that we will be successful in this respect due to the many factors that are
outside of our control.
COMPETITION
The domestic restaurant industry is highly competitive and generally considered to be mature. There are a substantial number
of casual dining, fast casual and quick service restaurant chains and other food and beverage service operations, that compete
both directly and indirectly with us in every respect, including food quality and service, the price-value relationship, beer
quality and selection, atmosphere, suitable sites for new restaurants and for qualified personnel to operate our restaurants,
among other factors. We also compete within each of our trade areas with locally-owned restaurants. We face growing
competition as a result of the trend toward convergence in grocery, deli and restaurant services, particularly in the supermarket
industry which offers “convenient meals” in the form of improved entrées and side dishes.
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Our restaurant concept is a relatively small “varied menu” casual dining competitor when compared to the mature “mass
market” chains, with 63 of our restaurants currently located in one state - California. Our overall brand awareness and
competitive presence in states outside of California is not as significant as that of our major casual dining chain competitors.
Many competitors with similar concepts to ours have been in business longer than we have, have greater consumer awareness,
and often have substantially greater capital, marketing and human resources. Accordingly, we must be prepared to constantly
evolve and refine the critical elements of our restaurant concept over time to protect our longer-term competitiveness.
Additionally, due to the continuing difficult operating environment for casual dining restaurants, coupled with continuing
pressure on consumer spending for restaurant occasions, we expect that our larger chain restaurant competitors will continue to
allocate even more resources to their national media advertising and discounting programs in order to protect their respective
market shares, which could have an adverse effect on our sales and results of operations.
The restaurant industry can be significantly affected by changes in consumer tastes and nutritional concerns, national, regional
or local economic conditions, demographic trends, traffic patterns, weather, and the type and number of competing restaurants.
Changes in these factors could adversely affect us. In addition, other factors such as increased food, beverage, labor, energy
and other operating costs could adversely affect us. We believe, however, that our ability to offer higher quality food and
beverages at moderate prices with superior service in a distinctive dining environment provides us with the opportunity to
capture additional market share in the casual dining segment.
FOOD QUALITY AND SAFETY
Our revenues can be substantially affected by adverse publicity resulting from food quality, illness, or health concerns
stemming from incidents occurring at a restaurant of ours as well as incidents that may occur at our competitors’ restaurants. In
addition, our revenues can be affected by illness or health concerns stemming from incidents occurring at our suppliers or
competing suppliers. While we believe that our internal policies and procedures for food safety and sanitation are thorough, the
risk of food-borne illness cannot be completely eliminated, and incidents at other restaurant chains or in the food supply chain
may affect our restaurants even if our restaurants are not implicated in a food safety concern. We attempt to manage risks of
this nature through food safety controls throughout our supply chain and internal training programs, but the occurrence of any
one of these factors in any one of our restaurants or elsewhere within the foodservice industry could cause our entire Company
to be adversely affected.
RELATED PARTY TRANSACTIONS
James Dal Pozzo, the Chief Executive Officer of the Jacmar Companies (“Jacmar”), is a member of our Board of Directors.
Jacmar, through its affiliation with DMA, a consortium of large, regional food distributors located throughout the United
States, is currently our largest distributor of food, beverage, paper products and supplies. In 2006, we began using DMA to
deliver the majority of our food products to our restaurants. In July 2017, after conducting a market evaluation, we entered into
a new five-year agreement with DMA. The new agreement expires in June 2022. Jacmar services our restaurants in California
and Nevada, while other DMA distributors service our restaurants in all other states. Under the terms of our agreement with
DMA, Jacmar is required to sell products to us at the same prices as the other DMA distributors. Jacmar does not provide us
with any produce, liquor, wine or beer products, all of which are provided by other third party vendors and are included in
“Cost of sales” on our Consolidated Statements of Income. See Note 11 of Notes to Consolidated Financial Statements in Part
IV, Item 15 of this Annual Report on Form 10-K for more information on related party transactions.
GOVERNMENT REGULATIONS
We are subject to various federal, state and local laws, rules and regulations that affect our business. Each of our restaurants is
subject to licensing and regulation by a number of governmental authorities, which may include alcoholic beverage control,
labor/equal employment, building, land use, health, safety and fire agencies, and environmental regulations in the state or
municipality in which the restaurant is located. Difficulties obtaining or maintaining the required licenses or approvals could
delay or prevent the development of a new restaurant in a particular area or could adversely affect the operation of an existing
restaurant. We believe, however, that we are in compliance in all material respects with all relevant laws, rules, and regulations.
We have never experienced abnormal difficulties or delays in obtaining the licenses or approvals required to open a new
restaurant or in continuing the operation of an existing restaurant.
Alcoholic beverage control regulations require each of our restaurants to apply to a federal and state authority and, in certain
locations, municipal authorities for a license and permit to sell alcoholic beverages on and off premises. Typically, licenses
must be renewed annually and may be revoked or suspended for cause by such authority at any time. Alcoholic beverage
control regulations relate to numerous aspects of the daily operations of our restaurants, including minimum age of patrons and
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employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, and storage and dispensing
of alcoholic beverages.
Our restaurants and brewing operations are subject to “tied house” laws and the “three tier system” of beverage alcohol
distribution, which were introduced after the repeal of Prohibition by various states. These laws generally prohibit brewers
from holding an interest in retail licenses and require manufacturers, distributors and retailers to remain separate “tiers.” Over
the last 25 years, “brewpubs,” which are both retailers and brew beer onsite, have been authorized by law in most states
through specific exceptions to these laws. These exceptions are unique to each state and do not mirror one another. However,
brewpubs are generally licensed as retailers and do not have the same privileges as microbreweries, and the privileges of, and
restrictions imposed on, brewpubs vary from state to state. These restrictions sometimes prevent us from operating both
brewpubs and restaurants in some states. We believe that we are currently in compliance with the brewpub regulations in the
states where we hold such licenses. However, there is some risk that a state’s brewpub regulations or the interpretation of these
regulations may change in a way that could impact our current model of brewing beer and/or supplying beer to our restaurants
in that state. We apply for our alcoholic beverage licenses with the advice of outside legal and licensing counsel and
consultants. Even after the issuance of these licenses, our operations could be subject to differing interpretations of the “tied
house” laws and the requirements of the “three tier system” of beverage alcohol distribution in any jurisdiction that we conduct
business. Additionally, the failure to receive or retain, or a delay in obtaining, a liquor license in a particular location could
adversely affect our ability to obtain such a license elsewhere.
We are subject to “dram-shop” statutes in California and other states in which we operate. Those statutes generally provide a
person who has been injured by an intoxicated person the right to recover damages from an establishment that has wrongfully
served alcoholic beverages to such person. We carry liquor liability coverage, as part of our existing comprehensive general
liability insurance, which we believe is consistent with coverage, carried by other entities in the restaurant industry and would
help protect us from exposure created by possible claims. Even though we carry liquor liability insurance, a judgment against
us under a dram-shop statute in excess of our liability coverage could have a materially adverse effect on us. Regardless of
whether any claims against us are valid or whether we are liable, claims may also be expensive to defend and may divert
management’s time and our financial resources away from our operations. We may also be adversely affected by publicity
resulting from such claims.
Various federal and state labor laws, along with rules and regulations, govern our relationship with our employees, including
such matters as minimum wage, overtime, tip credits, health insurance, working conditions, safety and work eligibility
requirements. Significant additional governmental mandates, such as an increased minimum wage, a change in the laws
governing exempt employees, an increase in paid time off or leaves of absence, mandates on health benefits and insurance or
increased tax reporting and payment requirements for employees who receive gratuities, could negatively impact our
restaurants’ profitability. We are also subject to the regulations of the Immigration and Customs Enforcement (“ICE”) branch
of the United States Department of Homeland Security. In addition, some states in which we operate have adopted immigration
employment protection laws. Even if we operate our restaurants in strict compliance with ICE and state requirements, some of
our employees may not meet federal work eligibility or residency requirements, despite our efforts and without our knowledge,
which could lead to a disruption in our work force. Additionally, our suppliers may also be affected by various federal and state
labor laws which could result in supply disruptions for our various goods and services or higher costs for goods and services
supplied to us.
We are also subject to various laws and proposals regarding regulations relating to nutritional content, nutritional labeling,
product safety and menu labeling.
We are subject to federal and state environmental regulations. Various laws concerning the handling, storage, and disposal of
hazardous materials, such as cleaning solvents, and the operation of restaurants and brewpubs in environmentally sensitive
locations may impact aspects of our operations. During fiscal 2017, there were no material capital expenditures for
environmental control facilities.
Our facilities must comply with the applicable requirements of the Americans With Disabilities Act of 1990 (“ADA”) and
related state statutes. The ADA prohibits discrimination on the basis of disability with respect to public accommodations and
employment. Under the ADA and related state laws, when constructing new restaurants or undertaking significant remodeling
of existing restaurants, we must make them readily accessible to disabled persons. We must also make reasonable
accommodations for the employment of disabled persons.
We have a significant number of hourly restaurant employees who receive income from gratuities. We have elected to
voluntarily participate in a Tip Reporting Alternative Commitment (“TRAC”) agreement with the Internal Revenue Service.
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By complying with the educational and other requirements of the TRAC agreement, we reduce the likelihood of potential
employer-only FICA assessments for unreported or under reported tips.
EMPLOYEES
At February 26, 2018, we employed approximately 21,500 employees at our 197 restaurants. Most of our employees in our
restaurant operations provide their services on a part-time basis. We also employed approximately 200 employees at our
restaurant support center and in our field supervision organization. We believe that we maintain favorable relations with our
employees. Currently, no unions or collective bargaining arrangements are in place at our Company.
INSURANCE
We maintain property and casualty insurance with coverage and limits we believe are currently appropriate for our operations.
We retain a substantial portion of our workers’ compensation and general liability costs through self-insured retentions and
large deductibles. There is no assurance that any insurance coverage maintained by us will be adequate or that we will not
experience claims in excess of our coverage limits; that we can continue to obtain and maintain such insurance at all; or that
our premium costs will not rise to an extent that they will adversely affect our ability to economically obtain or maintain such
insurance. While we also carry employment practices insurance, a settlement or judgment against us in excess of, or outside of,
our coverage limitations could have a material adverse effect on our results of operations, liquidity, financial position and
business. See “Limitations in our insurance coverage or rising insurance costs could adversely affect our business or financial
condition in certain circumstances” in “Risk Factors” contained in Part I, Item 1A of this Annual Report on Form 10-K.
TRADEMARKS AND COPYRIGHTS
We believe that our trademarks, service marks and other proprietary rights have significant value and are important to our
brand-building effort and the marketing of our restaurant concept. Our domestically-registered trademarks and service marks
include, among others, our stylized logos displaying the name “BJ’s” for restaurant services, restaurant and bar services, on-
line ordering and take-out restaurant services and the word mark “BJ’s” for restaurant and bar services, take-out and carry-out
restaurant services. We have also registered with the United States Patent and Trademark Office many of our standard and
seasonal beer logos and names, as well as many of our signature menu item names including “Great White” and “Sweet Pig”
for our proprietary pizzas, “Pizookie” for our proprietary dessert and “Enlightened Entrees,” “Craft Matters” and “Wow, I
Love This Place” for our branding. We have registered our BJ’s logo mark in a number of foreign countries. Additional
domestic and foreign trademark applications are pending. We have also registered our ownership of the internet domain name
“www.bjsrestaurants.com” and other internet domain names. We have in the past protected, and expect to continue to
vigorously protect, our proprietary rights. We cannot predict whether steps taken by us to protect our proprietary rights will be
adequate to prevent misappropriation of these rights or the use by others of restaurant features based upon, or otherwise similar
to, our concept and products. There may be other restaurants, retailers and/or businesses that also use the letters “BJ’s” in some
form or fashion throughout the United States and abroad. It may be difficult for us to prevent others from copying elements of
our concept. Any litigation undertaken to enforce our rights will likely be costly. In addition, we may face claims of
misappropriation or infringement of third parties’ trademarks, patents or other intellectual property rights. Defending these
claims may be costly and, if unsuccessful, may prevent us from continuing to use certain intellectual property rights or
information in the future and may result in a judgment or monetary damages.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning our executive officers and other members of the senior leadership
team as of February 26, 2018:
Name
Gregory A. Trojan
Gregory S. Levin
Gregory S. Lynds
Lon F. Ledwith
Kevin E. Mayer
Brian S. Krakower
Kendra D. Miller
Age
58
50
56
60
48
47
43
Position
Chief Executive Officer and Director
President, Chief Financial Officer and Secretary
Executive Vice President and Chief Development Officer
Executive Vice President, Operations
Executive Vice President and Chief Marketing Officer
Senior Vice President and Chief Information Officer
Senior Vice President, General Counsel and Assistant Secretary
GREGORY A. TROJAN has served as a member of the Company’s Board of Directors since December 2012 and as our Chief
Executive Officer since February 2013. Mr. Trojan also served as our President from December 2012 until January 2018, when
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Mr. Levin was promoted to President. Prior to joining the Company, Mr. Trojan was employed by Guitar Center, Inc., a
leading retailer of musical instrument products, where he served as President, Chief Executive Officer and Director from
November 2010 to November 2012 and as President, Chief Operating Officer and Director from October 2007 to November
2010. From 1998 to 2006, Mr. Trojan served as Chief Executive Officer of House of Blues Entertainment, Inc., an operator of
restaurant and music venues, concerts and media properties, having served as President from 1996 to 1998. Prior to that, he
held various positions with PepsiCo from 1990 to 1996, including service as an executive officer and eventually as Chief
Executive Officer of California Pizza Kitchen, Inc., when it was owned by PepsiCo. Earlier in his career, Mr. Trojan was a
consultant at Bain & Company, the Wharton Small Business Development Center and Arthur Andersen & Company. Mr.
Trojan served on the Board of Directors at Oakley Inc. from June 2005 to November 2007 and Domino's Pizza, Inc. from
March 2010 to November 2017.
GREGORY S. LEVIN has served as our Chief Financial Officer since September 2005. He was promoted to Executive Vice
President in October 2007 and added the post of Secretary in June 2008. In January 2018, Mr. Levin was promoted to President
and Chief Financial Officer. From February 2004 to August 2005, Mr. Levin served as Chief Financial Officer and Secretary of
SB Restaurant Company, a privately held company that operated the Elephant Bar Restaurants. From 1996 to 2004, Mr. Levin
was employed by California Pizza Kitchen, Inc., operator and licensor of casual dining restaurants, with his last position as
Vice President, Chief Financial Officer and Secretary. Earlier in his career, he served as an audit manager with Ernst & Young
LLP.
GREGORY S. LYNDS has served as our Chief Development Officer since July 2003 and was promoted to Executive Vice
President in October 2007. Prior to joining the Company, Mr. Lynds served as a Director of Real Estate for Darden
Restaurants, Inc., the largest casual dining company in America. Prior to joining Darden, Mr. Lynds served as Vice President
of Real Estate and Development for Wilshire Restaurant Group (Marie Callender’s and East Side Mario’s) and was a partner
responsible for expanding the Mimi’s Café brand.
LON F. LEDWITH has served as our Executive Vice President of Operations since April 2015. Prior to this responsibility, he
served as our Senior Vice President of Operations Talent Development from January 2010 to March 2015, as our Senior Vice
President of Restaurant Operations from April 2006 to December 2009, and as Vice President of Operations from February
2004 to March 2006. From July 1981 to November 2003, Mr. Ledwith was employed by Brinker International, Inc., with his
last position as a Regional Vice President of the Chili’s Grill & Bar concept.
KEVIN E. MAYER has served as our Executive Vice President and Chief Marketing Officer since July 2014. Prior to joining
the Company, Mr. Mayer was employed by Volkswagen of America, the U.S. subsidiary of the second largest global auto
brand, Volkswagen AG, where he served as Vice President of Marketing from June 2012 to December 2013. From October
2010 to June 2012, Mr. Mayer was employed by General Motors and served as their Director of Global Advertising and
Promotions for Chevrolet. Prior to that, Mr. Mayer served as the Director of Marketing Communications for Subaru of
America from March 2007 to October 2010. Early in his career, Mr. Mayer served in a variety of agency and client-side
leadership roles, such as Grey Advertising.
BRIAN S. KRAKOWER has served as our Senior Vice President and Chief Information Officer since February 2013. Prior to
joining the Company, Mr. Krakower served as Chief Technology Officer for Restaurant Revolution Technologies, a restaurant
order management technology solutions company. From 2007 to 2012, Mr. Krakower was employed by California Pizza
Kitchen, Inc., operator and licensor of casual dining restaurants, with his last position as Vice President of Information
Technology. From 2003 to 2007, Mr. Krakower served as Senior Director of Information Technology - Corporate Systems for
The Cheesecake Factory Incorporated, a publicly held operator of upscale casual dining restaurants. Prior to that, Mr.
Krakower was employed by House of Blues Entertainment, Inc., an operator of restaurant and music venues, concerts and
media properties, where he served as its Senior Director of Information Systems & Technology from 1997 to 2003.
KENDRA D. MILLER has served as our Senior Vice President, General Counsel and Assistant Secretary since March 2011.
From August 2008 to February 2011, Ms. Miller practiced law as a partner at the international law firm of Crowell & Moring
LLP in Irvine, California. From January 2001 to August 2008, she was employed by Carlton, DiSante & Freudenberger LLP,
where she became a partner in January 2008. From September 1999 to December 2000, she practiced law at Paul, Hastings,
Janofsky & Walker LLP in Los Angeles, California. In her private practice, she litigated on behalf of and counseled numerous
restaurant chains on employment law and business matters.
ITEM 1A. RISK FACTORS
The risk factors presented below may affect our future operating results, financial position and cash flows. The risks described
in this Item 1A and other sections of this Annual Report on Form 10-K are not exhaustive and are not the only risks we may
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ever face in our business. We operate in a very competitive and rapidly changing environment. New risks and uncertainties
arise from time to time, and we cannot predict those events or how they may affect us. There may be other risks and
uncertainties that are not currently known or that are currently deemed by us to be immaterial. However, they may ultimately
adversely affect our business, financial condition and/or operating results. In addition to the risk factors presented below,
changes in general economic conditions, credit markets, consumer tastes, discretionary spending patterns, demographic trends,
and consumer confidence in the economy, all of which affect consumer behavior and spending for restaurant dining occasions,
may have a material impact on us.
Failure to maintain a favorable image, credibility and the value of the BJ’s brand and our reputation for offering customers
a higher quality more differentiated total dining experience at a good value may adversely affect our business.
The successful operation of the BJ’s restaurant concept and the execution of our national expansion plan are highly dependent
upon BJ’s ability to remain relevant to consumers and a brand they trust. We believe that we have built a strong reputation for
quality and our differentiated BJ’s menu and beverage offerings are integral components of the total dining experience that
customers enjoy in our restaurants. We believe that we must continue to protect, enhance and evolve the BJ’s brand to continue
to be successful in the future. Any incident that erodes consumer trust in or affinity for the BJ’s brand may significantly reduce
its value. If consumers perceive or experience any reduction in our food or beverage quality, service or facility ambiance, or in
any way believe we failed to deliver a consistently positive dining experience, the value of the BJ’s brand and our entire
Company may be impaired. We may also need to evolve the BJ’s restaurant concept in order to compete with popular new
restaurant formats or concepts that emerge from time to time, and we cannot provide any assurance that we will be successful
in doing so, or that any changes we make to our concept in response will be successful or not adversely affect our profitability.
In addition, with the increasing prevalence of food-away-from-home at fast casual restaurants, single-serve operations, quick-
service restaurants and certain grocery operations, combined with the continuing pressure on consumer discretionary spending
for restaurant occasions, consumers may choose less expensive alternatives to BJ’s which may also negatively affect customer
traffic at our restaurants.
In addition, our ability to successfully develop new restaurants in new markets may be adversely affected by a lack of
awareness or acceptance of our brand in these new markets. To the extent that we are unable to foster name recognition and
affinity for our brand in new markets, our new restaurants may not perform as expected and our growth may be significantly
delayed or impaired.
Any inability or failure to recognize, respond to and effectively manage the accelerated impact of social media may
adversely affect our business.
There has been a significant increase in the use of social media and similar platforms, including weblogs (blogs), social media
websites and other forms of Internet-based communications which allow individuals’ access to a broad audience of consumers
and other interested persons. Consumers value readily available information concerning goods and services that they have or
plan to purchase, and may act on such information without further investigation or authentication. The availability of
information on social media platforms is virtually immediate as is its impact. Many social media platforms immediately
publish the content their subscribers and participant’s post, often without filters or checks on accuracy of the content posted.
The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily
available. Information concerning our Company may be posted on such platforms at any time. Information posted may be
adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may
be immediate without affording us an opportunity for redress or correction. Such platforms also may be used for dissemination
of trade secret information, compromising valuable company assets. In summary, the dissemination of information online may
harm our business, prospects, financial condition and results of operations, regardless of the information’s accuracy. The
inappropriate use of social media vehicles by our customers or employees could increase our costs, lead to litigation or result in
negative publicity that could damage our reputation.
As part of our marketing efforts, we rely on search engine marketing and social media platforms such as Facebook®, Twitter®
and Google+™ to attract and retain customers. We also are initiating a multi-year effort to implement new technology
platforms that should allow us to improve our level of digital engagement with our customers and employees and thereby help
strengthen our marketing and related consumer analytics capabilities. These initiatives may not prove to be successful and may
result in expenses incurred without the benefit of higher revenues or increased engagement. Our brand could also be confused
with brands that have similar names, including but not limited to brands such as BJ’s Wholesale Club and other unaffiliated
restaurants that use “BJ’s” in their names. As a result, our brand value may be adversely affected by any negative publicity
related to others that use “BJ’s” in their brand names. We have registered certain trademarks and service marks in the United
States and foreign jurisdictions. However, we are aware of names and marks identical or similar to our service marks being
used from time to time by other persons. Although our policy is to oppose any such infringement, further or unknown
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unauthorized uses or other misappropriation of our trademarks or service marks may diminish the value of our brands and
adversely affect our business.
Any deterioration in general economic conditions may affect consumer spending and adversely affect our revenues,
operating results and liquidity.
Any decrease in customer traffic or the average expenditure per customer will negatively impact our financial results, since
reduced sales result in the deleveraging of the fixed and semi-fixed costs in our operations and thereby cause downward
pressure on our operating profits and margins. There is also a risk that if negative economic conditions persist for a long period
of time or worsen, consumers may make long-lasting changes to their discretionary purchasing behavior, including less
frequent discretionary purchases on a more permanent basis.
The above factors may also impose practical limits on our menu price increases. From time to time, we may announce that we
intend to take price increases on selected menu items in order to offset increased operating expenses. However, we cannot
provide assurance that menu price increases will not deter customers from visiting our restaurants, reduce the frequency of
their visits or affect their purchasing decisions.
Any deterioration in general economic conditions, which may also have a material adverse impact on our landlords or on
businesses neighboring our locations, may adversely affect our revenues and results of operations.
Any deterioration in general economic conditions may result in our landlords being unable to obtain financing or remain in
good standing under their existing financing arrangements which may result in their failure to satisfy obligations to us under
leases, including failures to fund or reimburse agreed-upon tenant improvement allowances. Any such failure may adversely
impact our operations.
In addition, if our landlords are unable to obtain sufficient credit to continue to properly manage their retail centers, we may
experience a drop in the level of quality of such centers where we operate restaurants. Our future development of new
restaurants may also be adversely affected by the negative financial situation of developers and potential landlords. Landlords
may try to delay or cancel recent development projects (as well as renovations of existing projects) which may reduce the
number of appropriate locations available that we would consider for our new restaurants. Furthermore, the failure of landlords
to obtain licenses or permits for development projects on a timely basis, which is beyond our control, may negatively impact
our ability to implement our development plan.
Our restaurants are generally located in or around high traffic retail developments with nationally recognized co-tenants, which
help increase overall customer traffic into those retail developments. Some of our co-tenants have ceased or may cease
operations in the future or have deferred openings or fail to open in a retail development after committing to do so. These
failures may lead to reduced customer traffic and a general deterioration in the surrounding retail centers in which our
restaurants are located and may contribute to lower customer traffic at our restaurants. If these retail developments experience
high vacancy rates, we may experience decreases in customer traffic. A decrease in customer traffic may adversely affect our
results of operations.
Changes in consumer buying patterns, particularly e-commerce sites and off premise sales may affect our revenues,
operating results and liquidity.
Our restaurants are primarily located near high consumer activity areas such as regional malls, lifestyle centers, “big box”
shopping centers and entertainment centers. We depend in large part on a high volume of visitors to these centers to attract
customers to our restaurants. E-Commerce or online shopping continues to increase and negatively impact consumer traffic at
traditional “brick and mortar” retail sites located in regional malls, lifestyle centers, “big box” shopping centers and
entertainment centers. A decline in visitors to these centers near our restaurants may negatively affect our sales.
In the last several years, off premise sales, specifically delivery, have increased due to consumer demand for convenience.
While we plan to continue to invest in the growth of our off premise sales, there can be no guarantee that we will be able to
increase our off premise sales. Off premise sales could also cannibalize dine in sales, or our systems and procedures may not be
sufficient to handle off premise sales, which may require additional investments in technology or people. Additionally, a large
percentage of delivery from our restaurants is through third party delivery companies. These third party delivery companies
require us to pay them a commission, which may lower our profit margin on those sales. Any bad press, whether true or not,
regarding third party delivery companies or their business model may negatively impact our sales.
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Any inability or failure to successfully expand our restaurant operations may adversely affect our growth rate and results of
operations.
A critical factor in our future success is our ability to expand our restaurant operations successfully, which will depend in large
part on our ability to open new restaurants in a profitable manner. We anticipate that our new restaurants will generally take
several months or even longer to reach targeted productivity levels due to the inefficiencies typically associated with new
restaurants, including lack of initial market and consumer awareness, the need to hire and train sufficient management and
restaurant personnel and other factors. The opening of new restaurants can also have either an expected or an unintended effect
on the sales levels at existing restaurants. We cannot guarantee that any restaurant we open will obtain operating results similar
to those of our existing restaurants. If we are unable to open and operate new restaurants successfully, our growth rate and our
results of operations will be adversely affected. Our expansion plans may also be impacted by the delay or cancellation of
potential new sites by developers and landlords, which may become more common as a result of economic deterioration or
tightening credit markets.
We intend to open new restaurants in both established and new markets. Opening new restaurants in established markets
generally provides some advantages in the form of stronger levels of initial consumer awareness, trial and usage, as well as
greater leverage of certain supply chain and field supervision resources. On the other hand, there is a risk that a portion of the
sales of existing restaurants in the market may transfer to newly opened restaurants in the same market, resulting in negative
pressure on our overall comparable restaurant sales metric. While we do not generally select locations for our new restaurants
where we believe that a significant sales transfer will likely occur, some unexpected sales transfer may inadvertently occur.
Some of our new restaurants are planned for new markets where we have little or no operating experience. New markets may
have different competitive conditions, consumer tastes and discretionary spending patterns than our existing markets. As a
result, new restaurants in those markets may be less successful than restaurants in our existing markets. Consumers in a new
market may not be familiar with the BJ’s brand. We also may find it more difficult to hire, motivate and retain qualified
employees in new markets. Restaurants opened in new markets may also have lower average restaurant sales than restaurants
opened in our existing markets, and may have higher construction, occupancy or operating costs than restaurants in existing
markets. Sales at restaurants opened in new markets may take longer to achieve margins typical of mature restaurants in
existing markets or may never achieve these targeted margins thereby affecting our overall profitability. As we expand into
new markets and geographic territories, our operating cost structures may not resemble our experience in existing markets.
Because there will initially be fewer restaurants in a given market, our ability to optimally leverage our field supervision,
marketing and supply chain resources will be limited for a period of time. Further, our overall new restaurant development and
operating costs may increase due to more lengthy geographic distances between restaurants resulting in higher purchasing,
preopening, labor, transportation and supervision costs. The performance of restaurants in new markets will often be less
predictable.
As part of our ongoing restaurant expansion and growth strategy, we may consider the internal development or acquisition of
additional restaurant concepts. We may not be able to internally develop or acquire additional concepts that are as profitable as
our existing restaurants. Additionally, growth through acquisitions will also involve additional financial and operational risks.
Any inability to open new restaurants on schedule in accordance with our targeted capacity growth or problems associated
with securing suitable restaurant locations, leases and licenses, recruiting and training qualified managers and hourly
employees and other factors, some of which are beyond our control and difficult to forecast accurately may adversely affect
our operations.
In order to achieve our targeted capacity rate of new restaurant growth, we must identify suitable restaurant locations and
successfully negotiate and finalize the terms of restaurant leases at a number of these locations. Due in part to the unique nature
of each proposed restaurant location, we cannot predict the timing or ultimate success of our site selection process or these
lease negotiations. Delays encountered in negotiating, or our inability to finalize to our satisfaction, the terms of a restaurant
lease may delay our actual rate of new restaurant growth and cause a significant variance from our targeted capacity growth
rate. In addition, our scheduled rate of new restaurant openings may be adversely affected by other factors, some of which are
beyond our control, including the following:
the availability and cost of suitable restaurant locations for development;
our ability to compete successfully for suitable restaurant locations;
the availability of adequate financing;
the timing of delivery of leased premises from our landlords so we can commence our build-out construction
activities;
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construction and development costs;
labor shortages or disputes experienced by our landlords or outside contractors, including their ability to manage
union activities such as picketing or hand billing which may delay construction and may create adverse publicity
for our business and operations;
any unforeseen engineering or environmental problems with the leased premises;
our ability to hire, train and retain additional management and restaurant personnel;
our ability to secure governmental approvals and permits, including liquor licenses;
our ability to make satisfactory arrangements for the delivery of our proprietary craft beer;
our ability to successfully promote our new restaurants and compete in the markets in which our new restaurants
are located;
weather conditions or natural disasters; and
general economic conditions.
Any inability to access sources of capital and or to raise capital in the future may adversely affect our business.
Our ability to successfully grow our business depends, in part, on the availability of adequate capital to finance the
development of additional new restaurants and other growth related expenses. Changes in our operating plans, acceleration of
our expansion plans, a decision to acquire another restaurant concept, lower than anticipated revenues, unanticipated and/or
uncontrollable events in the capital or credit markets that impact our liquidity, lower than anticipated tenant improvement
allowances offered by landlords, increased expenses or other events, including those described in this Annual Report on Form
10-K, may cause us to seek additional debt or equity financing on an accelerated basis in the event our cash flow from
operations is insufficient. Financing may not be available on acceptable terms, or at all, and our failure to raise capital when
needed may adversely affect our growth and other plans, as well as our financial condition. Additional equity financing, if
available, may be dilutive to the holders of our common stock and adversely affect the price of our common stock. Debt
financing, if available, may involve significant cash payment obligations, covenants and financial ratios that restrict our ability
to operate and grow our business, and would cause us to incur additional interest expense and financing costs. In addition,
disruptions in the global credit and equity markets, including unanticipated and/or uncontrollable events, may have an adverse
effect on our liquidity and our ability to raise additional capital if and when required.
Issuance of additional equity securities without the consent of shareholders may adversely affect our stock price and the
rights of existing shareholders.
We are not restricted from issuing additional common stock or preferred stock, including any securities that are convertible
into or exchangeable for, or that represent the right to receive, common stock or preferred stock or any substantially similar
securities. Our Board of Directors is authorized to issue additional shares of common stock and additional classes or series of
preferred stock without any action on the part of the shareholders. The Board of Directors also has the discretion, without
shareholder approval, to set the terms of any such classes or series of preferred stock that may be issued, including voting
rights, dividend rights and preferences over the common stock with respect to dividends or upon the liquidation, or winding up
of our business and other terms. If we issue preferred shares in the future that have a preference over our common stock with
respect to dividends or upon liquidation, dissolution or winding up, or if we issue preferred shares with voting rights that dilute
the voting power of our common stock, the rights of our common shareholders or the market price of our common stock may
be adversely affected.
Any failure of our existing or new restaurants to achieve expected results may have a negative impact on our consolidated
financial results.
The financial results of our existing restaurants may not be indicative of longer term performance or the potential market
acceptance of restaurants in other locations. There can be no assurance that any new restaurant that we open will have similar
operating results to those of prior restaurants. Our new restaurants typically take several months, or even longer, to reach
targeted levels of productivity due to inefficiencies typically associated with new restaurants. Accordingly, incremental sales
from newly-opened restaurants generally do not make a significant contribution to our total operating profits in their initial
months of operation. We make certain estimates and projections with regard to individual restaurant operations, as well as our
overall performance in connection with our impairment analyses for long-lived assets in accordance with U.S. GAAP. An
impairment charge is required when the carrying value of the restaurant exceeds the estimated undiscounted future cash flows
of the restaurant, in which case the restaurant assets are written down to estimated fair value. The projection of restaurant
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future cash flows used in this analysis requires the use of judgment and a number of estimates. If the restaurant’s actual results
differ from our estimates, charges to impair the restaurant’s assets may be required. If impairment charges are significant, our
results of operations may be adversely affected.
Any strain on our infrastructure and resources due to growth, which may slow down development of new restaurants may
adversely affect our ability to manager our existing restaurants.
We plan to continue opening new restaurants and may also consider the internal development or acquisition of additional
restaurant concepts in the future. Additionally, we may also evaluate potential joint ventures to supplement our pace of
expansion. Our continued expansion will increase demands on our management team, restaurant management systems and
resources, financial controls and information systems. These increased demands may adversely affect our ability to open new
restaurants and to manage our existing restaurants. If we fail to continue to improve our infrastructure or to manage other
factors necessary for us to meet our expansion objectives, our growth rate and operating results may be adversely affected.
Any decision to either reduce or accelerate the pace of openings may positively or adversely affect our comparative financial
performance.
Our opening costs continue to be significant and the amount incurred in any single year or quarter is dependent on the number
of restaurants expected to be opened during that time period. As such, our decision to either decrease or increase the rate of
openings may have a significant impact on our financial performance for the period of time being measured. Therefore, if we
decide to reduce our openings, our comparable opening costs will be lower and the short-term effect on our comparative
financial performance will be favorable. Conversely, if the rate at which we develop and open new restaurants is increased to
higher levels in the future, the resulting increase in opening costs will have an unfavorable short-term impact on our
comparative financial performance. At some future point, our pace of openings and annual rate of growth in total restaurant
operating weeks will begin to gradually decelerate as we become a more mature company.
Our recent trends in average restaurant sales or our trends in comparable restaurant sales may not be indicative of future
trends or future operating results.
Our recent average restaurant sales and comparable restaurant sales trends may not be indicative of future trends or future
operating results. Our ability to operate new restaurants profitably and increase average restaurant sales and comparable
restaurant sales will depend on many factors, some of which are beyond our control, including:
our ability to execute our business strategy effectively;
our ability to execute productively and efficiently within the “four walls” of each restaurant;
our menu development and pricing strategy;
our ability to continue deploying menu, beverage, capital expenditure and technological innovations that have the
opportunity to increase customer visit frequency and spending per visit;
initial sales performance by new restaurants, some of which may be unusually strong and thus difficult to increase
further;
intrusions into our restaurant trade areas by new restaurants operated by competitors;
the timing of new restaurant openings and related expenses;
changing demographics, consumer tastes or discretionary spending;
our ability to develop restaurants in geographic locations that do not compete with or otherwise adversely affect
the sales of our existing restaurants;
overall brand awareness in new markets or existing markets where we may develop new restaurants;
maturation of the casual dining segment;
levels of competition in one or more of our markets; and
general economic conditions, credit markets and consumer confidence.
We believe that certain of our restaurants operate at or near their effective productive capacities. As a result, we may be unable
to grow or maintain comparable restaurant sales at those restaurants, particularly if additional restaurants are opened near the
existing locations either by us or by our competitors.
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Any failure to drive both short-term and long-term profitable sales growth through continued enhancements to the BJ’s
restaurant concept and brand, coupled with any slippage in restaurant operational execution, may result in poor financial
performance. As part of our business strategy, we intend to drive profitable sales growth by increasing sales at existing
restaurants and by opening new restaurants. This strategy involves numerous risks, and we may not be able to achieve our
growth objectives. If we are unable to maintain BJ’s brand relevance and restaurant operational excellence to achieve
sustainable comparable restaurant sales growth, we may have to consider slowing the pace of new restaurant openings. BJ’s
short-term sales growth may be impacted if we are unable to drive near-term growth in customer traffic, and long-term sales
growth may be impacted if we fail to continue to evolve BJ’s to maintain its relevance, contemporary energy and overall value
and appeal to the consumer. The casual dining segment, in general, has not seen any significant growth in customer traffic in
several years. If this trend continues, our ability to grow customer traffic at our restaurants will depend on our ability to
increase our market share within the casual dining segment.
Adverse changes in our average restaurant revenues and comparable restaurant sales may have an adverse effect on our
common stock or increase the volatility of the price of our common stock.
Any failure of our menu development and marketing programs may not be successful.
We expect to continue investing in certain menu, marketing and merchandising initiatives that are intended to attract and retain
customers for our restaurants. Not all of such initiatives may prove to be successful and may thereby result in incremental
expenses incurred without the benefit of higher revenues, or may result in other unfavorable economic consequences.
Additionally, if our competitors were to increase their spending on menu development and marketing initiatives, or if our menu
and marketing initiatives were to be less effective than those of our competitors, we may experience a material adverse effect
on our results of operations.
Our inability or failure to successfully and sufficiently raise menu prices to offset rising costs and expenses may adversely
affect our results of operations.
In the past, we have experienced dramatic price increases of certain items necessary to operate our restaurants and brewing
operations, including increases in the cost of food, commodities, labor, employee benefits, insurance arrangements,
construction, energy and other costs. Additionally, low unemployment, new restaurant growth and competition and state
minimum wage increases have resulted in unprecedented wage pressure in the restaurant industry for managers and hourly
employees. To manage this risk in part, we attempt to enter into fixed price purchase commitments, with terms up to one year,
for many of our commodity requirements. However, it may not be possible for us to enter into fixed-price contracts for an
entire fiscal year for many of our commodity requirements. Additionally, we utilize menu price increases to help offset the
increased cost of commodities, minimum wage and other costs. However, there is no guarantee that our menu price increases
will be accepted by our customers. If our costs increase, our operating margins and results of operations will be adversely
affected if we are unable to increase our menu prices to offset such increased costs or if our increased menu prices result in less
customer traffic.
Expenditures required to open new restaurants may adversely affect our future operating results.
The expenditures required to develop new restaurants are significant. Actual costs may vary significantly depending upon a
variety of factors, including the site type, the square footage and layout of each restaurant, and conditions in the local real
estate market. The combination of our relatively small number of existing restaurants, the significant investment associated
with each new restaurant and the average revenues of our new restaurants relative to our total revenue may cause our results of
operations to fluctuate significantly.
Our inability to renew existing leases on favorable terms may adversely affect our results of operations.
The majority of our restaurants are located on leased premises and are subject to varying lease-specific arrangements. Some of
our leases require base rent that is subject to regional cost-of-living increases and other leases include base rent with specified
periodic increases. Other leases are subject to renewal at fair market value, which may involve substantial increases.
Additionally, many leases require contingent rent based on a percentage of gross sales. There can be no assurance that we will
be able to renew our expiring leases after exercising all remaining renewal options; therefore we may incur additional costs to
operate our restaurants, including increased rent and other costs related to our renegotiation of lease terms for an existing
leased premise or for a new lease in a desirable location and the relocation and development of a replacement restaurant.
The success of our restaurants depends in large part on leased locations. As demographic and economic patterns change,
current locations may or may not continue to be attractive or profitable. Possible declines in trade areas where our restaurants
are located or adverse economic conditions in surrounding areas may result in reduced revenues in those locations. In addition,
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desirable locations for new restaurant openings or for the relocation of existing restaurants may not be available at an
acceptable cost.
We are subject to all of the risks associated with leasing space subject to long-term non-cancelable leases.
Generally our leases are “net” leases, which require us to pay all of the cost of insurance, taxes, maintenance and utilities and
cannot be canceled. Additional sites that we lease are likely to be subject to similar long-term non-cancelable terms. If an
existing or future restaurant is not profitable and we decide to close it, we may be required to continue to perform our
obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term.
These potential increased occupancy costs may materially adversely affect our business, financial condition or results of
operations.
Our suppliers inability to continue to do business with or the alteration of the terms on which they do business with us may
adversely affect our operations.
If we are forced to find alternative suppliers for key services, whether due to demands from the vendor or the vendor’s
bankruptcy, that may be a distraction to us and adversely impact our business. If any of our major suppliers or a large number
of other suppliers suspend or cease operations, we may have difficulty keeping our restaurants fully supplied with the
commodities and supplies that we require. In addition, we currently rely on one or a limited number of suppliers for certain key
menu ingredients. If we were forced to suspend serving one or more of our menu items, that may have a significant adverse
impact on our restaurant customer traffic and the public perceptions of us, which would be harmful to our operations.
Our concentration of a significant number of our restaurants in California, Texas and Florida makes us particularly
sensitive to economic, regulatory, weather and other risk factors and conditions that are more prevalent in those states.
A significant number of our restaurants are concentrated in California, Texas and Florida. As a result, we are particularly
susceptible to adverse trends and economic conditions in those states. Many states and municipalities in which our restaurants
are located may experience severe revenue and budget shortfalls. Additionally, changes in state and municipal-level regulatory
requirements, such as increases to the minimum wage rate, income taxes, unemployment insurance, and other taxes as well as
mandatory healthcare coverage or paid leave in some cities where we operate or may desire to operate restaurants, may
adversely impact our financial results. Additionally, we believe that California is subject to a greater risk for earthquakes, fires,
water shortages, energy fluctuations and other natural and man-made disasters than most other states.
Any adverse change in consumer trends or traffic levels may adversely affect our business, revenues and results of
operations.
Due to the nature of the restaurant industry, we are dependent upon consumer trends with respect to the public’s tastes, eating
habits, public perception toward alcohol consumption and discretionary spending priorities, all of which can shift rapidly. We
also are dependent upon high consumer traffic rates at the sites surrounding our restaurants, which are primarily located in
high-activity areas such as urban, retail, mixed-use and lifestyle centers, to attract customers to our restaurants. In general, such
consumer trends and visit frequencies are significantly affected by many factors, including national, regional or local economic
conditions, changes in area demographics, public perception and attitudes, increases in regional competition, food, liquor and
labor costs, traffic and shopping patterns, weather, natural disasters, interest rates, co-tenancies in urban, retail and mixed-use
and lifestyle centers and the availability and relative cost of gasoline. Our success will depend, in part, on our ability to
anticipate and respond to such changing consumer preferences, tastes, eating and purchasing habits, as well as other factors
affecting the restaurant industry, including new market entrants and demographic changes. Any adverse change in any of the
above factors and our inability to respond to such changes may cause our restaurant volumes to decline and adversely affect
our business, revenues and results of operations.
Any inability to compete effectively in the restaurant industry may adversely affect our revenues, profitability and financial
results.
The restaurant industry is highly competitive. We compete on the basis of the taste, quality and price of food offered, customer
service, brand name identification, beer quality and selection, facilities attractiveness, restaurant location, atmosphere and
overall dining experience. Our competitors include a large and diverse group of restaurant chains and individual restaurants
that range from independent local operators that have opened restaurants in various markets to well-capitalized national
restaurant companies. In addition, we compete with other restaurants and retailers for real estate. We also face growing
competition as a result of the trend toward convergence in grocery, deli and restaurant services, particularly in the supermarket
industry which offers “convenient meals” in the form of improved entrées and side dishes from the deli section. Many of our
competitors have substantially greater financial, marketing and other resources than we do.
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Restaurant consumers are highly focused on overall value and price perception. If other restaurants are able to promote and
deliver a higher degree of perceived value through heavy discounting or other methods, our customer traffic levels may suffer
which would adversely impact our revenues and profitability. In addition, with improving product offerings at “fast-casual”
restaurants, quick-service restaurants and grocery stores, consumers may choose to trade down to these alternatives, which may
also negatively affect our financial results.
We believe that we have built a favorable reputation for the quality and differentiation of our restaurant concept. We also
believe that we must continue to re-invest in our core established restaurant operations to further protect and grow the overall
consumer “value” of our concept so that it will continue to be relevant in the future. Any incident that erodes consumer trust in,
or their attraction to, our concept may significantly reduce its value. If consumers perceive or experience any material
reduction in food quality, service or ambiance, or in any way believe we materially failed to deliver a consistently positive
dining experience, the consumer “value’ of our concept may suffer.
Any negative publicity about us, our restaurants, other restaurants, or others across the food supply chain, due to food
borne illness or about other reasons, whether or not accurate may adversely affect the reputation and popularity of our
restaurants and our results of operations.
The good reputation of our restaurants is a key factor to the success of our business. Incidents that occur at any of our
restaurants, or at restaurants operated by other foodservice providers or generally in the food supply chain, may be damaging to
the restaurant industry overall, may specifically harm our brand and reputation and may quickly result in negative publicity for
us, which may adversely affect our reputation and popularity with our customers. Moreover, negative publicity resulting from
poor food quality, illness, injury, food tampering or other health concerns, whether related to one of our restaurants, to the
restaurant industry, or to the beef, seafood, poultry or produce industries (such as negative publicity concerning the
accumulation of carcinogens in seafood, e-coli, hepatitis A, Avian Flu, listeria, salmonella, and other food-borne illnesses), or
operating problems related to one or more of our restaurants, may adversely affect sales for all of our restaurants and make our
brand and menu offerings less appealing to consumers.
Although we have followed industry standard food safety protocols in the past and continue to enhance our food safety and
quality assurance procedures, no food safety protocols can completely eliminate the risk of food-borne illness in any restaurant.
Even if food-borne illnesses arise from conditions outside of our control, the negative publicity from any such illnesses is likely
to be significant. If our restaurant customers or employees become ill from food-borne illnesses, we may be forced to
temporarily close the affected restaurants.
In addition, our brewing operations are subject to certain hazards and liability risks faced by all brewers, such as potential
contamination of ingredients or products by bacteria or other external agents that may be wrongfully or accidentally introduced
into products or packaging. While we have not experienced any serious contamination problem in our products, the occurrence
of such a problem may result in a costly product recall and serious damage to our reputation for product quality, as well as
claims for product liability.
New information or attitudes regarding diet, health and the consumption of alcoholic beverages may materially affect
customer demand and have an adverse impact on our results of operations.
Regulations and consumer eating habits may change as a result of new information or attitudes regarding diet and health. Such
changes may include regulations that impact the ingredients and nutritional content of the food and beverages we offer. For
example, several municipalities and states have approved restrictions on the use of trans-fats by restaurants. The success of our
restaurant operations is dependent, in part, upon our ability to effectively respond to changes in any consumer health
regulations and our ability to adapt our menu offerings to trends in food consumption. If consumer health regulations or
consumer eating habits change significantly, we may be required to modify or delete certain menu items. To the extent we are
unable to respond with appropriate changes to our menu offerings, it may materially affect customer demand and have an
adverse impact on our results of operations. The risks and costs associated with nutritional disclosures on our menus may also
impact our operations, particularly given differences among applicable legal requirements and practices within the restaurant
industry with respect to testing and disclosure, ordinary variations in food preparation among our own restaurants, and the need
to rely on the accuracy and completeness of nutritional information obtained from third party suppliers.
The gross profit margin on our sales of alcoholic beverages is generally higher than our gross profit margin on sales of food
items. The alcoholic beverage industry has become the subject of considerable societal and political attention in recent years
due to increasing public concern over alcohol-related social problems, including driving under the influence, underage drinking
and health consequences from the misuse of alcohol, including alcoholism. As an outgrowth of these concerns, the possibility
exists that advertising by beer producers may be restricted, that additional cautionary labeling or packaging requirements might
be imposed, that further restrictions on the sale of alcohol might be imposed, or that there may be renewed efforts to impose
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increased excise or other taxes on beer or alcohol related items sold in the United States. If beer or alcohol consumption were
to come into disfavor among domestic drinkers, or if the domestic beer industry were subjected to significant additional
governmental regulations, our sales and profits may be adversely affected.
Health concerns arising from outbreaks of flu viruses or other diseases, or regional or global health pandemics may
adversely affect our business.
The United States and other countries have experienced, or may experience in the future, outbreaks of viruses, such as
norovirus, Avian Flu or “SARS,” and H1N1 or “swine flu,” or other diseases such as bovine spongiform encephalopathy,
commonly known as “mad cow disease.” To the extent that a virus or disease is food-borne, or perceived to be food-borne,
future outbreaks may adversely affect the price and availability of certain food products and cause our customers to eat less of a
product. For example, health concerns relating to the consumption of beef or to specific events such as the outbreak of “mad
cow disease” may adversely impact sales of our beef-related menu items. In addition, public concern over “avian flu” may
cause fear about the consumption of chicken, eggs and other products derived from poultry. The inability to serve beef or
poultry-based products would restrict our ability to provide a variety of menu items to our customers. If we change our menu in
response to such concerns, we may lose customers who do not prefer the new menu, and we may not be able to sufficiently
attract new customers to produce the revenue needed to restore the profitability of our restaurant operations. We also may
generate different or additional competitors for our intended customers as a result of such a menu change and may not be able
to successfully compete against such competitors. If a virus is transmitted by human contact, our employees or customers may
become infected, or may choose, or be advised, to avoid gathering in public places, any of which may adversely affect our
restaurant customer traffic and our ability to adequately staff our restaurants, receive deliveries on a timely basis or perform
functions at the corporate level. We also may be adversely affected if jurisdictions in which we have restaurants impose
mandatory closures, seek voluntary closures or impose restrictions on operations. Even if such measures are not implemented
and a virus or other disease does not spread significantly, the perceived risk of infection or significant health risk may
adversely affect our business.
A health pandemic is a disease outbreak that spreads rapidly and widely by infection and affects many individuals in an area or
population at the same time. We believe that our restaurants have one of the highest levels of customer traffic per square foot in
the casual dining segment of the restaurant industry. Our restaurants are places where people can gather together for human
connection. Customers might avoid public gathering places in the event of a health pandemic, and local, regional or national
governments might limit or ban public gatherings to halt or delay the spread of disease. The impact of a health pandemic on us
might be disproportionately greater than on other casual dining concepts that have lower customer traffic and that depend less
on the gathering of people.
Any adverse changes in the cost of food, labor and related employee benefits (including, but not limited to, group health
insurance coverage for our employees), brewing and energy may adversely affect our operating results.
Our profitability depends, in part, on our ability to anticipate and effectively react to changes in food, labor, utilities and supply
costs. Our supply chain department negotiates prices for all of our ingredients and supplies through contracts (with terms of
one month up to one year, or longer in a few cases), spot market purchases or commodity pricing formulas. Furthermore,
various factors beyond our control, including adverse weather conditions and governmental regulations, may also cause our
food and supply costs to increase. We cannot predict whether we will be able to anticipate and react to changing food and
supply costs by adjusting our purchasing practices. A failure to do so may adversely affect our operating results or cash flows
from operations. We also have a single or a limited number of suppliers for certain of our commodity and supply items.
Accordingly, supply chain risk may increase our costs and limit the availability of some products that are critical to our
restaurant and brewing operations.
The overall cost environment for food commodities can be volatile primarily due to domestic and worldwide agricultural
supply/demand and other macroeconomic factors that are outside of our control. The availability and prices of food
commodities are also influenced by energy prices, droughts, animal-related diseases, natural disasters, increased geo-political
tensions, the relationship of the dollar to other currencies, and other issues. Virtually all commodities purchased and used in the
restaurant industry (meats, grains, oils, dairy products, and energy) have varying amounts of inherent price volatility associated
with them. Our suppliers also may be affected by higher costs to produce and transport commodities used in our restaurants
and brewpubs, higher minimum wage and benefit costs, and other expenses that they pass through to their customers, which
may result in higher costs for goods and services supplied to us. While we attempt to manage these factors by offering a
diversified menu and by contracting for our key commodities for extended periods of time whenever feasible and possible,
there can be no assurance that we will be successful in this respect due to the many factors that are outside of our control. In
addition, raw materials that we may purchase on the international market are subject to fluctuations in both the value of the
U.S. dollar and increases in local demand, which may increase our costs and negatively impact our profitability.
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We and our major independent third party brewing partners purchase a substantial portion of brewing raw materials and
products, primarily malt and hops, from a limited number of domestic and foreign suppliers. We purchase both North
American and European malts and hops for our beers. We purchase a majority of our malts from a single supplier with multiple
sources of malts. We generally enter into one-year purchase commitments with our malt and hops suppliers, based on the
projected future volumes and brewing needs. We are exposed to the quality of the barley crop each year, and significant failure
of a crop may adversely affect our beer costs. Changes in currency exchange rates and freight costs can also result in increased
prices. There are other malt vendors available that are capable of supplying all of our needs. We use American and German
hops for our beers. We enter into purchase commitments with several hops suppliers, based on our projected future volumes
and brewing needs. However, the quality and availability of the hops may be materially adversely affected by factors such as
adverse weather and changes in currency exchange rates, resulting in increased prices. We attempt to maintain at least six
months’ supply of essential hop varieties on hand in order to limit the risk of an unexpected reduction in supply. We store our
hops in multiple cold storage warehouses, both at our brewpubs and at our suppliers, to minimize the impact of a catastrophe at
a single site. Hops and malt are agricultural products and, therefore, many outside factors, including weather conditions,
farmers rotating out of hops or barley to other crops, government regulations and legislation affecting agriculture, may affect
both price and supply.
Our restaurant-level operating margins are also affected by fluctuations in the availability and cost of utilities services, such as
electricity and natural gas. Interruptions in the availability of gas, electric, water or other utilities, whether due to aging
infrastructure, weather conditions, fire, animal damage, trees, digging accidents or other reasons largely out of our control, may
adversely affect our operations. In addition, weather patterns in recent years have resulted in lower than normal levels of
rainfall in certain areas that may produce droughts in key states such as California, thus impacting the price of water and the
corresponding prices of commodities grown in states facing drought conditions. There is no assurance that we will be able to
maintain our utility and commodity costs at levels that do not have a material adverse effect on our operations.
Any inability or failure of distributors or suppliers to provide food and beverages to us in a timely fashion may adversely
affect our reputation, customer patronage, revenues and results of operations.
We currently depend on national and regional food distribution service companies, as well as other food manufacturers and
suppliers, to provide food and beverage products to all of our restaurants. We also rely on independent third party brewers and
many local beer distributors to provide us with beer for our restaurants. The operations of our distributors, suppliers and
independent third party brewers are subject to risks including labor disputes, financial liquidity, inclement weather, natural
disasters, supply constraints, and general economic and political conditions that may limit their ability to timely provide us
with acceptable products. Additionally, under the “force majeure” provisions in most of our agreements with suppliers, certain
unexpected and disruptive events may excuse a supplier from performing. If our distributors, suppliers and independent third
party brewers cease doing business with us, or cannot make a scheduled delivery to us, or are unable to obtain credit in a
tightened credit market or experience other issues, we may experience short-term product supply shortages in some or all of
our restaurants and may be required to purchase food, beer and beverage products from alternate suppliers at higher prices. We
may also be forced to temporarily remove popular items from the menu offering of our restaurants. If alternative suppliers
cannot meet our current product specifications, the consistency and quality of our food and beverage offerings, and thus our
reputation, customer patronage, revenues and results of operations, may be adversely affected.
With respect to potential liability claims related to our food, beer and beverage products, we believe we have sufficient primary
or excess umbrella liability insurance in place. However, this insurance may not continue to be available at a reasonable cost
or, if available, may not be adequate to cover all claims. We generally seek contractual indemnification and insurance coverage
from our key suppliers of food, beer and beverages, but this indemnification or insurance coverage is limited, as a practical
matter, by the creditworthiness of the indemnifying party and the insured limits of any insurance provided by suppliers.
Pursuant to various laws and regulations, the majority of our proprietary craft beer must be distributed to our restaurants
through independent wholesale beer distributors, whether we produce the beer or it is produced by independent third party
brewers. Although we currently have arrangements with a sufficient number of beer distributors in all markets where we
operate restaurants, our continued national expansion will require us to enter into agreements with additional beer distributors.
No assurance can be given that we will be able to maintain or secure additional beer distributors on terms favorable to us.
Changes in control or ownership of the participants in our current beer distribution network may lead to less willingness on the
part of certain distributors to carry our proprietary craft beer. Our beer distribution agreements are generally terminable by the
distributor on short notice. While these beer distribution agreements contain provisions regarding our enforcement and
termination rights, some state laws prohibit us from readily exercising these contractual rights. Our ability to maintain our
existing beer distribution agreements may also be adversely affected by the fact that many of our distributors are reliant on one
of the major beer producers for a large percentage of their revenue and, therefore, they may be influenced by such producers. If
our existing beer distribution agreements are terminated, we may not be able to enter into new distribution agreements on
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substantially similar terms or it may take some time to enter into a replacement agreement, which may result in an increase in
the delivered cost of beer to our restaurants.
Our inability or failure to protect our trademarks, service marks, trade secrets or other intellectual property may adversely
affect our business.
Our business prospects depend in part on our ability to develop favorable consumer recognition of our brands, including the
BJ’s Restaurants name in particular. Although BJ’s is a federally registered trademark, there are many other retailers,
restaurants and other types of businesses using the name “BJ’s” in some form or fashion throughout the United States. While
we intend to aggressively protect and defend our trademarks, service marks, trade dress, trade secrets and other intellectual
property, particularly with respect to their use in our restaurant and brewing operations, they may be imitated or appropriated in
ways that we cannot prevent. Alternatively, third parties may attempt to cause us to change our trademarks, service marks or
trade dress or not operate in a certain geographic region or regions if our names are deemed confusingly similar to their prior
trademarks, service marks or trade dress. We may also encounter claims from prior users of similar intellectual property in
areas where we operate or intend to conduct operations. This may harm our image, brand or competitive position and cause us
to incur significant penalties and costs. In addition, we rely on trade secrets, proprietary know-how, concepts and recipes. Our
methods of protecting this information may not be adequate. While we believe that we take reasonable protective actions with
respect to our intellectual property, these actions may not be sufficient to prevent, and we may not be aware of all incidents of,
unauthorized usage or imitation by others. Moreover, we may face claims of misappropriation or infringement of third parties’
rights that may interfere with our use of this information. Defending these claims may be costly and, if unsuccessful, may
prevent us from continuing to use this proprietary information in the future and may result in a judgment or monetary damages.
We do not maintain confidentiality and non-competition agreements with all of our employees or suppliers. Moreover, even
with respect to the confidentiality and non-competition agreements we have, we cannot assure that those agreements will not
be breached, that they will provide meaningful protection or that adequate remedies will be available in the event of an
unauthorized use or disclosure of our proprietary information. If competitors independently develop or otherwise obtain access
to our trade secrets, proprietary know-how or recipes, the appeal of our restaurants may be reduced and our business may be
harmed.
Federal, state and local beer, liquor and food service regulations may adversely affect our revenues and results of
operations.
We are required to operate in compliance with federal laws and regulations relating to alcoholic beverages administered by the
Alcohol and Tobacco Tax and Trade Bureau of the U.S. Department of Treasury, as well as the laws and licensing requirements
for alcoholic beverages of states and municipalities where our restaurants are or will be located. In addition, each restaurant must
obtain a food service license from local authorities. Failure to comply with federal, state or local regulations may cause our
licenses to be revoked and force us to cease the brewing or sale of alcoholic beverages, or both, or the serving of food at our
restaurants. Additionally, state liquor laws may prevent or impede the expansion of our restaurants into certain markets. The liquor
laws of certain states prevent us from selling the beer brewed at our restaurants. Any difficulties, delays or failures in obtaining
such licenses, permits or approvals may delay or prevent the opening of a restaurant in a particular area or increase the costs
associated therewith. In addition, in certain states, including states where we have existing restaurants or where we plan to open a
restaurant, the number of liquor licenses available is limited, and licenses are traded on the open market. Liquor, beer and wine
sales comprise a significant portion of our revenues. If we are unable to maintain our existing licenses, our customer patronage,
revenues and results of operations may be adversely affected. Or, if we choose to open a restaurant in those states where the
number of available licenses is limited, the cost of a new license may be significant.
Brewing operations require various federal, state, and local licenses, permits and approvals. Our restaurants and on-site
brewpubs operate pursuant to exceptions to the “tied house” laws, which created the “three tier system” of liquor distribution.
These “tied house” laws were adopted by all of the states after the repeal of Prohibition and, generally, prohibit brewers from
holding retail licenses and prohibit vertical integration in ownership and control among the three tiers. Brewing restaurants and
brewpubs operate under exceptions to these general prohibitions. Over the last 25 years, nearly all of the states have adopted
laws and regulations permitting brewing restaurants and brewpubs; however, the privileges and restrictions for brewpubs and
brewing restaurants vary from state to state.
We apply for our liquor and brewing licenses with the advice of outside legal and licensing consultants. Generally, our brewing
restaurants are licensed as retailers with limited privileges to brew beer on the restaurant premises, and we do not have the
same privileges as a microbrewery. Other restrictions imposed by law may prevent us from operating both brewing restaurants
and non-brewing restaurants in some states. We are at risk that a state’s regulations concerning brewing restaurants or the
interpretation of these regulations may change. Because of the many and various state and federal licensing and permitting
requirements, there is a significant risk that one or more regulatory agencies may determine that we have not complied with
applicable licensing or permitting regulations or have not maintained the approvals necessary for us to conduct business within
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its jurisdiction. Even after the issuance of our licenses, our operations may be subject to differing interpretations of the “tied
house” laws and the requirements of the “three tier system” of liquor distribution in any jurisdiction that we conduct business.
Any such changes in interpretation may adversely impact our current model of brewing beer or supplying beer, or both, to our
restaurants in that state, and may also cause us to lose, either temporarily or permanently, the licenses, permits and registrations
necessary to conduct our restaurant operations, and subject us to fines and penalties.
The manufacture and sale of alcoholic beverages is a highly regulated and taxed business. Our operations are subject to more
restrictive regulations and increased taxation by federal, state, and local governmental entities than are those of non-alcohol
related beverage businesses. Federal, state, and local laws and regulations govern the production and distribution of beer,
including permitting, licensing, trade practices, labeling, advertising, marketing, distributor relationships, and related matters.
Federal, state, and local governmental entities also levy various taxes, license fees, and other similar charges and may require
bonds to ensure compliance with applicable laws and regulations. Failure to comply with applicable federal, state, or local laws
and regulations may result in higher taxes, penalties, fees, and suspension or revocation of permits, licenses or approvals.
Increasing the federal and/or state excise tax on alcoholic beverages, or certain types of alcoholic beverages, is frequently
proposed in various jurisdictions either to increase revenues or discourage purchase by underage drinkers. If adopted, these
measures may affect some or all of our proprietary craft beer products. If federal or state excise taxes are increased, we may have
to raise prices to maintain our current profit margins. Higher taxes may reduce overall demand for beer, thus negatively impacting
sales of our beer. Some states have also been reviewing the state tax treatment for flavored malt beverages which may result in
increased costs for us, as well as decreased sales. Further federal or state regulation may be forthcoming that may further restrict
the distribution and sale of alcohol products.
Any inability of our internal or independent third party brewers to timely supply our beer may adversely affect our operating
results.
Our proprietary craft beer is a key factor in the success of our business. Each year, our brewing operations department forecasts
our annual beer requirements based on our current restaurant requirements and expansion plans and determines our brewing
production. Additionally, in certain states we are either legally required or choose to arrange for independent third party
brewers to brew our beer using our proprietary recipes. If the independent third party brewers cease doing business with us, or
cannot make a scheduled delivery to us because of a supply chain or production disruption or other issues, or if we cannot
otherwise satisfy our internal brewing requirements, we may experience short-term supply shortages in some or all of our
restaurants which may result in a loss of revenue. Potential disruptions include labor issues, governmental and regulatory
actions, quality issues, contractual disputes, machinery failures or operational shut downs. Additionally, if these independent
third party brewers cease doing business with us, we may be required to purchase or brew our own beer at higher costs to us, or
we may not be able to sell our proprietary craft beer at all, until we are able to secure an alternative supply source. If the
independent third party brewers fail to adhere to our proprietary recipe and brewing specifications, the consistency and quality
of beer offerings, and thus our reputation, customer patronage, revenues and results of operations, may be adversely affected.
Additionally, financial stability of those brewing operations where we currently contract for our proprietary craft beer
production, as well as their ability or willingness to continue to meet our beer production requirements, continues to be a
significant risk in our business model. Accordingly, there can be no guarantees that our proprietary brewing requirements will
continue to be met in the future.
From time to time, we or the independent third party brewers and manufacturers may also experience shortages of kegs
necessary to distribute our craft beer. We distribute our craft beer in kegs that are owned by us as well as leased from third
party vendors. We are also responsible for providing kegs to the independent third party brewers that produce our proprietary
craft beer.
Periodic reviews and audits of our internal brewing, independent third party brewing and beer distribution arrangements by
various federal, state and local governmental and regulatory agencies may adversely affect our operations and our
operating results.
Brewing and wholesale operations require various federal, state and local licenses, permits and approvals. The loss or
revocation of any existing licenses, permits or approvals, and/or the failure to obtain any required additional or new licenses,
permits, or approvals may have a material adverse effect on the ability of the Company to conduct its business.
We are subject to periodic audits and reviews by federal, state and local regulatory agencies related to our internal and
independent third party brewing operations. We are particularly subject to extensive regulation at the federal, state and local
levels. Permits, licenses and approvals necessary to the U.S. beer business are required from the Alcohol and Tobacco Tax and
Trade Bureau of the United States Treasury Department (“TTB”), state alcohol beverage regulatory agencies and local
authorities in some jurisdictions. Compliance with these laws and regulations can be costly. TTB permits and registrations can
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be suspended, revoked or otherwise adversely affected for failure to pay taxes, keep proper accounts, pay fees, bond premises,
abide by federal alcoholic beverage production and distribution regulations, or notify the TTB of any material change. Permits,
licenses and approvals from state regulatory agencies can be revoked for many of the same reasons. Our operations are subject
to audit and inspection by the TTB at any time. At the state and local level, some jurisdictions merely require notice of any
material change in the operations, management or ownership of the permit or license holder and others require advance
approvals, requiring that new licenses, permits or approvals be applied for and obtained in the event of a change in the
management or ownership of the permit or license holder. State and local laws and regulations governing the sale of malt
beverages and hard cider within a particular state by a supplier or wholesaler vary from locale to locale. Our operations are
subject to audit and inspection by state regulatory agencies at any time. Because of the many and various state and federal
licensing and permitting requirements, there is a risk that one or more regulatory agencies may determine that we have not
complied with applicable licensing or permitting regulations or have not maintained the approvals necessary to conduct
business within its jurisdiction.
We are routinely subject to new or modified laws and regulations for which we must comply in order to avoid fines and other
penalties. From time to time, new laws and regulations are proposed that may affect the overall structure and effectiveness of
the proprietary craft beer production and distribution model we currently utilize. Any such changes in interpretation may
adversely impact our current model of brewing beer or supplying beer, or both, to our restaurants in that state, and may also
cause us to lose, either temporarily or permanently, the licenses, permits and registrations necessary to conduct our restaurant
operations, and subject us to fines and penalties.
Government laws and regulations affecting the operation of our restaurants, including but not limited to those that apply to
the acquisition and maintenance of our brewing and retail liquor licenses, minimum wages, federal or state exemption
rules, health insurance coverage, or other employment benefits such as paid time off, consumer health and safety,
nutritional disclosures, and employment eligibility-related documentation requirements may cause disruptions to our
operations, adversely affect our operating costs and restrict our growth.
Our development and construction of additional restaurants must comply with applicable zoning, land use and environmental
regulations. More stringent and varied requirements of local government bodies with respect to zoning, land use and
environmental factors may delay construction of new restaurants and add to their cost in the future. In addition, difficulties or
failure in obtaining the required licenses and approvals may delay, or result in our decision to cancel, the opening of new
restaurants.
In addition, various federal and state labor laws govern our relationship with our employees and affect our operating costs.
These laws include minimum wage requirements, overtime pay, meal and rest breaks, unemployment tax rates, workers’
compensation rates, work eligibility requirements, employee classification as exempt/non-exempt for overtime and other
purposes, immigration status and other wage and benefit requirements. In particular, we are subject to the regulations of the
ICE branch of the United States Department of Homeland Security. In addition, some states in which we operate have adopted
immigration employment protection laws. Changes to these aforementioned laws or other employment laws or regulations,
may adversely affect our operating results and thus restrict our growth, including additional government-imposed increases in
minimum wages, overtime pay, paid time off or leaves of absence, mandated health benefits, increased tax reporting and tax
payment requirements for employees who receive gratuities, a reduction in the number of states that allow tips to be credited
toward minimum wage requirements and increased employee litigation, including claims relating to the Fair Labor Standards
Act and comparable state laws.
The U.S. Congress and Department of Homeland Security from time to time consider and may implement changes to federal
immigration laws, regulations or enforcement programs. Some of these changes may increase our obligations for compliance
and oversight, which may subject us to additional costs and make our hiring process more cumbersome, or reduce the
availability of potential employees. We currently participate in the “E-Verify” program, an Internet-based, free program run by
the U.S. government, to verify employment eligibility for all employees throughout our company. However, use of E-Verify
does not guarantee that we will properly identify all employees who are ineligible for employment. Even if we operate our
restaurants in strict compliance with ICE and state requirements, some of our employees may not meet federal work eligibility
or residency requirements, which may lead to a disruption in our work force. Although we require all of our new employees to
provide us with the government-specified documentation evidencing their employment eligibility, some of our employees may,
without our knowledge, be unauthorized workers. Unauthorized workers are subject to seizure and deportation and may subject
us to fines, penalties or loss of our business license in certain jurisdictions. Additionally, a government audit may result in a
disruption to our workforce or adverse publicity that may negatively impact our brand and our use of E-Verify and/or potential
for receipt of letters from the Social Security Administration requesting information (commonly referred to as no-match letters)
may make it more difficult to recruit and/or retain qualified employees.
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Potential changes in labor laws or increased union recruiting activates may result in portions of our workforce being subjected
to greater organized labor influence. Because we do not franchise, risks associated with hiring and maintaining a large
workforce, including increases in wage rates or the cost of employee benefits, compliance with laws and regulations related to
the hiring, payment and termination of employees, and employee-related litigation, may be more pronounced for us than for
restaurant companies at which some or all of these risks are borne by franchisees or other operating contractors. Additionally,
while we do not currently have any unionized employees, union organizers have engaged in efforts to organize employees of
other restaurant companies. If a significant portion of our employees were to become union organized, our labor costs may
increase and our efforts to maintain a culture appealing only to top-performing employees may be impaired. Potential changes
in labor laws, including the possible passage of legislation designed to make it easier for employees to unionize, may increase
the likelihood of some or all of our employees being subjected to greater organized labor influence, and may have an adverse
effect on our business and financial results by imposing requirements that may potentially increase our costs, reduce our
flexibility, impact our employee culture and our ability to service our customers. In addition, a labor dispute involving some or
all of our employees may harm our reputation, disrupt our operations and reduce our revenues and resolution of disputes may
increase our costs.
Additionally, some states, counties and cities have enacted menu labeling laws which are separate of the federally mandated
menu labeling law that is part of the Patient Protection and Affordable Care Act. Non-compliance with these laws may result in
the imposition of fines and/or the closure of restaurants. We may also be subject to lawsuits that claim our non-compliance.
These menu labeling laws may also result in changing consumer preferences which may adversely affect our results of
operations and financial position. We may not be able to adequately adapt our menu offerings to keep pace with developments
in current consumer preferences related to nutrition, which may adversely impact our sales.
Some jurisdictions in which we operate have recently enacted new requirements that require us to adopt and implement a
Hazard Analysis and Critical Control Points (“HACCP”) System for managing food safety and quality. HACCP refers to a
management system in which food safety is addressed through the analysis and control of potential hazards from production,
procurement and handling, to manufacturing, distribution and consumption of the finished product. We expect to incur certain
costs to comply with these regulations, and these costs may be more than we anticipate. If we fail to comply with these laws or
regulations, our business may experience a material adverse effect.
The Americans with Disabilities Act of 1990 prohibits discrimination on the basis of disability in public accommodations and
employment. Although our restaurants are designed to be accessible to the disabled, we may be required to make modifications
to our restaurants to provide service to, or make reasonable accommodations for, disabled persons. Non-compliance with this
law and related laws enacted at the state or local level may result in the imposition of fines or an award of damages to private
litigants.
The collective impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional
requirements and the consequences of litigation relating to current or future laws and regulations, or our inability to respond
effectively to significant regulatory or public policy issues, may increase our compliance and other costs of doing business and
therefore have an adverse effect on our results of operations. Failure to comply with the laws and regulatory requirements of
federal, state and local authorities may result in, among other things, revocation of required licenses, administrative
enforcement actions, fines and civil and criminal liability. Compliance with these laws and regulations can be costly and can
increase our exposure to litigation or governmental investigations or proceedings.
Any limitations in our insurance coverage or rising insurance costs may adversely affect our business or financial
conditions.
We purchase comprehensive insurance coverage, including, but not limited to, property, casualty, directors and officers
liability and network privacy and security liability with coverage levels that we consider appropriate, based on the advice of
our outside insurance and risk management advisors. However, such insurance is subject to limitations, including deductibles,
exclusions and maximum liabilities covered. The cost of insurance fluctuates based on market conditions and availability as
well as our historical loss trends. Moreover, there are certain types of losses that may be uninsurable or not economically
insurable. Such hazards may include earthquake, hurricane and flood losses and certain employment practices. If such a loss
should occur, we would, to the extent that we were not covered for such loss by insurance, suffer a loss of the capital invested,
as well as anticipated profits and cash flow. Punitive damage awards are generally not covered by insurance; thus, any awards
of punitive damages as to which we may be liable may adversely affect our ability to continue to conduct our business, to
expand our operations or to develop additional restaurants. There is no assurance that any insurance coverage we maintain will
be adequate, that we can continue to obtain and maintain such insurance at all or that the premium costs will not rise to an
extent that they adversely affect us or our ability to economically obtain or maintain such insurance.
28
We retain a substantial portion of our workers’ compensation and general liability costs through self-insured retentions and
large deductibles. We estimate the liability for these programs through the use of third party actuarial analysis. Any
unfavorable changes in trends or any increase in the actual dollar amount of claims that we incur may have a negative impact
on our profitability. Our self-insured retention and large deductible reserves may not be sufficient causing us to record
additional expense. Unanticipated changes may produce materially different financial results than previously reported which
may have an adverse impact on operations. Additionally, health insurance costs have risen significantly over the past few years
and are expected to continue to increase. These increases may have a negative impact on our profitability if we are not able to
offset the effect of such increases with plan modifications and cost control measures, or by continuing to improve our operating
efficiencies.
Any inability to retain key personnel or difficulties in recruiting qualified personnel may adversely affect our business until
a suitable replacement is found.
The success of our business continues to depend on the contributions of our senior management team, both individually and as
a group. Our senior executives have been instrumental in setting our strategic direction, operating our business, identifying,
recruiting and training key personnel, identifying expansion opportunities and arranging necessary financing. Losing the
services of any of these individuals may materially adversely affect our business until a suitable replacement is found. We
believe that these individuals cannot easily be replaced with executives of equal experience and capabilities. Although we have
employment agreements with our Chief Executive Officer and some of our senior executives, we cannot prevent them from
terminating their employment with us.
Litigation, including allegations of illegal, unfair or inconsistent employment practices may have a material adverse affect
on our business.
Our business is subject to the risk of litigation by employees, customers, suppliers, shareholders, government agencies or
others through private actions, class or collective actions, administrative proceedings, regulatory actions or other litigation.
These actions and proceedings may involve allegations of illegal, unfair or inconsistent employment practices, including wage
and hour violations and employment discrimination; customer discrimination; food safety issues including poor food quality,
food-borne illness, food tampering, food contamination, and adverse health effects from consumption of various food products
or high-calorie foods (including obesity); other personal injury; violation of “dram-shop” laws (providing an injured party with
recourse against an establishment that serves alcoholic beverages to an intoxicated party who then causes injury to himself or a
third party); trademark or patent infringement; violation of the federal securities laws; or other concerns. The outcome of
litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. Plaintiffs in these types of
lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such
lawsuits may remain unknown for substantial periods of time. The cost to defend litigation may be significant. There may also
be adverse publicity associated with litigation that may decrease customer acceptance of our brands, regardless of whether the
allegations are valid or we ultimately are found liable. Litigation may impact our operations in other ways as well. Allegations
of illegal, unfair or inconsistent employment practices, for example, may adversely affect employee acquisition and retention.
Also, some employment related claims in the area of wage and hour disputes are not insurable risks. We also are subject to
claims and disputes from landlords under our leases, which may lead to litigation or a threatened or actual lease termination.
Litigation of any nature may be expensive to defend and may divert money and management’s attention from our operations
and adversely affect our financial condition and results of operations.
The occurrence or threat of extraordinary events, including terrorist attacks, may cause consumer spending to decline may
adversely affect our sales and results of operations.
The occurrence or threat of extraordinary events, including future terrorist attacks and military and governmental responses and
the prospect of future wars, may result in negative changes to economic conditions likely resulting in decreased consumer
spending. Additionally, decreases in consumer discretionary spending may impact the frequency with which our customers
choose to dine out at restaurants or the amount they spend on meals while dining out at restaurants, thereby adversely affecting
our sales and results of operations. A decrease in consumer discretionary spending may also adversely affect our ability to
achieve the benefit of planned menu price increases to help preserve our operating margins.
Any adverse weather conditions, seasonal fluctuations, natural disasters and effects of climate change may adversely affect
our results of operations.
The occurrence of natural disasters, such as fires, hurricanes, freezing weather or earthquakes (particularly in California where
our centralized operating systems and restaurant support center administrative personnel are located) may unfavorably affect
our operations and financial performance. Such events may result in physical damage to one or more of our restaurants; the
temporary or permanent closure of one or more of our restaurants or restaurant support center; the temporary lack of an
adequate work force in an affected geographical trade area; the temporary or long-term disruption in the supply of food,
29
beverages, beer and other products to our restaurants; the temporary disruption of electric, water, sewer and waste disposal
services necessary for our restaurants to operate; and/or the temporary reduction in the availability of certain products in our
restaurants.
We have disaster recovery procedures and business continuity plans in place to address most events of a crisis nature, including
hurricanes and other natural disasters, including back up and off-site locations for recovery of electronic and other forms of
data and information. However, if we are unable to fully implement our disaster recovery plans, we may experience delays in
recovery of data, inability to perform vital corporate functions, tardiness in required reporting and compliance, failures to
adequately support field operations and other breakdowns in normal communication and operating procedures that may have a
material adverse effect on our financial condition, results of operation and exposure to administrative and other legal claims.
Any future changes in financial accounting standards may significantly change our reported results of operations.
Generally accepted accounting principles in the U.S. are subject to interpretation by the Financial Accounting Standards Board
(“FASB”), the American Institute of Certified Public Accountants (“AICPA”), the SEC and various bodies formed to
promulgate and interpret appropriate accounting principles. A change in these principles or interpretations may have a
significant effect on our reported financial results and may affect the reporting of transactions completed before the
announcement of a change. In addition, the SEC has announced a multi-year plan that may ultimately lead to the use of
International Financial Reporting Standards by U.S. issuers in their SEC filings. Any such change may have a significant effect
on our reported financial results.
Additionally, our assumptions, estimates and judgments related to complex accounting matters may significantly affect our
financial results. Generally accepted accounting principles and related accounting pronouncements, implementation guidelines
and interpretations with regard to a wide range of matters that are relevant to our business, including but not limited to, revenue
recognition, fair value of investments, impairment of long-lived assets, leases and related economic transactions, intangibles,
self-insurance, income taxes, property and equipment, unclaimed property laws and litigation, and stock-based compensation
are highly complex and involve many subjective assumptions, estimates and judgments by us. Changes in these rules or their
interpretation or changes in underlying assumptions, estimates or judgments by us may significantly change our reported or
expected financial performance.
The market price of our common stock may be volatile and our shareholders may lose all or part of their investment.
The market price of our common stock may fluctuate significantly, and our shareholders may not be able to resell their shares
at or above the price they paid for them. Those fluctuations may be based on various factors in addition to those otherwise
described in this Form 10-K and the following:
actual or anticipated fluctuations in comparable restaurant sales or operating results, whether in our operations or
in those of our competitors;
changes in financial estimates or opinions by research analysts, either with respect to us or other casual dining
companies;
any failure to meet investor or analyst expectations, particularly with respect to total restaurant operating weeks,
number of restaurant openings, comparable restaurant sales, average weekly sales per restaurant, total revenues,
operating margins and net income per share;
the public’s reaction to our press releases, other public announcements and our filings with the SEC;
actual or anticipated changes in domestic or worldwide economic, political or market conditions, such as
recessions or international currency fluctuations;
changes in the consumer spending environment;
terrorist acts;
changes in laws or regulations, or new interpretations or applications of laws and regulations, that are applicable to
our business;
changes in accounting standards, policies, guidance, interpretations or principles;
short sales, hedging and other derivative transactions in the shares of our common stock;
future sales or issuances of our common stock, including sales or issuances by us, our directors or executive
officers and our significant shareholders;
30
our dividend policy;
changes in the market valuations of other restaurant companies;
actions by shareholders;
various market factors or perceived market factors, including rumors, involving us, our suppliers and distributors,
whether accurate or not;
announcements by us or our competitors of new locations, menu items, technological advances, significant
acquisitions, strategic partnerships, divestitures, joint ventures or other strategic initiatives;
the addition or loss of a key member of management; and
changes in the costs or availability of key inputs to our operations.
In addition, we cannot assure that an active trading market for our common stock will continue which may affect our stock
price and the liquidity of any investment in our common stock.
The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish
about us, our business and our industry. If one or more analysts adversely change their recommendation regarding our shares or
our competitors’ stock, our share price would likely decline. If one or more analysts cease coverage of us or fail to regularly
publish reports on us, we may lose visibility in the financial markets which, in turn, may cause our share price or trading
volume to decline.
In addition, our stock price can be influenced by trading activity in our common stock or trading activity in derivative
instruments with respect to our common stock as a result of market commentary (including commentary that may be unreliable
or incomplete in some cases); changes in expectations about our business, our creditworthiness or investor confidence
generally; actions by shareholders and others seeking to influence our business strategies; portfolio transactions in our stock by
significant shareholders; or trading activity that results from the ordinary course rebalancing of stock indices in which our stock
may be included.
In the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted
securities class action litigation against those companies. Such litigation, if instituted, may result in substantial costs and a
diversion of management attention and resources, which would significantly harm our profitability and reputation.
Any inability to continue to pay cash dividends may negatively impact investor confidence in us and negatively impact our
stock price.
Our dividend program requires the use of a substantial amount of our free cash flow. Our ability to pay our dividends over time
will depend on our ability to generate sufficient cash flows from operations and capacity to borrow funds, which may be
subject to economic, financial, competitive and other factors that are beyond our control. Our credit facility limits cash
distributions with respect to our equity interests, such as cash dividends and share repurchases, based on a defined ratio. Any
failure to pay or increase our dividends over time may negatively impact investor confidence in us, and may negatively impact
our stock price.
Any failure to establish, maintain and apply adequate internal control over our financial reporting may adversely affect our
reported results of operations.
We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 and the related
rules adopted by the SEC and the Public Company Accounting Oversight Board. These provisions provide for the
identification of material weaknesses in internal control over financial reporting, which is a process to provide reasonable
assurance regarding the reliability of financial reporting for external purposes in accordance with U.S. GAAP. Because of its
inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement
of our financial statements would be prevented or detected. Should we identify a material weakness in internal controls, there
can be no assurance that we will be able to remediate the material weaknesses identified in a timely manner or maintain all of
the controls necessary to remain in compliance. Any failure to maintain an effective system of internal controls over financial
reporting may limit our ability to report our financial results accurately and timely or to detect and prevent fraud. Any such
failure may subject us to adverse regulatory consequences, including sanctions by the SEC or violations of applicable stock
exchange listing rules, or cause a breach of certain covenants under our financing arrangements. There also may be a negative
reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.
Confidence in the reliability of our financial statements also may suffer if we or our independent registered public accounting
31
firm were to report a material weakness in our internal controls over financial reporting. This may materially adversely affect
us and lead to a decline in the price of our common stock.
Heavy dependence of our operations, including our loyalty and employee engagement programs, on information technology
may adversely affect our revenues and impair our ability to efficiently operate our business if there is a material failure of
such technology.
We rely heavily on electronic information systems in all aspects of our operations, including (but not limited to) point-of-sale
transaction processing in our restaurants; efficient operation of our restaurant kitchens; management of our inventories and
overall supply chain; collection of cash; payment of payroll and other obligations; and, various other processes and procedures
including our customer loyalty and employee engagement programs. Our ability to efficiently manage our business depends
significantly on the reliability and capacity of our in-house information systems and those technology services and systems that
we contract for from third parties. Our electronic information systems, including our back-up systems, are subject to damage or
interruption from power outages, cyber-attacks, computer and telecommunications failures, computer viruses, internal or
external security breaches, catastrophic events such as fires, earthquakes, tornadoes and hurricanes, and/or errors by our
employees. The failure of any of these systems to operate effectively, any problems with their maintenance, any issues with
upgrades or transitions to replacement systems, or any breaches in data security may cause material interruptions to our
operations or harm to individuals in the form of identity theft or improper use of personal information. While we have invested
and continue to invest in technology security initiatives and disaster recovery plans, these measures cannot fully insulate us
from technology disruption that may result in adverse effects on operations and profits. Although we, with the help of third
party service providers and consultants, intend to maintain and upgrade our security technology and establish operational
procedures to prevent such damage, breaches, or attacks, there can be no assurance that these security measures will be
successful. In addition, advances in computer capabilities, new discoveries in the field of cryptography or other developments
may result in a compromise or breach of the algorithms we and our third party service providers use to encrypt and protect
customer transaction data. A failure of such security measures may harm our reputation and financial results, as well as subject
us to litigation or actions by regulatory authorities. Significant capital investments might be required to remediate any
problems, infringements, misappropriations or other third party claims.
Any failure or inability of our third party technology-based vendors to comply with applicable privacy laws and regulations
or maintain secure systems may adversely affect our financial performance.
Some of our essential business processes that are dependent on technology are outsourced to third parties. Such processes
include, but are not limited to, gift card tracking and authorization, on-line ordering, credit card authorization and processing,
certain components of our “BJ’s Premier Rewards” customer loyalty program, certain insurance claims processing, payroll
processing, web site hosting and maintenance, data warehousing and business intelligence services, point-of-sale system
maintenance, certain tax filings, telecommunications services, web-based labor scheduling and other key processes. We make a
diligent effort to ensure that all providers of outsourced services are observing proper internal control practices, such as
redundant processing facilities; however, there are no guarantees that failures will not occur. If the security and information
systems that our outsourced third party providers use to store or process such information are compromised or if such third
parties otherwise fail to comply with applicable privacy laws and regulations, we may face litigation and the imposition of
penalties that may adversely affect our financial performance. Our reputation as a brand or as an employer may also be
adversely affected from these types of security breaches or regulatory violations, which may impair our sales or ability to
attract and keep qualified employees.
We may incur costs resulting from security risks we face in connection with our electronic processing and transmission of
confidential customer information.
We accept electronic payment cards from our customers for payment in our restaurants. A number of restaurant operators and
retailers have experienced actual or potential security breaches in which credit and debit card information may have been stolen
in addition to other personal information such as our customer’s names, email addresses, home addresses and phone numbers.
While we have taken reasonable steps to prevent the occurrence of security breaches in this respect, we may, in the future,
become subject to claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card
information, and we may also be subject to lawsuits or other proceedings in the future relating to these types of incidents.
Proceedings related to theft of credit or debit card information may be brought by payment card providers, banks and credit
unions that issue cards, cardholders (either individually or as part of a class action lawsuit) and federal and state regulators.
Any such proceedings may distract our management from running our business and cause us to incur significant unplanned
losses and expenses. Additionally, any adverse publicity related to any security breaches or any stolen personal identification
from credit and debit card information or other personal information such as our customer’s or employee names, email
addresses, home addresses and phone numbers may negatively affect our sales, profitability and reputation. We also receive
and maintain certain personal information about our customers and employees. The use of this information by us is regulated at
32
the federal and state levels. If our security and information systems are compromised or our employees fail to comply with
these laws and regulations and this information is obtained by unauthorized persons or used inappropriately, it may adversely
affect our reputation, as well as results of operations, and may result in litigation against us or the imposition of penalties. In
addition, our ability to accept credit cards as payment in our restaurants and on-line store depends on us remaining in
compliance with standards set by the PCI Security Standards Council. These standards, set by a consortium of the major credit
card companies, require certain levels of system security and procedures to protect our customers’ credit card and other
personal information. Privacy and information security laws and regulations change over time, and compliance with those
changes may result in cost increases due to necessary systems and process changes.
Periodic audits of our federal, state and local tax returns by the taxing authorities may result in tax assessments or penalties
that may have a material adverse impact on our results of operations and financial position.
We are subject to federal, state and local taxes. Significant judgment is required in determining the provision for income taxes.
Although we believe our tax estimates are reasonable, if the IRS or other taxing authority disagrees with the positions we have
taken on our tax returns, we may have additional tax liability, including interest and penalties. If material, payment of such
additional amounts, upon final adjudication of any disputes, may have a material impact on our results of operations and
financial position. The cost of complying with new tax rules, laws or regulations may be significant. Increases in federal or
state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any increase in
our effective tax rate may have a material impact on our financial results.
Unsolicited takeover proposals, governance change proposals, proxy contests and certain proposals/actions by activist
investors may create additional risks and uncertainties with respect to the Company’s financial position, operations,
strategies and management, and may adversely affect our ability to attract and retain key employees. Any perceived
uncertainties may affect the market price and volatility of our securities.
Public companies in the restaurant industry have been the target of unsolicited takeover proposals in the past. In the event that a
third party, such as a competitor, private equity firm or activist investor makes an unsolicited takeover proposal, or proposes to
change our governance policies or board of directors, or makes other proposals concerning the Company’s ownership structure
or operations, our review and consideration of such proposals may be a significant distraction for our management and
employees, and may require us to expend significant time and resources. Such proposals may create uncertainty for our
employees’ additional risks and uncertainties with respect to the Company’s financial position, operations, strategies and
management, and may adversely affect our ability to attract and retain key employees. Any perceived uncertainties as to our
future direction also may affect the market price and volatility of our securities.
Any suspension of or failure to pay regular dividends or repurchase the Company’s stock up to the maximum amounts
permitted under our previously announced repurchase program, either of which may negatively impact investor perception
of us and may affect the market price and volatility of our stock.
Our stock repurchase program may require us to use a significant portion of our cash flow from operations and/or may require
us to incur indebtedness utilizing our existing Credit Facility or some other form of debt financing. Our ability to repurchase
stock will depend on our ability to generate sufficient cash flows from operations, as supplemented by proceeds from the
exercise of employee stock options and our capacity to borrow funds, which may be subject to economic, financial,
competitive and other factors that are beyond our control. The inability to complete stock repurchases under our previously
announced repurchase program may negatively impact investor perception of us, and may therefore affect the market price and
volatility of our stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
33
ITEM 2. PROPERTIES
RESTAURANT LOCATIONS
As of February 26, 2018, we operated a total of 197 restaurants as follows:
Alabama
Arizona
Arkansas
California
Colorado
Florida
Indiana
Kansas
Kentucky
Louisiana
Maryland
Michigan
Nevada
New Jersey
New Mexico
New York
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
Tennessee
Texas
Virginia
Washington
BJ’s
Grill®
BJ’s Pizza
& Grill®
—
—
—
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3
BJ’s Restaurant
& Brewhouse®
2
5
2
53
5
22
5
1
3
3
5
1
4
1
2
2
2
11
3
2
4
1
1
33
6
4
183
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
BJ’s Restaurant
& Brewery®
—
1
—
6
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
1
—
—
—
1
—
—
10
Total
2
6
2
63
5
22
5
1
3
3
5
1
5
1
2
2
2
11
3
3
4
1
1
34
6
4
197
As of February 26, 2018, the average interior square footage of our restaurants was approximately 8,100 square feet. Many of
our restaurants also have outdoor patios that are utilized when weather conditions permit.
As of February 26, 2018, 195 of our 197 existing restaurants are located on leased properties. We own the underlying land for
two of our operating restaurants and our Texas brewpub locations. We also own two parcels of land adjacent to two of our
operating restaurants. There can be no assurance that we will be able to renew expiring leases after the expiration of all
remaining renewal options. Most of our restaurant leases provide for contingent rent based on a percentage of restaurant sales
(to the extent this amount exceeds a minimum base rent) and payment of certain occupancy-related expenses. We own
substantially all of the equipment, furnishings and trade fixtures in our restaurants. Our restaurant support center (“RSC”) is
located in an approximate 56,000 square foot leased space in Huntington Beach, California. Our RSC lease expires August 31,
2018. The lease provides for a five year renewal option, which we have exercised. We are currently negotiating the specific
terms of the renewal with the landlord.
ITEM 3. LEGAL PROCEEDINGS
See Note 5 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for a
summary of legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
34
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Our common stock (symbol BJRI) trades on the NASDAQ Global Select Market. As of February 26, 2018, we had
approximately 70 shareholders of record and we estimate that there were approximately 12,000 beneficial shareholders. All stock
prices are closing prices per the NASDAQ Global Select Market. On February 26, 2018, the closing price of our common stock
was $43.65 per share. The table below shows the quarterly high and low common stock closing prices as reported by
NASDAQ Global Select Market and the quarterly cash dividend declared per share of our common stock.
Fiscal 2017
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal 2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
Low
Cash
Dividend
Declared
$
$
$
$
$
$
$
$
40.40 $
46.75 $
36.40 $
37.25 $
46.29 $
47.36 $
44.83 $
40.15 $
34.70 $
36.90 $
28.10 $
29.80 $
39.52 $
40.80 $
36.36 $
33.65 $
—
—
—
0.11
—
—
—
—
Future decisions to pay, increase or decrease dividends are at the discretion of the Board and will be dependent on our
operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the
terms and conditions of our Credit Facility and other such factors that the Board considers relevant. (See Note 7 of Notes to
Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for further discussion of our
shareholders’ equity.)
35
STOCK-PERFORMANCE GRAPH
The following chart compares the five-year cumulative total stock performance of our common stock, the S&P 500 Index and a
peer group consisting of: Bloomin’ Brands, Inc., Bravo Brio Restaurant Group, Brinker International, Inc., Buffalo Wild
Wings, Inc., The Cheesecake Factory Incorporated, Chuy’s Holdings, Inc., Darden Restaurants, Inc., Famous Dave’s of
America, Inc., Kona Grill, Inc., Red Robin Gourmet Burgers, Inc., and Texas Roadhouse, Inc. (Class A). In June 2017 and
December 2017, Ignite Restaurant Group and Ruby Tuesday, Inc. (GA), respectively, became a private company and therefore
were removed from the Companies peer group. The peer group companies all compete in the “casual dining” segment of the
restaurant industry. The graph assumes that $100 was invested on December 31, 2012, in our common stock and in each of the
indices and that all dividends were reinvested. The measurement points utilized in the graph consist of the last trading day in
each calendar year, which closely approximates the last day of our respective fiscal year. The historical stock performance
presented below is not intended to and may not be indicative of future stock performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL
RETURN
Among BJ's Restaurants, Inc., the S&P 500 Index,
and a Peer Group
$250
$200
$150
$100
$50
$0
12/12
12/13
12/14
12/15
12/16
12/17
BJ's Restaurants, Inc.
S&P 500
Peer Group
CALCULATION OF AGGREGATE MARKET VALUE OF NON-AFFILIATE SHARES
For purposes of calculating the aggregate market value of shares of our common stock held by non-affiliates as set forth on the
cover page of this Annual Report on Form 10-K, we have assumed that all outstanding shares are held by non-affiliates, except
for shares held by each of our executive officers, directors and 5% or greater shareholders. In the case of 5% or greater
shareholders, we have not deemed such shareholders to be affiliates unless there are facts and circumstances which would
indicate that such shareholders exercise any control over our company, or unless they hold 10% or more of our outstanding
common stock. These assumptions should not be deemed to constitute an admission that all executive officers, directors and
5% or greater shareholders are, in fact, affiliates of our company, or that there are no other persons who may be deemed to be
affiliates of our company. Further information concerning shareholdings of our officers, directors and principal shareholders is
included or incorporated by reference in Part III, Item 12 of this Annual Report on Form 10-K.
36
STOCK-BASED COMPENSATION PLAN INFORMATION
We have a shareholder approved stock-based compensation plan, the 2005 Equity Incentive Plan (“the Plan”), under which we
may issue shares of our common stock to employees, officers, directors and consultants. Under the Plan, we have granted
incentive stock options, non-qualified stock options and restricted stock units. The following table provides information about
the shares of our common stock that may be issued upon exercise of awards as of January 2, 2018 (share numbers in
thousands):
Stock-based compensation plans approved by
shareholders
Stock-based compensation plans not approved by
shareholders
Total
Number of
Securities
to be Issued Upon
Exercise of
Outstanding Stock
Options
Weighted Average
Exercise Price of
Outstanding Stock
Options
Number of Securities
Remaining Available
for Future Issuance
Under Stock-Based
Compensation Plans
1,880 $
—
1,880 $
32.68
—
—
789
—
789
DIVIDEND POLICY AND STOCK REPURCHASES
Historically, we have not paid any dividends to our shareholders. However, on October 24, 2017, our Board of Directors
authorized and declared a quarterly cash dividend of $0.11 per share of common stock payable on December 4, 2017, to
shareholders of record at the close of business on November 13, 2017. On February 20, 2018, our Board of Directors
authorized and declared a second quarterly cash dividend of $0.11 per share of common stock payable on March 27, 2018, to
shareholders of record at the close of business on March 13, 2018. While we intend to pay comparable quarterly cash dividends
in future periods, any decisions to pay or to increase or decrease cash dividends will be reviewed and declared by the Board of
Directors at its discretion. Our Credit Facility contains, and debt instruments that we enter into in the future may contain,
covenants that place limitations on the amount of dividends we may pay.
As of January 2, 2018, we have cumulatively repurchased approximately $357.5 million shares in accordance with our
approved share repurchase plan. We repurchased approximately $66.9 million of these shares fiscal 2017. The share
repurchases were executed through open market purchases, and future share repurchases may be completed through the
combination of individually negotiated transactions, accelerated share buyback, and/or open market purchases. In March 2017,
our Board of Directors approved an expansion of the share repurchase program by $50 million to $400 million. As of January
2, 2018, we have approximately $42.5 million available under our share repurchase plan. Our Credit Facility does not contain
any restrictions on the amount of borrowings that can be used to make share repurchases as long as we are in compliance with
our financial and non-financial covenants.
37
The following table sets forth information with respect to the repurchase of common shares during fiscal 2017:
Period (1)
Total
Number
of Shares
Purchased
Average
Price
Paid Per
Share
01/04/17 – 01/31/17
02/01/17 – 02/28/17
03/01/17 – 04/04/17
04/05/17 – 05/02/17
05/03/17 – 05/30/17
05/31/17 – 07/04/17
07/05/17 – 08/01/17
08/02/17 – 08/29/17
08/30/17 – 10/03/17
10/04/17 – 10/31/17
11/01/17 – 11/28/17
11/29/17 – 01/02/18
Total
309,677 $
316,423 $
170,689 $
33,916 $
3,143 $
36,348 $
200,019 $
57,968 $
555,673 $
135,586 $
119,294 $
44,672 $
1,983,408
Increase in
Dollars for
Share
Repurchase
Authorization
Total
Dollar
Number of
Value of
Shares
Shares that
Purchased
May Yet Be
as Part of
Purchased
the
Under the
Publicly
Plans or
Announced
Programs
Plans
— $48,279,389
309,677 $
316,423 $
— $36,977,187
170,689 $ 50,000,000 $80,469,746
— $79,101,642
— $78,963,417
— $77,603,349
— $70,550,137
— $68,639,351
— $52,181,393
— $48,043,768
— $44,135,267
— $42,542,963
33,916 $
3,143 $
36,348 $
200,019 $
57,968 $
555,673 $
135,586 $
119,294 $
44,672 $
1,983,408
36.12
35.72
38.12
40.34
43.98
37.42
35.26
32.96
29.62
30.52
32.76
35.64
(1) Period information is presented in accordance with our fiscal months during fiscal 2017.
38
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the five fiscal years ended January 2, 2018, are derived from our audited
consolidated financial statements. All fiscal years presented consist of 52 weeks with the exception of fiscal year 2016 which
consists of 53 weeks. This selected consolidated financial data should be read in conjunction with our consolidated financial
statements and accompanying notes, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and other financial information included elsewhere in this report.
Revenues
Restaurant operating costs (excluding depreciation
and amortization):
Cost of sales
Labor and benefits
Occupancy and operating
General and administrative
Depreciation and amortization
Restaurant opening
Loss on disposal and impairment of assets
Gain on lease termination, net
Natural disaster and related
Severance and legal settlements
Total costs and expenses
Income from operations
Other (expense) income:
Interest (expense) income, net
Other income, net
Total other (expense) income
2017
Fiscal Year
2015
(in thousands, except per share data)
$1,031,782 $ 993,052 $ 919,597 $ 845,569 $ 775,125
2016
2013
2014
268,707
371,220
219,863
55,447
68,665
3,873
4,775
—
905
423
993,878
251,460
345,370
204,583
55,406
64,275
6,977
2,971
—
—
369
931,411
226,942 212,979
317,050 298,703
192,739 182,149
51,558
55,387
4,973
1,963
—
—
2,431
856,535 810,143
53,827
59,417
6,562
2,908
(2,910 )
—
—
191,891
273,458
173,981
49,105
49,007
9,132
3,879
—
—
812
751,265
37,904
61,641
63,062
35,426
23,860
(4,501)
1,987
(2,514)
(1,730)
1,180
(550)
(1,015 )
60
(955 )
(238)
1,135
897
133
1,019
1,152
Income before income taxes
35,390
61,091
62,107
36,323
25,012
Income tax (benefit) expense
Net income
Net income per share:
Basic
Diluted
Weighted average number of shares outstanding:
Basic
Diluted
Consolidated Balance Sheets Data (end of
period):
Cash and cash equivalents
Marketable securities
Total assets
Total long-term debt (including current portion)
Shareholders’ equity
$
$
$
(9,390)
44,780 $
15,534
45,557 $
16,782
45,325 $
8,926
27,397 $
3,990
21,022
2.10 $
2.06 $
1.91 $
1.88 $
1.76 $
1.73 $
0.99 $
0.97 $
0.75
0.73
21,374
21,772
23,824
24,233
25,718
26,231
27,710
28,316
28,194
28,895
24,335 $
— $
22,761 $
— $
22,995
$
$
9,791
$ 684,958 $ 691,312 $ 681,665 $ 647,083 $ 610,879
$ 163,500 $ 148,000 $ 100,500 $
—
$ 258,729 $ 274,897 $ 316,483 $ 348,689 $ 401,436
34,604 $
— $
30,683 $
— $
58,000 $
39
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
As of February 26, 2018, we owned and operated 197 restaurants located in 26 states as described in Item 2 - Properties -
“Restaurant Locations” in this Form 10-K. Each of our restaurants is operated either as a BJ’s Restaurant & Brewhouse®, a
BJ’s Restaurant & Brewery®, a BJ’s Pizza & Grill®, or a BJ’s Grill® restaurant. Currently, the BJ’s Restaurant &
Brewhouse® format represents our primary future expansion vehicle. Our proprietary craft beer is produced at several of our
BJ’s Restaurant & Brewery® locations, our Temple, Texas brewpub locations and by independent third party brewers using
our proprietary recipes. Our BJ’s Pizza & Grill® restaurant is a smaller format full-service restaurant relative to our BJ’s
Restaurant & Brewhouse® and BJ’s Restaurant & Brewery® locations, which reflect the original format of the BJ’s restaurant
concept that was first introduced in 1978. We operate one BJ’s Grill® restaurant that is a slightly smaller footprint restaurant
than our BJ’s Restaurant & Brewhouse® format. Our menu features BJ’s award-winning, signature deep-dish pizza, our
proprietary craft and other beers, as well as a wide selection of appetizers, entrées, pastas, sandwiches, specialty salads and
desserts, including our Pizookie® dessert.
We intend to continue opening new BJ’s restaurants in high profile locations within densely populated areas in both existing
and new markets. Since most of our established restaurants currently operate close to full capacity during the peak demand
periods of lunch and dinner, and given our relatively high average sales per productive square foot, we generally do not expect
to achieve sustained increases in comparable restaurant sales in excess of our annual effective menu price increases for our
mature restaurants, assuming we are able to retain our customer traffic levels in those restaurants. Therefore, we currently
expect that the majority of our year-over-year revenue growth for fiscal 2018 will be derived from new restaurant openings, the
carryover impact of partial-year openings during fiscal 2017, and menu price increases.
Newly opened restaurants typically experience inefficiencies in the form of higher cost of sales, labor and direct operating and
occupancy costs for several months after their opening relative to our more mature, established restaurants. Accordingly, the
number and timing of new restaurant openings have had, and are expected to continue to have, an impact on restaurant opening
expenses, cost of sales, labor and occupancy and operating expenses. Additionally, restaurant openings in new markets may
experience even greater inefficiencies for several months, if not longer, due to lower initial sales volumes, which results from
initially low consumer awareness levels, and a lack of supply chain and other operating cost leverage until additional
restaurants can be opened in those markets.
Our revenues are comprised of food and beverage sales at our restaurants. Revenues from restaurant sales are recognized when
payment is tendered at the point of sale. Amounts paid with a credit card are recorded in accounts and other receivables until
payment is collected. Revenues from our gift cards are recognized upon redemption in our restaurants. Gift card breakage is
recognized as a component of “Other income, net” on our Consolidated Statements of Income. Gift card breakage is recorded
when the likelihood of redemption becomes remote, which is typically after 24 months from the original gift card issuance
date.
All of our restaurants are Company-owned. In calculating comparable restaurant sales, we include a restaurant in the
comparable base once it has been open for 18 months. Customer traffic for our restaurants is estimated based on individual
customer checks.
Cost of sales is comprised of food and beverage costs, including the cost to produce and distribute our proprietary craft beer,
soda and ciders. The components of cost of sales are variable and typically fluctuate directly with sales volumes, but may be
impacted by changes in commodity prices, a shift in sales mix to higher cost proteins or other higher cost items, or varying
levels of promotional activities.
Labor and benefit costs include direct hourly and management wages, bonuses, payroll taxes, fringe benefits and stock-based
compensation and workers’ compensation expense that is directly related to restaurant level employees.
Occupancy and operating expenses include restaurant supplies, credit card fees, marketing costs, fixed rent, percentage rent,
common area maintenance charges, utilities, real estate taxes, repairs and maintenance and other related restaurant costs.
General and administrative costs include all corporate, field supervision and administrative functions that support existing
operations and provide infrastructure to facilitate our future growth. Components of this category include corporate
management, field supervision and corporate hourly staff salaries and related employee benefits (including stock-based
compensation expense and cash-based incentive compensation), travel and relocation costs, information systems, the cost to
40
recruit and train new restaurant management employees, corporate rent, certain brand marketing-related expenses and legal,
professional and consulting fees.
Depreciation and amortization are composed primarily of depreciation of capital expenditures for restaurant and brewing
equipment and leasehold improvements.
Restaurant opening expenses, which are expensed as incurred, consist of the costs of hiring and training the initial hourly work
force for each new restaurant, travel, the cost of food and supplies used in training, grand opening promotional costs, the cost
of the initial stock of operating supplies and other direct costs related to the opening of a restaurant, including rent during the
construction and in-restaurant training period.
While we currently expect to pursue the renewal of substantially all of our expiring restaurant leases, there is no guarantee that
we can obtain a new lease that is satisfactory to our landlord and us or that, if renewed, rents will not increase substantially.
RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, our Consolidated Statements of Income expressed as percentages of total
revenues. All fiscal years presented consist of 52 weeks with the exception of fiscal year 2016 which consists of 53 weeks.
Percentages below may not reconcile due to rounding.
2017
2016
Fiscal Year
2015
2014
2013
100.0%
100.0%
100.0 %
100.0%
100.0%
Revenues
Restaurant operating costs (excluding depreciation
and amortization):
Cost of sales
Labor and benefits
Occupancy and operating
General and administrative
Depreciation and amortization
Restaurant opening
Loss on disposal and impairment of assets
Gain on lease termination, net
Natural disaster and related
Severance and legal settlements
Total costs and expenses
Income from operations
Other (expense) income:
Interest (expense) income, net
Other income, net
Total other (expense) income
26.0
36.0
21.3
5.4
6.7
0.4
0.5
—
0.1
—
96.3
25.3
34.8
20.6
5.6
6.5
0.7
0.3
—
—
—
93.8
24.7
34.5
21.0
5.9
6.5
0.7
0.3
(0.3 )
—
—
93.1
25.2
35.3
21.5
6.1
6.6
0.6
0.2
—
—
0.3
95.8
3.7
6.2
6.9
4.2
(0.4)
0.2
(0.2)
(0.2)
0.1
(0.1)
(0.1 )
—
(0.1 )
—
0.1
0.1
24.8
35.3
22.4
6.3
6.3
1.2
0.5
—
—
0.1
96.9
3.1
—
0.1
0.1
3.2
0.5
2.7%
Income before income taxes
3.4
6.2
6.8
4.3
Income tax (benefit) expense
Net income
(0.9)
4.3%
1.6
4.6%
1.8
4.9 %
1.1
3.2%
52 WEEKS ENDED JANUARY 2, 2018 (FISCAL 2017) COMPARED TO THE 53 WEEKS ENDED JANUARY 3, 2017
(FISCAL 2016)
Revenues. Total revenues increased by $38.7 million, or 3.9%, to $1.0 billion during fiscal 2017, from $993.1 million during
the fiscal 2016. The increase in revenues primarily consisted of an approximate $65.5 million increase in sales from new
restaurants not yet in our comparable restaurant sales base, partially offset by an approximate 0.7%, or $6.5 million, decrease in
comparable restaurant sales, a $19.9 million decrease related to the shift in weeks as a result of our 53rd week in fiscal 2016 and
a $0.4 million decrease in restaurant sales due to the closure of our Century City, California restaurant in January 2016. The
41
decrease in comparable restaurant sales resulted from a reduction in customer traffic of approximately 2.7%, partially offset by
an increase in the average check of 2.0%.
Cost of Sales. Cost of sales increased by $17.2 million, or 6.9%, to $268.7 million during fiscal 2017, from $251.5 million
during fiscal 2016. This increase was primarily due to the opening of 10 new restaurants during fiscal 2017. As a percentage of
revenues, cost of sales increased to 26.0% for fiscal 2017 from 25.3% for the prior fiscal year. The increase in cost of sales, as
a percentage of revenues, was primarily due to an increase in commodity costs, menu mix shifts related to our new slow
roasted items and Daily Brewhouse Specials, as well as increased promotional activities.
Labor and Benefits. Labor and benefit costs for our restaurants increased by $25.9 million, or 7.5%, to $371.2 million during
fiscal 2017, from $345.4 million during fiscal 2016. This increase was primarily due to the opening of 10 new restaurants
during fiscal 2017. As a percentage of revenues, labor and benefit costs increased to 36.0% for fiscal 2017 from 34.8% for the
prior fiscal year. The percentage increase was driven by higher hourly labor rates, increased training labor hours related to our
major sales building initiatives, and deleveraging from negative comparable restaurant sales. Included in labor and benefits for
fiscal 2017 and 2016 was approximately $1.9 million and $1.8 million, respectively, or 0.2% of revenues, of stock-based
compensation expense related to equity awards granted in accordance with our Gold Standard Stock Ownership Program for
certain restaurant management employees.
Occupancy and Operating. Occupancy and operating expenses increased by $15.3 million, or 7.5%, to $219.9 million during
fiscal 2017, from $204.6 million during fiscal 2016. This increase was primarily due to the opening of 10 new restaurants
during fiscal 2017. As a percentage of revenues, occupancy and operating expenses increased to 21.3% for fiscal 2017 from
20.6% for the prior fiscal year. This percentage increase was due to the deleveraging of the fixed component of these expenses
as a result of negative comparable restaurant sales coupled with the impact of the 53rd week in fiscal 2016.
General and Administrative. General and administrative expenses remained consistent at $55.4 million during fiscal 2017 and
2016. As a percentage of revenues, general and administrative expenses decreased to 5.4% for fiscal 2016 from 5.6% for the
prior fiscal year. This percentage decrease was primarily due to the leveraging of our costs over a higher revenue base and a
reduction in cash based incentive compensation. Also included in general and administrative costs for fiscal 2017 and 2016
was approximately $5.1 million and $3.7 million, or 0.5% and 0.4% of revenues, respectively, of stock-based compensation
expense.
Depreciation and Amortization. Depreciation and amortization increased by $4.4 million, or 6.8%, to $68.7 million during fiscal
2017, compared to $64.3 million during fiscal 2016. This increase was primarily due to depreciation expense related to the 10
new restaurants opened during fiscal 2017. As a percentage of revenues, depreciation and amortization slightly increased to
6.7% for fiscal 2017 from 6.5% for the prior fiscal period. This increase is primarily due to the impact of the 53rd week in fiscal
2016.
Restaurant Opening. Restaurant opening expense decreased by $3.1 million, or 44.5%, to $3.9 million during fiscal 2017,
compared to $7.0 million during fiscal 2016. This decrease was due to the opening of 10 new restaurants during fiscal 2017,
compared to 17 new restaurants during fiscal 2016.
Loss on Disposal and Impairment of Assets. The loss on disposal and impairment of assets increased by $1.8 million, or 60.7%,
to $4.8 million during fiscal 2017, compared to $3.0 million during fiscal 2016. This increase was primarily due to the write-
off of the remaining net book value of certain convection ovens and point of sale terminals following the rollout of our new
slow roasting ovens and server handheld point of sale tablets.
Natural Disaster and Related. Natural disaster and related expense of $0.9 million during fiscal 2017 related to property
damages, food spoilage, labor and other expenses caused by Hurricanes Harvey and Irma, in excess of our related insurance
coverage.
Severance and Legal Settlements. Severance and legal settlements was $0.4 million during fiscal 2017 compared to $0.4
million during fiscal 2016. For fiscal 2017, these costs related to the reduction of corporate positions primarily supporting new
restaurant openings. For fiscal 2016, these costs related to the settlement of a wage and hour claim.
Interest Expense, Net. Interest expense, net increased by $2.8 million to $4.5 million during fiscal 2017, compared to $1.7
million during fiscal 2016. This increase was due to increased borrowings under our Credit Facility.
42
Other Income, Net. Other income, net increased by $0.8 million to $2.0 million during fiscal 2017, compared to $1.2 million
during fiscal 2016. This increase was primarily due to the increase in the cash surrender value of life insurance programs held
as part of our deferred compensation program.
Income Tax (Benefit) Expense. As a result of the 2017 Tax Cut and Jobs Act, for fiscal 2017, we recorded a net tax benefit of
(26.5%) as a result of the re-measurement of our net deferred tax liability to the new lower corporate tax rate.
53 WEEKS ENDED JANUARY 3, 2017 (FISCAL 2016) COMPARED TO THE 52 WEEKS ENDED DECEMBER 29,
2015 (FISCAL 2015)
Revenues. Total revenues increased by $73.5 million, or 8.0%, to $993.1 million during fiscal 2016 from $919.6 million during
fiscal 2015. The increase in revenues primarily consisted of an approximate $70.1 million increase in sales from new
restaurants not yet in our comparable restaurant sales base and $21.2 million of sales due to the 53rd week, offset by an
approximate 1.3%, or $11.3 million decrease in comparable restaurant sales on a 52 week basis, and a $6.5 million decrease in
restaurant sales due to the closure of our La Jolla, California restaurant in August 2015 and our Century City, California
restaurant in January 2016. On a 52 week basis the decrease in comparable restaurant sales resulted from a reduction in
customer traffic of approximately 2.6%, partially offset by an increase in the average check, menu mix and incident rates of
approximately 1.3%.
Cost of Sales. Cost of sales increased by $24.5 million, or 10.8%, to $251.5 million during fiscal 2016 compared to $226.9
million during fiscal 2015. This increase was primarily due to the opening of 17 new restaurants during fiscal 2016 coupled
with the impact of the 53rd week. As a percentage of revenues, cost of sales increased to 25.3% for fiscal 2016 from 24.7% for
the prior fiscal year. Substantially all of the increase in cost of sales, as a percentage of revenues, resulted from our decision at
the beginning of fiscal 2016 to no longer allocate the food costs related to certain promotional activities to occupancy and
operating expenses. This change presents our cost of sales and promotional activities consistently with casual dining industry
practices.
Labor and Benefits. Labor and benefit costs for our restaurants increased by $28.3 million, or 8.9%, to $345.4 million during
fiscal 2016 compared to $317.1 million during fiscal 2015. This increase was primarily due to the opening of 17 new
restaurants during fiscal 2016 coupled with the impact of the 53rd week. As a percentage of revenues, labor and benefit costs
increased to 34.8% for fiscal 2016 from 34.5% for the prior fiscal year. The percentage increase was driven by higher hourly
labor primarily related to minimum wage increases coupled with the deleveraging of fixed management labor and benefit costs
as a result of negative comparable restaurant sales. Included in labor and benefits for fiscal 2016 and 2015 was approximately
$1.8 million and $1.4 million, or 0.2% of revenues, respectively, of stock-based compensation expense related to equity awards
granted in accordance with our Gold Standard Stock Ownership Program for certain restaurant management employees.
Occupancy and Operating. Occupancy and operating expenses increased by $11.8 million, or 6.1%, to $204.6 million during
fiscal 2016 compared to $192.7 million during fiscal 2015. This increase was primarily due to the opening of 17 new
restaurants during fiscal 2016 coupled with the impact of the 53rd week. As a percentage of revenues, occupancy and operating
expenses decreased to 20.6% for fiscal 2016 from 21.0% for the prior fiscal year. This percentage decrease was due to the
change in the allocation of food costs related to certain promotional activities. Beginning in fiscal 2016, we no longer allocate
these food costs to occupancy and operating expenses.
General and Administrative. General and administrative expenses increased by $1.5 million, or 2.9%, to $55.4 million during
fiscal 2016 compared to $53.8 million during fiscal 2015. The increase in general and administrative costs was primarily due to
higher field supervision and support costs to manage our increasing number of restaurants coupled with the impact of the 53rd
week, offset by lower corporate incentive compensation of approximately $1.9 million. As a percentage of revenues, general
and administrative expenses decreased to 5.6% for fiscal 2016 from 5.9% for the prior fiscal year. This percentage decrease
was primarily due to our ability to leverage the fixed component of these expenses over a higher revenue base from new
restaurants and lower incentive compensation. Also included in general and administrative costs for fiscal 2016 and 2015 was
approximately $3.7 million and $4.0 million, respectively, or 0.4% of revenues, of stock-based compensation expense.
Depreciation and Amortization. Depreciation and amortization increased by $4.9 million, or 8.2%, to $64.3 million during
fiscal 2016 compared to $59.4 million during fiscal 2015. This increase was primarily due to depreciation expense related to
the 17 new restaurants opened during fiscal 2016. As a percentage of revenues, depreciation and amortization was 6.5% for
both fiscal 2016 and the prior fiscal year. Depreciation and amortization did not change as a percentage of sales primarily due
to the impact of the 53rd week.
43
Restaurant Opening. Restaurant opening expense was $7.0 million during fiscal 2016 compared to $6.6 million during fiscal
2015. This increase is due to the opening of 17 new restaurants during fiscal 2016, compared to 16 new restaurants during the
prior fiscal year.
Loss on Disposal and Impairment of Assets. The loss on disposal and impairment of assets was $3.0 million during fiscal 2016
compared to $2.9 million during fiscal 2015. These costs primarily related to the disposal of certain unproductive restaurant
assets.
Severance and Legal Settlements. Severance and legal settlements expense was approximately $0.4 million during fiscal 2016
and related to the settlement of a wage and hour claim.
Gain on Lease Termination, Net. Gain on lease termination, net was $2.9 million during fiscal 2015 and related to the closure
of our Century City, California restaurant as a result of our landlord exercising their right to terminate our lease. Our Century
City restaurant was located at The Westfield Century City Mall, which was being significantly reconfigured and renovated,
requiring the restaurant to be closed by the end of January 2016. As a result of the forced lease termination, we recorded a $6.0
million termination fee receivable in accordance with our lease provision. This fee offset by the remaining net book value of
the restaurants fixed assets resulted in this net gain.
Income Tax (Benefit) Expense. Our effective income tax rate for fiscal 2016 was 25.4% compared to 27.0% for fiscal
2015. The effective income tax rate for fiscal 2016 differed from the statutory income tax rate primarily due to tax credits.
LIQUIDITY AND CAPITAL RESOURCES
The following table provides, for the periods indicated, a summary of our key liquidity measurements (dollar amounts in
thousands):
Cash and cash equivalents
Net working capital
Current ratio
January 3, 2017
January 2, 2018
$
$
24,335 $
(62,212 ) $
0.5:1.0
22,761
(67,008)
0.5:1.0
Our capital requirements are driven by our fundamental financial objective to improve total shareholder return through a
balanced approach to new restaurant expansion plans, enhancements to and initiatives focused on to our existing restaurants,
and return of capital to our shareholders through our share repurchase program and dividends. In addition, we want to maintain
a flexible balance sheet to provide the financial resources necessary to manage the risks and uncertainties of conducting our
business operations in a mature segment of the restaurant industry. In order to achieve these objectives, we use a combination
of operating cash flows, funded debt and landlord allowances. Over the last several years we have been augmenting our cash
flow from operations by increasing our funded debt and using these proceeds to return capital to shareholders in the form of
share repurchases and, beginning in the fourth quarter of fiscal 2017, pay quarterly cash dividends.
We currently estimate the total domestic capacity for BJ’s restaurants to be at least 425, given the size of our current restaurant
prototype and the current structure of the BJ’s concept and menu. We expect to fund our growth plans using cash from our
ongoing operations, our cash balance on hand, proceeds from employee stock option exercises, tenant improvement allowances
from our landlords and our $250 million Credit Facility. However, depending on the expected level of new restaurant
development, tenant improvement allowances that we receive from our landlords, other planned capital investments including
ongoing maintenance capital expenditures, and results from our ongoing operations, we may not generate enough cash flow
from operations to completely fund our plans. In addition, share repurchases and our quarterly cash dividend or any significant
increases in such repurchases or dividends may impact our available capital resources. Accordingly, we continue to actively
monitor overall conditions in the capital and credit markets with respect to the potential sources and the timing of additional
financing in order to enhance total shareholder return. However, there can be no assurance that such financing will be available
when required or available on terms acceptable to us. If we are unable to secure additional capital resources, when needed, we
may be required to reduce our planned rate of expansion, share repurchases, quarterly cash dividends or other shareholder
return initiatives.
Similar to many restaurant chains, we typically utilize operating lease arrangements (principally ground leases) for the majority
of our restaurant locations. We believe our operating lease arrangements provide appropriate leverage for our capital structure
in a financially efficient manner. However, we are not limited to the use of lease arrangements as our only method of opening
new restaurants and from time to time have purchased the underlying land for new restaurants. While our operating lease
44
obligations currently are not required to be reflected as indebtedness on our Consolidated Balance Sheets, the minimum rents
and other related lease obligations, such as common area expenses, under our lease agreements must be satisfied by cash flows
from our ongoing operations. Accordingly, our lease arrangements reduce, to some extent, our capacity to utilize debt in our
capital structure.
We typically lease our restaurant locations for periods of 10 to 20 years under operating lease arrangements. Our rent structures
vary from lease to lease, but generally provide for the payment of both minimum and contingent (percentage) rent based on
sales, as well as other expenses related to the leases (for example, our pro-rata share of common area maintenance, property tax
and insurance expenses). Many of our lease arrangements include the opportunity to secure tenant improvement allowances to
partially offset the cost of developing and opening the related restaurants. Generally, landlords recover the cost of such
allowances from increased minimum rents. However, there can be no assurance that such allowances will be available to us on
each project. From time to time, we may also decide to purchase the underlying land for a new restaurant if that is the only way
to secure a highly desirable site. Currently, we own the underlying land for two of our operating restaurants and our Texas
brewpub locations. We also own two parcels of land adjacent to two of our operating restaurants. It is not our current strategy
to own a large number of land parcels that underlie our restaurants. Therefore, in many cases we subsequently enter into sale-
leaseback arrangements for land parcels that we may purchase. We disburse cash for certain site-related work, buildings,
leasehold improvements, furnishings, fixtures and equipment to build our leased and owned premises. We own substantially all
of the equipment, furniture and trade fixtures in our restaurants and currently plan to do so in the future.
We also require capital resources to evolve, maintain and increase the productive capacity of our existing base of restaurants
and brewing operations and to further expand and strengthen the capabilities of our corporate and information technology
infrastructures. Our requirement for working capital is not significant since our restaurant customers pay for their food and
beverage purchases in cash or credit cards at the time of the sale. Thus, we are able to sell many of our inventory items before
we are required to pay our suppliers for such items.
CASH FLOWS
The following tables set forth, for the years indicated, our cash flows from operating, investing, and financing activities (dollar
amounts in thousands):
Cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
2017
107,036 $
(52,831)
(52,631)
1,574 $
Fiscal Year
2016
138,359 $
(104,852 )
(45,350 )
(11,843 ) $
$
$
2015
127,224
(82,592)
(40,711)
3,921
45
Operating Cash Flows
Net cash provided by operating activities was $107.0 million during fiscal 2017, representing a $31.3 million decrease from the
$138.4 million provided during fiscal 2016. The decrease in cash from operating activities for fiscal 2017, in comparison to
fiscal 2016, is primarily due to a decrease in our net deferred income tax liability resulting from the revaluation of our deferred
tax liability under the 2017 Tax Cut and Jobs Act, the collection of our $6.0 million lease termination fee receivable in fiscal
2016, coupled with an increase in payroll related accruals in fiscal 2016, as a result of the impact of the 53rd operating week,
offset by greater depreciation and amortization and the timing of prepaids and other current assets.
Net cash provided by operating activities was $138.4 million during fiscal 2016, representing an $11.1 million increase from the
$127.2 million provided during fiscal 2015. The increase in cash from operating activities for fiscal 2016, in comparison to
fiscal 2015, is primarily due the timing of the collection of credit card related accounts receivable and the $6.0 million lease
termination fee receivable, coupled with an increase in payroll related accruals as a result of the impact of the 53rd operating
week and greater depreciation and amortization, offset by the timing of prepaids and other current assets.
Investing Cash Flows
Net cash used in investing activities was $52.8 million during fiscal 2017, representing a $52.0 million decrease from the $104.9
million used in fiscal 2016. The decrease over prior year is primarily due to a lower investment in new restaurant openings as a
result of seven fewer openings, offset by proceeds from three sale-leaseback transactions in fiscal 2017.
Net cash used in investing activities was $104.9 million during fiscal 2016, representing a $22.3 million increase from the $82.6
million used in fiscal 2015. The increase over prior year is primarily due to an increased investment in new restaurant
openings.
The following table provides, for the years indicated, the components of capital expenditures (dollar amounts in thousands):
New restaurants
Restaurant maintenance and key productivity initiatives
Restaurant and corporate systems
Total capital expenditures
2017
Fiscal Year
2016
$
$
39,049 $
30,938
749
70,736 $
86,960 $
21,670
733
109,363 $
2015
69,376
16,403
291
86,070
We expect to open four to six new restaurants in fiscal 2018, and we have entered into signed leases, land purchase agreements
or letters of intent for all of our potential restaurant locations. While we expect our capital expenditures to remain significant,
the reduction of restaurant openings in fiscal 2018 will reduce our capital expenditure spend as compared to fiscal 2017. The
decision to continue to reduce our pace of expansion will generate increased free cash flow and provide added financial
flexibility. It will also allow us to allocate greater resources to our core base of established restaurants to improve sales and
profitability. While our new restaurant unit economics remain solid and warrant continued capital allocation, we will continue
to balance this new restaurant growth with our commitment to drive shareholder returns through our share repurchases program
and, beginning in the fourth quarter of fiscal 2017, quarterly cash dividends.
We currently anticipate our total capital expenditures for fiscal 2018, including all expenditure categories, to be approximately
$50 million to $55 million. We expect to fund our anticipated capital expenditures for fiscal 2018 with our current cash balance
on hand, expected cash flows from operations, proceeds from sale-leaseback transactions, expected tenant improvement
allowances and our line of credit. Our future cash requirements will depend on many factors, including the pace of our
expansion, conditions in the retail property development market, construction costs, the nature of the specific sites selected for
new restaurants, and the nature of the specific leases and associated tenant improvement allowances available, if any, as
negotiated with landlords.
46
Financing Cash Flows
Net cash used in financing activities was $52.6 million during fiscal 2017, representing a $7.3 million increase from the $45.4
million used in fiscal 2016. The increase over prior year is primarily due to a net increase in line of credit repayments, offset by
a decrease in share repurchases.
Net cash used in financing activities was $45.4 million during fiscal 2016, representing a $4.6 million increase from the $40.7
million used in fiscal 2015. Cash used in financing activities were primarily used to fund our share repurchase program of
$95.0 million during fiscal 2016. The increase over prior year is primarily due to decreased proceeds from the exercise of stock
options and lower excess tax benefits from stock-based compensation, partially offset by an increase in net borrowings.
We have a $250 million unsecured revolving line of credit that expires on November 18, 2021, and may be used for working
capital and other general corporate purposes. We utilize the Credit Facility principally for letters of credit that are required to
support certain of our self-insurance programs, to fund a portion of our stock repurchase program and quarterly cash dividend
and working capital and construction requirements.
Historically, we have not paid any dividends to our shareholders. However, on October 24, 2017, our Board of Directors
authorized and declared a quarterly cash dividend of $0.11 per share of common stock payable on December 4, 2017, to
shareholders of record on the close of business November 13, 2017. Subsequently, on February 20, 2018, our Board of
Directors authorized and declared a second quarterly cash dividend of $0.11 per share of common stock payable on March 27,
2018, to shareholders of record on the close of business March 13, 2018. While we intend to pay regular quarterly cash
dividends in the future, any decisions to pay, increase or decrease cash dividends will be reviewed quarterly and declared by
the Board of Directors at its discretion. Our Credit Facility contains, and debt instruments that we enter into in the future may
contain, covenants that place limitations on the amount of dividends we may pay.
As of fiscal 2017, we have cumulatively repurchased shares valued at approximately $357.5 million in accordance with our
approved share repurchase plan. We repurchased shares valued at approximately $66.9 million during fiscal 2017. The share
repurchases were executed through open market purchases, and future share repurchases may be completed through the
combination of individually negotiated transactions, accelerated share buyback, and/or open market purchases. In March 2017,
our Board of Directors approved an expansion of the share repurchase program by $50 million to $400 million. As of January
2, 2018, we have approximately $42.5 million available under our share repurchase plan. Our Credit Facility does not contain
any restrictions on the amount of borrowings that can be used to make share repurchases as long as we are in compliance with
our financial and non-financial covenants.
OFF-BALANCE SHEET ARRANGEMENTS
We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or variable interest entities (“VIEs”), which would have been established for the
purpose of facilitating off-balance sheet arrangements or other contractually narrow limited purposes. As of January 2, 2018, we
are not involved in any off-balance sheet arrangements.
IMPACT OF INFLATION
Inflation on food, labor, energy and occupancy costs can significantly affect the profitability of our restaurant operations. Our
profitability is dependent, among other things, on our ability to anticipate and react to changes in the cost of key operating
resources, including food and other raw materials, labor, energy and other supplies and services. Substantial increases in costs
and expenses could impact our operating results to the extent that such increases cannot be passed along to our restaurant
customers. While we have taken steps to enter into agreements for some of the commodities used in our restaurant operations,
there can be no assurance that future supplies and costs for such commodities will not fluctuate due to weather or other market
conditions outside of our control. We are currently unable to contract for certain commodities, such as fluid dairy, fresh
seafood and most fresh produce items for long periods of time. Consequently, such commodities can be subject to unforeseen
supply and cost fluctuations.
Many of our restaurant employees are paid hourly rates subject to the federal, state or local minimum wage requirements.
Numerous state and local governments have their own minimum wage requirements that are generally greater than the federal
minimum wage and are subject to annual increases based on changes in their local consumer price indices. Additionally, a
general shortage in the availability of qualified restaurant management and hourly workers in certain geographic areas in which
we operate has caused increases in the costs of recruiting and compensating such employees. Certain operating and other costs,
including health benefits in compliance with the Patient Protection and Affordable Care Act, taxes, insurance, federal and state
47
exemption rules, and regulatory requirements relating to employees and other outside services, continue to increase with the
general level of inflation and may also be subject to other cost and supply fluctuations outside of our control.
While we have been able to partially offset inflation and other changes in the costs of key operating resources by gradually
increasing prices of our menu items, coupled with more efficient purchasing practices, productivity improvements and greater
economies of scale, there can be no assurance that we will be able to continue to do so in the future. From time to time,
competitive conditions will limit our menu pricing flexibility. In addition, macroeconomic conditions that impact consumer
discretionary spending for food away from home could make additional menu price increases imprudent. There can be no
assurance that all of our future cost increases can be offset by higher menu prices or that higher menu prices will be accepted
by our restaurant customers without any resulting changes in their visit frequencies or purchasing patterns. Many of the leases
for our restaurants provide for contingent rent obligations based on a percentage of sales. As a result, rent expense will absorb a
proportionate share of any menu price increases in our restaurants. There can be no assurance that we will continue to generate
increases in comparable restaurant sales in amounts sufficient to offset inflationary or other cost pressures.
SEASONALITY AND ADVERSE WEATHER
Our business is impacted by weather and other seasonal factors that typically impact other restaurant operations. Holidays (and
shifts in the holiday calendar) and severe weather including hurricanes, tornados, thunderstorms and similar conditions may
impact restaurant sales volumes in some of the markets where we operate. Many of our restaurants are located in or near
shopping centers and malls that typically experience seasonal fluctuations in sales. Quarterly results have been and will
continue to be significantly impacted by the timing of new restaurant openings and their associated restaurant opening
expenses. As a result of these and other factors, our financial results for any given quarter may not be indicative of the results
that may be achieved for a full fiscal year.
CRITICAL ACCOUNTING POLICIES
Critical accounting policies require the greatest amount of subjective or complex judgments by management and are important
to portraying our financial condition and results of operations. Judgments or uncertainties regarding the application of these
policies may result in materially different amounts being reported under different conditions or using different assumptions.
We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our
consolidated financial statements.
Property and Equipment
We record all property and equipment at cost. Property and equipment accounting requires us to estimate the useful lives of the
assets for depreciation purposes and to select depreciation methods. We believe the useful lives reflect the actual economic life
of the underlying assets. We have elected to use the straight-line method of depreciation over the estimated useful life of an
asset or the lease term of the respective lease, whichever is shorter, for leasehold improvements. Renewals and betterments that
materially extend the useful life of an asset are capitalized while maintenance and repair costs are charged to operating expense
as incurred. Judgment is often required in the decision to distinguish between an asset which qualifies for capitalization versus
an expenditure which is for maintenance and repairs. Internal costs associated with the acquisition, development and
construction of our restaurants are capitalized and allocated to the projects which they relate. When property and equipment are
sold or otherwise disposed of, the asset account and related accumulated depreciation and amortization accounts are relieved,
and any gain or loss is included in earnings. Additionally, any interest capitalized for new restaurant construction would be
included in “Property and equipment, net” on our Consolidated Balance Sheets.
Impairment of Long-Lived Assets
We assess the potential impairment of our long-lived assets whenever events or changes in circumstances indicate that the
carrying value of the assets may not be recoverable. The assets are generally reviewed for impairment in total as well as on a
restaurant by restaurant basis. Factors considered include, but are not limited to, significant underperformance by the restaurant
relative to expected historical or projected future operating results; significant changes in the manner of use of the acquired
assets or the strategy for the overall business; and significant negative industry or economic trends. The recoverability is
assessed in most cases by comparing the carrying value of the asset to the undiscounted cash flows expected to be generated by
the asset. This assessment process requires the use of estimates and assumptions regarding future restaurant cash flows and
estimated useful lives, which are subject to a significant degree of judgment. If these assumptions change in the future, we may
be required to record impairment charges for these assets or for the entire restaurant.
48
Self-Insurance Liability
We retain large deductibles or self-insured retentions for a portion of our general liability insurance and our employee workers’
compensation programs. We maintain coverage with a third party insurer to limit our total exposure for these programs. The
accrued liability associated with these programs is based on our estimate of the ultimate costs within our retention amount to
settle known claims as well as claims incurred but not yet reported to us (“IBNR claims”) as of the balance sheet date. Our
estimated liability is based on information provided by a third party actuary, combined with our judgments regarding a number
of assumptions and factors, including the frequency and severity of claims, our claims development history, case jurisdiction,
related legislation, and our claims settlement practice. Significant judgment is required to estimate IBNR claims as parties have
yet to assert such claims. If actual claims trends, including the severity or frequency of claims, differ from our estimates, our
financial results could be significantly impacted.
Income Taxes
We provide for income taxes based on our expected federal and state tax liabilities. Our estimates include, but are not limited
to, effective state and local income tax rates, allowable tax credits for items such as FICA taxes paid on reported tip income
and estimates related to depreciation expense allowable for tax purposes. We usually file our income tax returns several months
after our fiscal year-end. All tax returns are subject to audit by federal and state governments, usually years after the returns are
filed, and could be subject to differing interpretation of the tax laws.
We utilize the liability method of accounting for income taxes. Deferred income taxes are recognized based on the tax
consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts
at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which differences are expected to
affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
We recognize the impact of a tax position in our financial statements if that position is more likely than not of being sustained
on audit, based on the technical merits of the position. Interest and penalties related to uncertain tax positions are included in
income tax expense.
Leases
We lease the majority of our restaurant locations. We account for our leases in accordance with U.S. GAAP, which require that
our leases be evaluated and classified as operating or capital leases for financial reporting purposes. The term used for this
evaluation includes renewal option periods only in instances in which the exercise of the renewal option can be reasonably
assured and failure to exercise such option would result in an economic penalty. All of our restaurant leases are classified as
operating leases. We disburse cash for leasehold improvements, furniture and fixtures and equipment to build out and equip our
leased premises. Tenant improvement allowance incentives may be available to partially offset the cost of developing and
opening the related restaurants, pursuant to agreed-upon terms in our leases. Tenant improvement allowances can take the form
of cash payments upon the opening of the related restaurants, full or partial credits against minimum or percentage rents
otherwise payable by us or a combination thereof. All tenant improvement allowances received by us are recorded as a deferred
lease incentive and amortized over the term of the lease. The related cash received from the landlord is reflected as “Landlord
contribution for tenant improvements” within operating activities of our Consolidated Statements of Cash Flows.
The lease term used for straight-line rent expense is calculated from the date we obtain possession of the leased premises
through the lease termination date (including any options that can be reasonably assured where failure to exercise such option
would result in an economic penalty). We expense rent from possession date through restaurant open date as preopening
expense. Once a restaurant opens for business, we record straight-line rent over the lease term plus contingent rent to the extent
it exceeded the minimum rent obligation per the lease agreement.
There is potential for variability in the rent holiday period, which begins on the possession date and ends on the restaurant open
date, during which no cash rent payments are typically due under the terms of the lease. Factors that may affect the length of
the rent holiday period generally pertain to construction related delays. Extension of the rent holiday period due to delays in
restaurant opening will result in greater preopening rent expense recognized during the rent holiday period and lesser
occupancy expense during the rest of the lease term (post-opening).
We record total rent payable during the lease term, including rent escalations in which the amount of future rent is certain or
can be reasonably calculated on the straight-line basis over the term of the lease (including the rent holiday period beginning
49
upon our possession of the premises), and record the difference between the minimum rents paid and the straight-line rent as
deferred rent. Certain leases contain provisions that require additional rent payments based upon restaurant sales volume
(“contingent rent”). Contingent rent is accrued each period as the liabilities are incurred, in addition to the straight-line rent
expense noted above. This results in some variability in occupancy expense as a percentage of revenues over the term of the
lease in restaurants where we pay contingent rent.
Management makes judgments regarding the probable term for each restaurant property lease, which can impact the
classification and accounting for a lease as capital or operating, the rent holiday and/or escalations in payments that are taken
into consideration when calculating straight-line rent and the term over which leasehold improvements for each restaurant are
amortized. These judgments may produce materially different amounts of depreciation, amortization and rent expense than
would be reported if different assumed lease terms were used.
In February 2016, the FASB issued guidance, which requires a lessee to recognize most leases on the balance sheet to give
investors, lenders, and other financial statement users a more comprehensive view of a company’s long-term financial
obligations as well as the assets it owns versus leases. Currently, all of our restaurant and our restaurant support center leases
are accounted for as operating leases, and therefore are not recorded within our balance sheet. This guidance will be effective
for fiscal years beginning after December 15, 2018. We expect this adoption will result in a material increase in the assets and
liabilities on our consolidated balance sheets, but will likely have an insignificant impact on our consolidated statements of
earnings.
Stock-Based Compensation
Under our shareholder approved stock-based compensation plan, we have granted incentive stock options, non-qualified stock
options, and restricted stock units that generally vest over three to five years and expire ten years from the date of grant. We
have also granted performance-based restricted stock units under our shareholder approved stock-based compensation plan that
generally vests after three years based on achievement of certain performance targets. Stock-based compensation is measured
in accordance with U.S. GAAP based on the estimated fair value of the awards granted. In valuing stock options, we are
required to make certain assumptions and judgments regarding the grant date fair value, which we value utilizing the Black-
Scholes option-pricing model. These judgments include expected volatility, risk free interest rate, expected option life,
dividend yield and vesting percentage. These estimations and judgments are determined by us using many different variables
that, in many cases, are outside of our control. The changes in these variables or trends, including stock price volatility and risk
free interest rate, may significantly impact the grant date fair value resulting in a significant impact to our financial results.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table summarizes our future estimated cash payments under existing contractual obligations as of January 2, 2018,
including estimated cash payments due by period (in thousands).
Contractual Obligations:
Operating leases (1)
Purchase obligations (2)
Total
Other Obligations:
Long-term debt
Interest (3)
Standby letters of credit
Total
Payments Due by Period
Total
Less Than
1 Year
2-3 Years 4-5 Years
After 5
Years
$ 603,523 $
22,496
$ 626,019 $
46,766 $
14,583
61,349 $
89,842 $
5,524
95,366 $
86,324 $ 380,591
2,389
—
88,713 $ 380,591
$ 163,500 $
18,639
14,423
$ 196,562 $
— $
4,788
14,423
19,211 $
— $ 163,500 $
9,590
—
4,261
—
9,590 $ 167,761 $
—
—
—
—
(1) For more detailed description of our operating leases, refer to Note 5 in the accompanying Consolidated Financial
Statements.
(2) Amounts represent non-cancelable commitments for the purchase of goods and other services.
50
(3) We have assumed $163.5 million remains outstanding under our Credit Facility until the maturity date of November
18, 2021, using the interest rate in effect on January 2, 2018, which was approximately 2.94%.
Additionally, we have entered into lease agreements related to future restaurants with commencement dates subsequent to January
2, 2018. Our aggregate future commitment relating to these leases is $7.7 million and is not included in operating leases above.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion of market risks contains “forward-looking” statements. Actual results may differ materially from the
following discussion based on general conditions in the financial and commodity markets.
Interest Rate Risk
We have a $250 million unsecured Credit Facility of which $163.5 million is currently outstanding that carries interest at a
floating rate. We utilize the Credit Facility principally for letters of credit that are required to support our self-insurance
programs, to fund a portion of our announced stock repurchase program and cash dividends, and for working capital and
construction requirements, as needed. We are exposed to interest rate risk through fluctuations in interest rates on our
obligations under the Credit Facility. Based on our current outstanding balance, a hypothetical 1% change in the interest rates
under our Credit Facility would have an approximate $1.4 million annual impact on our net income.
Food and Commodity Price Risks
We purchase food and other commodities for use in our operations based upon market prices established with our suppliers.
Many of the commodities purchased by us can be subject to volatility due to market supply and demand factors outside of our
control, whether contracted for or not. Costs can also fluctuate due to government regulation. To manage this risk in part, we
attempt to enter into fixed-price purchase commitments, with terms typically up to one year, for some of our commodity
requirements. However, it may not be possible for us to enter into fixed-price contracts for certain commodities or we may
choose not to enter into fixed-price contracts for certain commodities. We believe that substantially all of our food and supplies
are available from several sources, which helps to diversify our overall commodity cost risk. We also believe that we have
some flexibility and ability to increase certain menu prices, or vary certain menu items offered or promoted, in response to food
commodity price increases. Some of our commodity purchase arrangements may contain contractual features that limit the
price paid by establishing certain price floors or caps. We do not use financial instruments to hedge commodity prices, since
our purchase arrangements with suppliers, to the extent that we can enter into such arrangements, help control the ultimate cost
that we pay.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Consolidated Financial Statements and other data attached hereto beginning on page F-1 of this Annual Report on
Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial
Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15
promulgated under the Securities Exchange Act of 1934 as amended, as of the end of the period covered by this report. Based
on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of January 2, 2018, our
disclosure controls and procedures are designed and are effective to provide reasonable assurance that information we are
required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.
51
Changes in Internal Control Over Financial Reporting
There has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during our fourth fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting as of January 2, 2018, based on the framework in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) (“COSO”). Based on that evaluation, our management concluded that our internal control over financial reporting
was effective as of January 2, 2018.
Ernst & Young LLP, the independent registered public accounting firm has independently assessed the effectiveness of our
internal control over financial reporting and its report is included herein.
52
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of BJ’s Restaurants, Inc.
Opinion on Internal Control over Financial Reporting
We have audited BJ’s Restaurants, Inc.’s internal control over financial reporting as of January 2, 2018, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, BJ’s Restaurants, Inc. (the Company) maintained, in all
material respects, effective internal control over financial reporting as of January 2, 2018, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of BJ’s Restaurants, Inc. as of January 2, 2018 and January 3, 2017, and the related
consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended January
2, 2018 and the related notes (collectively referred to as the “financial statements”) of the Company and our report dated
February 26, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Irvine, California
February 26, 2018
/s/ Ernst & Young LLP
53
Inherent Limitations on Effectiveness of Controls
Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure
controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no
matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits
of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control
issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls
can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management
override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions. Projections of any evaluation of control effectiveness to future periods are subject to risks. Over time, controls may
become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
We have adopted a Code of Business Ethics and a Code of Business Conduct to promote honest and ethical conduct of our
business, professional and personal relationships. The Code of Business Ethics covers all executives, including our principal
executive officer and principal financial and accounting officer. The Code of Business Conduct is applicable to all directors,
executives and other employees. A copy of our Code of Integrity, Ethics and Conduct is available on our website
http://investors.bjsrestaurants.com under Corporate Governance. We intend to post any amendments to or waivers from our
Code of Business Ethics and Code of Business Conduct at this website location.
Information with respect to our executive officers is included in Part I, Item 1 of this Annual Report on Form 10-K. Other
information required by this Item is hereby incorporated by reference to the information contained in the Proxy Statement
relating to the Annual Meeting of Shareholders, which we expect to be filed with the SEC no later than 120 days after the close
of the year ended January 2, 2018.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to the information contained in the Proxy Statement
relating to the Annual Meeting of Shareholders, which we expect to file with the SEC no later than 120 days after the close of
the year ended January 2, 2018.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
The information required by this Item is incorporated herein by reference to the information contained in the Proxy Statement
relating to the Annual Meeting of Shareholders, which we expect to file with the SEC no later than 120 days after the close of
the year ended January 2, 2018.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated herein by reference to the information contained in the Proxy Statement
relating to the Annual Meeting of Shareholders, which we expect to file with the SEC no later than 120 days after the close of
the year ended January 2, 2018.
See Part II, Item 5 – “Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities – Stock-Based Compensation Plan Information” for certain information regarding our equity compensation plans.
54
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item is incorporated herein by reference to the information contained in the Proxy Statement
relating to the Annual Meeting of Shareholders, which we expect to file with the SEC no later than 120 days after the close of
the year ended January 2, 2018.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) CONSOLIDATED FINANCIAL STATEMENTS
The following documents are contained in Part II, Item 8 of this Annual Report on Form 10-K:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at January 2, 2018 and January 3, 2017
Consolidated Statements of Income for Each of the Three Fiscal Years in the Period Ended January 2, 2018
Consolidated Statements of Shareholders’ Equity for Each of the Three Fiscal Years in the Period Ended January 2, 2018
Consolidated Statements of Cash Flows for Each of the Three Fiscal Years in the Period Ended January 2, 2018
Notes to the Consolidated Financial Statements
(2) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not applicable or the required information is shown in the Consolidated
Financial Statements or notes thereto.
55
(3) EXHIBITS
Exhibit
Number
Description
3.1
3.2
Amended and Restated Articles of Incorporation of the Company.
Amended and Restated Bylaws of the Company, incorporated by reference to Exhibits 3.1 to the Form 8-K filed
on June 4, 2007.
3.3
Certificate of Amendment of Articles of Incorporation incorporated by reference to Exhibit 3.3 of the Form 10-
K for the year ended January 2, 2005.
3.4
Certificate of Amendment of Articles of Incorporation, dated June 8, 2010, incorporated by reference to Exhibit
3.4 of the Form 10-K for the year ended December 28, 2010.
4.1
Specimen Common Stock Certificate of the Company, incorporated by reference to Exhibit 4.1 of the
Company’s Registration Statement on Form SB-2A filed with the Securities and Exchange Commission on
August 22, 1996 (File No. 3335182-LA) (as amended, the “Registration Statement”).
10.1*
Form of Indemnification Agreement with Officers and Directors.
10.2*
BJ’s Restaurants, Inc. 2005 Equity Incentive Plan, as amended (incorporated by reference to Appendix A to the
Company’s definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on
April 24, 2015).
10.3*
Form of Employee Stock Option Agreement under the 2005 Equity Incentive Plan, incorporated by reference to
Exhibit 10.1 to the Form 10-Q filed on October 31, 2006.
10.4*
Form of Notice of Grant of Stock Option under the 2005 Equity Incentive Plan, incorporated by reference to
Exhibit 10.4 of the Form 8-K filed July 1, 2005.
10.5*
Form of Non-Employee Director Stock Option Agreement under the 2005 Equity Incentive Plan, incorporated
by reference to Exhibit 10.8 of the Form 10-K for the year ended January 3, 2006.
10.6*
Form of Non-Employee Director Notice of Grant of Stock Option under the 2005 Equity Incentive Plan,
incorporated by reference to Exhibit 10.9 of the Form 10-K for the year ended January 3, 2006.
10.7*
Form of Restricted Stock Unit Agreement (non-GSSOP) for employees under the 2005 Equity Incentive Plan,
incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on November 6, 2007.
10.8*
Form of Restricted Stock Unit Notice (non-GSSOP) for employees under the 2005 Equity Incentive Plan,
incorporated by reference to Exhibit 10.2 to the Form 10-Q filed on November 6, 2007.
10.9*
Form of Restricted Stock Unit Agreement (2012 BJ’s GSSOP) for employees under the 2005 Equity Incentive
Plan, incorporated by reference to Exhibit 10.11 to the Form 10-K for the year ended January 1, 2013.
10.10*
Form of Equity Award Certificate (2012 BJ’s GSSOP) for employees under the 2005 Equity Incentive Plan,
incorporated by reference to Exhibit 10.12 to the Form 10-K for the year ended January 1, 2013.
10.11*
Form of Stock Option Agreement (2012 BJ’s GSSOP) for employees under the 2005 Equity Incentive Plan,
incorporated by reference to Exhibit 10.13 to the Form 10-K for the year ended January 1, 2013.
10.12*
Form of Option Grant Notice (2012 BJ’s GSSOP) for employees under the 2005 Equity Incentive Plan,
incorporated by reference to Exhibit 10.14 to the Form 10-K for the year ended January 1, 2013.
10.13*
Form of Restricted Stock Unit Agreement for non-employee directors under the 2005 Equity Incentive Plan,
incorporated by reference to Exhibit 10.15 to the Form 10-K for the year ended January 1, 2013.
10.14*
Form of Restricted Stock Unit Award Certificate for non-employee directors under the 2005 Equity Incentive
Plan, incorporated by reference to Exhibit 10.16 to the Form 10-K for the year ended January 1, 2013.
10.15*
Employment Agreement, dated June 12, 2003, between the Company and Gregory S. Lynds, incorporated by
reference to Exhibit 10.26 of the Form 10-K filed on or about March 14, 2008.
10.16*
Employment Agreement dated April 6, 2010, between the Company and Gerald W. Deitchle, incorporated by
reference to Form 8-K filed on April 12, 2010.
10.17*
Employment Agreement, dated September 6, 2005, between the Company and Gregory S. Levin, incorporated
56
Exhibit
Number
Description
by reference to Exhibit 10.1 of the Form 10-Q filed on November 3, 2005.
10.18*
Employment Agreement, effective March 1, 2011, between the Company and Kendra D. Miller, incorporated
by reference to Exhibit 10.17 of the Form 10-K filed on March 9, 2011.
10.19*
Employment Agreement dated October 28, 2012, between the Company and Gregory A. Trojan, incorporated
by reference to Exhibit 10.1 to Form 8-K filed on October 29, 2012.
10.20*
Employment Agreement dated January 28, 2013, between the Company and Brian S. Krakower, incorporated
by reference to Exhibit 10.1 to Form 10-Q filed on May 6, 2013.
10.21*
Consulting Agreement, dated February 1, 2013, between the Company and Gerald W. Deitchle, incorporated by
reference to Exhibit 10.2 to Form 10-Q filed on May 6, 2013.
10.22*
Employment Agreement effective July 9, 2014, between the Company and Kevin E. Mayer, incorporated by
reference to Exhibit 10.1 to Form 10-Q filed on November 3, 2014.
10.23*
Amended and Restated Employment Agreement dated August 8, 2017, between the Company and Gregory A. Trojan,
incorporated by reference to Exhibit 10.1 to Form 8K filed on August 8, 2017.
10.24
10.25
[Reserved]
[Reserved]
10.26
Second Amended and Restated Credit Agreement, dated November 18, 2016, between the Company and Bank
of America, N.A. and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.1 of the Company's
Current Report on Form 8-K filed on November 18, 2016).
10.27*
BJ’s Restaurants, Inc. 2011 Performance Incentive Plan (incorporated by reference to Appendix A to the
Company’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission
on April 22, 2016.
10.28*
Form of Performance Stock Unit Agreement under the 2005 Equity Incentive Plan, incorporated by reference to
Exhibit 10.1 to Form 10-Q filed on May 6, 2014.
21
List of Significant Subsidiaries.
23.1
Consent of Independent Registered Public Accounting Firm.
31
32
Section 302 Certifications of Chief Executive Officer and Chief Financial Officer.
Section 906 Certification of Chief Executive Officer and Chief Financial Officer.
101
The following materials from BJ’s Restaurants, Inc.’s Quarterly Report on Form 10-K for the year ended January 2,
2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii)
Consolidated Statements of Income; (iii) Consolidated Statements of Shareholders’ Equity (iv) Consolidated
Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements.
*
Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to
participate.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
57
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on our behalf by the undersigned, thereunto duly authorized.
February 26, 2018
BJ’S RESTAURANTS, INC.
By:
/s/ Gregory A. Trojan
Gregory A. Trojan
Chief Executive Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Capacity
Date
By: /s/ GREGORY A. TROJAN
Gregory A. Trojan
By: /s/ GREGORY S. LEVIN
Gregory S. Levin
By: /s/ PETER A. BASSI
Peter A. Bassi
Chief Executive Officer and Director
(Principal Executive Officer)
February 26, 2018
President, Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
February 26, 2018
Lead Independent Director
February 26, 2018
By: /s/ LARRY D. BOUTS
Larry D. Bouts
Director
By: /s/ JAMES A. DAL POZZO
James A. Dal Pozzo
Director
February 26, 2018
February 26, 2018
By: /s/ GERALD W. DEITCHLE
Gerald W. Deitchle
Chairman of the Board and Director
February 26, 2018
By: /s/ NOAH A. ELBOGEN
Noah A. Elbogen
Director
By: /s/ WESLEY A. NICHOLS
Wesley A. Nichols
Director
By: /s/ LEA ANNE S. OTTINGER
Lea Anne S. Ottinger
Director
By: /s/ PATRICK D. WALSH
Patrick D. Walsh
Director
February 26, 2018
February 26, 2018
February 26, 2018
February 26, 2018
58
BJ’S RESTAURANTS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm ......................................................................................
Consolidated Balance Sheets at January 2, 2018 and January 3, 2017 ......................................................................
Consolidated Statements of Income for Each of the Three Fiscal Years in the Period Ended January 2, 2018 ......
Consolidated Statements of Shareholders’ Equity for Each of the Three Fiscal Years in the Period Ended J January 2,
2018 .............................................................................................................................................................................
Consolidated Statements of Cash Flows for Each of the Three Fiscal Years in the Period Ended January 2, 2018
Notes to Consolidated Financial Statements ..............................................................................................................
Page
F-Error!
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not
defined.
F-2
F-3
F-4
F-5
F-6
59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of BJ’s Restaurants, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of BJ’s Restaurants, Inc. (the Company) as of January 2, 2018
and January 3, 2017, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the
three years in the period ended January 2, 2018, and the related notes (collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company
at January 2, 2018 and January 3, 2017, and the consolidated results of its operations and its cash flows for each of the three
years in the period ended January 2, 2018, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of January 2, 2018, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated February 26, 2018, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due
to fraud or error. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2001.
Irvine, California
February 26, 2018
BJ’S RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
Assets
Current assets:
Cash and cash equivalents
Accounts and other receivables, net
Inventories, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill
Other assets, net
Total assets
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable (1)
Accrued expenses
Total current liabilities
Deferred income taxes
Deferred rent
Deferred lease incentives
Long-term debt
Other liabilities
Total liabilities
Commitments and contingencies (Note 5)
Shareholders’ equity:
Preferred stock, 5,000 shares authorized, none issued or outstanding
Common stock, no par value, 125,000 shares authorized and 20,485 and
22,332 shares issued and outstanding as of January 2, 2018 and
January 3, 2017, respectively
Capital surplus
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
January 2, 2018 January 3, 2017
$
$
$
24,335 $
13,865
10,514
11,615
60,329
589,844
4,673
30,112
684,958 $
25,275 $
97,266
122,541
21,694
32,487
52,843
163,500
33,164
426,229
22,761
14,698
9,907
11,324
58,690
601,324
4,673
26,625
691,312
31,145
94,553
125,698
37,587
30,424
54,119
148,000
20,587
416,415
—
—
—
68,904
189,825
258,729
684,958 $
—
66,200
208,697
274,897
691,312
$
The accompanying notes are an integral part of these consolidated financial statements.
(1)
Included in accounts payable for fiscal years 2017 and 2016 is $6,537 and $5,782, respectively, of related party trade
payables. See Note 11 for further information.
F-2
BJ’S RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Revenues
Restaurant operating costs (excluding depreciation and
amortization):
Cost of sales (1)
Labor and benefits
Occupancy and operating (1)
General and administrative
Depreciation and amortization
Restaurant opening
Loss on disposal and impairment of assets
Gain on lease termination, net
Natural disaster and related
Severance and legal settlements
Total costs and expenses
Income from operations
Other expense, net:
Interest expense, net
Other income, net
Total other expense, net
Income before income taxes
Income tax (benefit) expense
Net income
Net income per share:
Basic
Diluted
Weighted average number of shares outstanding:
Basic
Diluted
2017
1,031,782 $
$
Fiscal Year
2016
2015
993,052 $
919,597
268,707
371,220
219,863
55,447
68,665
3,873
4,775
—
905
423
993,878
37,904
251,460
345,370
204,583
55,406
64,275
6,977
2,971
—
—
369
931,411
61,641
(4,501)
1,987
(2,514)
35,390
(1,730 )
1,180
(550 )
61,091
226,942
317,050
192,739
53,827
59,417
6,562
2,908
(2,910)
—
—
856,535
63,062
(1,015)
60
(955)
62,107
$
$
$
(9,390)
15,534
16,782
44,780 $
45,557 $
45,325
2.10 $
2.06 $
1.91 $
1.88 $
1.76
1.73
21,374
21,772
23,824
24,233
25,718
26,231
The accompanying notes are an integral part of these consolidated financial statements.
(1) Related party costs included in cost of sales are $83,554, $81,789 and $78,887 for fiscal years 2017, 2016, and 2015,
respectively. Related party costs included in operating and occupancy are $9,247, $8,880 and $8,378 for fiscal years
2017, 2016, and 2015, respectively. See Note 11 for further information.
F-3
BJ’S RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
Common Stock
Capital
Retained
Shares
Amount Surplus Earnings
Total
Balance, December 30, 2014
Exercise of stock options
Issuance of restricted stock units
Repurchase of common stock
Stock-based compensation
Tax benefit from stock option exercises
Net income
Balance, December 29, 2015
Exercise of stock options
Issuance of restricted stock units
Repurchase of common stock
Stock-based compensation
Tax benefit from stock option exercises
Net income
Balance, January 3, 2017
Exercise of stock options
Issuance of restricted stock units
Repurchase and retirement of common stock
Stock-based compensation
Cash dividends paid
Net income
Balance, January 2, 2018
26,229 $
432
80
(2,069)
—
—
—
24,672
88
53
(2,481)
—
—
—
22,332
57
79
(1,983)
—
—
—
20,485 $
93,971 $
8,945
—
(95,549)
—
—
—
7,367
2,931
2,002
(12,300)
—
—
—
—
1,886
3,714
(5,600)
—
—
—
— $
(534 )
(293 )
—
5,680
4,220
—
—
—
—
—
—
45,325
63,290 245,826
—
—
(82,686)
—
—
45,557
66,200 208,697
—
—
(61,322)
—
(2,330)
44,780
54,217 $ 200,501 $ 348,689
8,411
(293)
(95,549)
5,680
4,220
45,325
316,483
2,126
(323)
(94,986)
5,707
333
45,557
274,897
1,382
(322)
(66,922)
7,244
(2,330)
44,780
68,904 $ 189,825 $ 258,729
(805 )
(2,325 )
—
5,707
333
—
(504 )
(4,036 )
—
7,244
—
—
The accompanying notes are an integral part of these consolidated financial statements.
F-4
BJ’S RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Deferred income taxes
Stock-based compensation expense
Loss on disposal and impairment of assets
Gain on lease termination, net
Natural disaster and related
Changes in assets and liabilities:
Accounts and other receivables
Landlord contribution for tenant improvements
Inventories, net
Prepaid expenses and other current assets
Other assets, net
Accounts payable
Accrued expenses
Deferred rent
Deferred lease incentives
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Proceeds from sale of assets
Net cash used in investing activities
Cash flows from financing activities:
Borrowings on line of credit
Payments on line of credit
Excess tax benefit from stock-based compensation
Taxes paid on vested stock units under employee plans
Proceeds from exercise of stock options
Cash dividends paid
Repurchases of common stock
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosure of cash flow information:
Cash paid for income taxes
Cash paid for interest, net of capitalized interest
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment acquired and included in accounts payable
Stock-based compensation capitalized
F-5
2017
Fiscal Year
2016
2015
$
44,780 $
45,557 $
45,325
68,665
(16,486 )
6,946
4,775
—
194
(210 )
1,565
(607 )
(718 )
(4,022 )
(1,261 )
2,652
2,063
(1,276 )
(24 )
107,036
64,275
7,073
5,527
2,971
—
—
9,904
762
(1,014)
(5,065)
(5,257)
542
10,692
2,797
282
(687)
138,359
59,417
5,319
5,395
2,908
(2,910)
—
(994)
426
(883)
1,477
(3,282)
(1,983)
11,274
2,947
2,753
35
127,224
(70,736 )
17,905
(52,831 )
(109,363)
4,511
(104,852)
(86,070)
3,478
(82,592)
2,145,100 1,179,800
(2,129,600 ) (1,132,300)
333
(323)
2,126
—
(94,986)
(45,350)
—
(322 )
1,382
(2,269 )
(66,922 )
(52,631 )
529,400
(486,900)
4,220
(293)
8,411
—
(95,549)
(40,711)
1,574
22,761
24,335 $
(11,843)
34,604
22,761 $
3,921
30,683
34,604
5,163 $
4,245 $
6,803 $
1,351 $
12,097
503
3,876 $
298 $
8,485 $
180 $
10,915
285
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
BJ’S RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company and Summary of Significant Accounting Policies
Description of Business
BJ’s Restaurants, Inc. (referred to herein as the “Company,” “BJ’s,” “we,” “us” and “our”) was incorporated in California on
October 1, 1991, to assume the management of five “BJ’s Chicago Pizzeria” restaurants and to develop additional BJ’s
restaurants. As of January 2, 2018, we owned and operated 197 restaurants located in 26 states. Each of our restaurants is
currently operated as a BJ’s Restaurant & Brewhouse®, BJ’s Restaurant & Brewery®, BJ’s Pizza & Grill® or BJ’s Grill®.
During fiscal 2017, we opened 10 new restaurants. Several of our BJ’s Restaurant & Brewery® locations, in addition to our two
brewpub locations in Texas, brew our signature, proprietary craft BJ’s beer. All of our other restaurants receive their BJ’s beer
either from one of our restaurant brewing operations, our Texas brewpubs and/or independent third party brewers using our
proprietary recipes.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of BJ’s Restaurants, Inc. and its wholly owned
subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The financial statements
presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of the financial condition, results of operations and cash flows for the period.
The consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted
accounting principles (“U.S. GAAP”). The Company had no components of other comprehensive income (loss) during any of
the years presented, as such; a consolidated statement of comprehensive income (loss) is not presented.
The preparation of financial statements in conformity U.S. GAAP requires management to make estimates and assumptions for
the reporting period and as of the financial statement date. These estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses.
Actual results could differ from those estimates.
Our fiscal year consists of 52 or 53 weeks and ends on the Tuesday closest to December 31 for financial reporting purposes.
Fiscal year 2017 ended on January 2, 2018 and consisted of 52 weeks of operations, fiscal year 2016 ended on January 3, 2017
and consisted of 53 weeks of operations and fiscal year 2015 ended on December 29, 2015 and consisted of 52 weeks of
operations.
Segment Disclosure
The FASB Accounting Standards Codification (“ASC”) Topic No. 280, Segment Reporting, establishes standards for
disclosures about products and services, geographic areas and major customers. We currently operate in one operating
segment: casual dining company-owned restaurants. Additionally, we operate in one geographic area: the United States of
America.
Recently Issued Accounting Standards
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). This guidance
requires the recognition of most leases on the balance sheet to give investors, lenders, and other financial statement users a
more comprehensive view of a company’s long-term financial obligations as well as the assets it owns versus leases. ASU
2016-02 will be effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.
Currently, all of our restaurant and our restaurant support center leases are accounted for as operating leases, and therefore are
not recorded within our balance sheet. We expect this adoption will result in a material increase in the assets and liabilities on
our consolidated balance sheets, but will likely have an insignificant impact on our consolidated statements of earnings. In
preparation for the adoption of the guidance, we are implementing controls and key system changes to enable the preparation
of financial information.
In April 2016, the FASB issued ASU 2016-10, an amendment to ASU 2014-09, Revenue from Contracts with Customers
F-6
(Topic 606). ASU 2014-09 provides a comprehensive new revenue recognition model that requires a company to recognize
revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to
receive in exchange for those goods or services and expands related disclosure requirements. ASU 2016-10 clarifies ASU
2014-09 to address the potential for diversity in practice at the adoption. ASUs 2016-10 and 2014-09 are effective for annual
and interim reporting periods beginning after December 15, 2017, and early application is permitted.
The majority of our revenues are from food and beverage sales at our restaurants. ASU 2014-09 will not have an impact on
revenue recognition related to food and beverage sales unless the sales are to a customer participating in our loyalty program.
Currently, we measure our total loyalty rewards obligation based on the estimated number of customers who will ultimately
claim the rewards earned under the program using the estimated cost of the rewards. Under this approach, we estimate the cost
of a loyalty point based on the equivalent cost of the food and beverage earned by our customers. These expenses are accrued
for and recorded as marketing expenses and are included in “Occupancy and operating” expenses on our Consolidated
Statements of Income. Under ASU 2016-10, we will be required to allocate the transaction price between the goods delivered
and the future goods that will be delivered, using the loyalty points earned, on a relative standalone selling price basis. The
portion of the transaction price allocated to the future loyalty rewards will be recorded as deferred revenue and recognized as
revenue when the related loyalty rewards are redeemed. Upon adoption, we will no longer record a marketing expense related
to loyalty points earned.
In addition to the impact on the accounting for loyalty points, ASU 2014-09 requires gift card breakage to be recognized as
revenue in proportion to the pattern of gift card redemptions exercised by our customers. Currently, the Company records
breakage income within other (expense) income and not within revenue.
The new guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect
adjustment to opening retained earnings as of the date of adoption (modified retrospective approach). We have elected the
modified retrospective adoption method and plan to adopt this guidance in the first quarter of fiscal 2018. We do not expect the
adoption of this guidance to have a material impact on our consolidated financial statements.
Recently Adopted Accounting Standards
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740). This
guidance required deferred tax liabilities and assets to be classified as non-current in a classified balance sheet. This update was
effective for annual and interim periods beginning after December 15, 2016, and early adoption was permitted. As of January
3, 2017, we had reported a net deferred income tax liability of $36.8 million, consisting of a current deferred income tax asset
of $18.4 million and a non-current deferred income tax liability of $55.2 million. We adopted ASU 2015-17 during the first
quarter of fiscal 2017; therefore, our reported $36.8 million deferred income tax liability, as of January 3, 2017, has been
reclassified as $0.8 million within ‘Other assets, net” and as “Deferred income taxes” of $37.6 million on our Consolidated
Balance Sheets.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718).
This guidance changed how companies account for certain aspects of share-based payments to employees. Companies are now
required to recognize the difference between the estimated and the actual tax impact of awards within the income statement
when the awards vest or are settled, and additional paid-in capital (“APIC”) pools are eliminated. This ASU also impacted the
classification of awards as either equity or liabilities and the classification of share-based transactions within the statement of
cash flows. We adopted ASU 2016-09 during the first quarter of fiscal 2017. The impact of the adoption of this standard was
$0.08 million of additional income tax expense within our consolidated financial statements.
Reclassifications
As a result of the adoption of ASU 2015-17, reclassifications of financial statement amounts have been made to the prior
period to conform to the current period’s presentation. The adoption of this standard resulted in the reclassification of $18.4
million from current to long-term deferred taxes on January 3, 2017.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments and money market funds with an original maturity of three months
or less when purchased. Cash and cash equivalents are stated at cost, which approximates fair market value.
F-7
Concentration of Credit Risk
Financial instruments which subject us to a concentration of credit risk principally consist of cash and cash equivalents. We
currently maintain our day-to-day operating cash balances with a major financial institution. At times, our operating cash balances
may be in excess of the FDIC insurance limit.
Inventories
Inventories are comprised primarily of food and beverage products and are stated at the lower of cost (first-in, first-out) or net
realizable value.
Property and Equipment
Property and equipment are recorded at cost and depreciated over their estimated useful lives. Leasehold improvements are
amortized over the estimated useful life of the asset or the lease term, including reasonably assured renewal periods or exercised
options, of the respective lease, whichever is shorter. Renewals and betterments that materially extend the life of an asset are
capitalized while maintenance and repair costs are expensed as incurred. When property and equipment are sold or otherwise
disposed of, the asset accounts and related accumulated depreciation or amortization accounts are relieved, and any gain or loss is
included in earnings.
Depreciation and amortization are recorded using the straight-line method over the following estimated useful lives:
Furniture and fixtures
Equipment
Brewing equipment
Building improvements
Leasehold improvements
10 years
5-10 years
10-20 years
the shorter of 20 years or the remaining lease term
the shorter of the useful life or the lease term,
including reasonably assured renewal periods
Goodwill
We perform impairment testing annually, during the fourth quarter, and more frequently if factors and circumstances indicate
impairment may have occurred. When evaluating goodwill for impairment, we first perform a qualitative assessment to
determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying value. If it is
concluded that this is the case, we estimate the fair value of the reporting unit and compare it to the carrying value of the
reporting unit, including goodwill. If the carrying value of the reporting unit is greater than the estimated fair value, an
impairment charge is recorded for the difference between the implied fair value of goodwill and its carrying amount. To
calculate the implied fair value of the reporting unit’s goodwill, the fair value of the reporting unit is first allocated to all of the
other assets and liabilities of that unit based on their relative fair values. The excess of the reporting unit’s fair value over the
amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized
when the carrying amount of goodwill exceeds its implied fair value. This adjusted carrying value becomes the new goodwill
accounting basis value. We did not record any impairment to goodwill during fiscal 2017, 2016 or 2015.
Intangible Assets
Definite-lived intangible assets are comprised of trademarks and are amortized over their estimated useful lives of ten years.
Definite-lived intangible assets are tested for impairment when facts and circumstances indicate that the carrying values may
not be recoverable. Indefinite-lived intangible assets are not subject to amortization and tested for impairment when facts and
circumstances indicate that the carrying values may not be recoverable. We did not record any impairment of intangible assets
during fiscal 2017, 2016 or 2015. Intangible assets are included in “Other assets, net” on the accompanying Consolidated
Balance Sheets.
Long-Lived Assets
We assess the potential impairment of our long-lived assets whenever events or changes in circumstances indicate that the
carrying value of the assets may not be recoverable. These assets are generally reviewed for impairment in total as well as on a
restaurant by restaurant basis. Factors considered include, but are not limited to, significant underperformance by the restaurant
relative to expected historical or projected future operating results, significant changes in the manner of use of the acquired
assets or the strategy for the overall business, and significant negative industry or economic trends. The recoverability is
F-8
assessed by comparing the carrying value of the asset to the undiscounted cash flows expected to be generated by the asset. If
the carrying amount is greater than the anticipated undiscounted cash flows, an impairment charge is recorded as the difference
between the carrying amount and the assets estimated fair value. In fiscal 2015, we recorded impairment expense of $0.4 million
related to the reduction in the carrying value of two of our underperforming BJ’s Pizza & Grill® restaurants, which is included in
“Loss on disposal of assets and impairments” on our Consolidated Statements of Income. We did not incur an impairment
expense in fiscal 2017 or 2016.
Revenue Recognition
Revenues from food and beverage sales at restaurants are recognized when payment is tendered at the point-of-sale. Amounts
paid with a credit card are recorded in accounts and other receivables until payment is collected. We sell gift cards which do
not have an expiration date and we do not deduct non-usage fees from outstanding gift card balances. Revenues from the sale
of gift cards are deferred and recognized upon redemption. Deferred gift card revenue, included in “Accrued expenses” on the
accompanying Consolidated Balance Sheets, was $15.0 million and $13.0 million as of January 2, 2018 and January 3, 2017,
respectively. We recognize gift card breakage income when the likelihood of the redemption of the cards becomes remote,
which is typically 24 months after original issuance. Gift card breakage income is recorded in “Other income, net” on our
Consolidated Statements of Income.
Cost of Sales
Cost of sales is comprised of food and beverage costs, including the cost to produce and distribute our proprietary craft beer,
soda and ciders. The components of cost of sales are variable and typically fluctuate directly with sales volumes, but may be
impacted by changes in commodity prices or promotional activities.
Sales Taxes
Revenues are presented net of sales tax collected. The obligations to the appropriate tax authorities are included in other
accrued expenses until the taxes are remitted to the appropriate taxing authorities.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense for fiscal 2017, 2016, and 2015 was approximately $21.0
million, $18.9 million and $20.5 million, respectively. Advertising costs are primarily included in “Occupancy and operating”
expenses on our Consolidated Statements of Income.
Customer Loyalty Program
Our “BJ’s Premier Rewards” customer loyalty program enables participants to earn points for each qualifying purchase. The
points can then be redeemed for rewards including food discounts and other items. We measure our total rewards obligation
based on the estimated number of customers that will ultimately earn and claim rewards under the program, and record the
estimated related expense as reward points accumulate. These expenses are accrued for and recorded as marketing expenses
and are included in “Occupancy and operating” expenses on our Consolidated Statements of Income.
Income Taxes
We utilize the liability method of accounting for income taxes. Deferred income taxes are recognized based on the tax
consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts
at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which differences are expected to
affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
We provide for income taxes based on our expected federal and state tax liabilities. Our estimates include, but are not limited
to, effective state and local income tax rates, allowable tax credits for items such as FICA taxes paid on reported tip income
and estimates related to depreciation expense allowable for tax purposes. We usually file our income tax returns several months
after our fiscal year-end. All tax returns are subject to audit by federal and state governments for years after the returns are
filed, and could be subject to differing interpretations of the tax laws.
F-9
We recognize the impact of a tax position in our financial statements if that position is more likely than not of being sustained
through an audit, based on the technical merits of the position. Interest and penalties related to uncertain tax positions are
included in income tax expense.
Restaurant Opening Expense
Restaurant payroll, supplies, training, other start-up costs and rent expense incurred prior to the opening of a new restaurant are
expensed as incurred.
Gain on Lease Termination
On August 3, 2015, the landlord of our Century City, California restaurant notified us that they were exercising their right to
terminate our lease in return for a $6.0 million termination fee. Our Century City restaurant was located at The Westfield
Century City Mall, which was being significantly reconfigured and renovated, requiring the restaurant to be closed by the end
of January 2016. As a result of the forced lease termination, in fiscal 2015, we recorded a $6.0 million termination fee
receivable in accordance with our lease provision. This fee, offset by the remaining net book value of the restaurants fixed
assets, resulted in a $2.9 million net gain. In January 2016, we received the $6.0 million termination fee from the landlord.
Leases
We lease the majority of our restaurant locations. We account for our leases in accordance with U.S. GAAP, which require that
our leases be evaluated and classified as operating or capital leases for financial reporting purposes. The lease term used for
this evaluation includes renewal option periods when the exercise of the renewal option can be reasonably assured and failure
to exercise the option would result in an economic penalty. All of our restaurant leases are classified as operating leases.
Tenant improvement allowance incentives may be available to partially offset the cost of developing and opening our
restaurants, pursuant to agreed-upon terms in our leases. Tenant improvement allowances can take the form of cash payments
upon the opening of the related restaurants, full or partial credits against minimum or percentage rents otherwise payable by us
or a combination thereof. All tenant improvement allowances received by us are recorded as a deferred lease incentive and
amortized over the term of the lease. The related cash received from the landlord is reflected as “Landlord contribution for
tenant improvements” within the “Cash flow from operating activities” section of our Consolidated Statements of Cash Flows.
The lease term used for straight-line rent expense is calculated from the date we obtain possession of the leased premises
through the lease termination date. We expense rent from possession date through the restaurant opening date as restaurant
opening expense within our statement of operations. Once a restaurant opens for business, we record straight-line rent over the
probable lease term plus contingent rent to the extent it exceeds the minimum rent obligation per the lease agreement.
Cash rent payments are not typically due under the terms of our leases during the rent holiday period, which begins on the
possession date and ends on the restaurant opening date. Factors that may affect the length of the rent holiday period include
construction related delays. Extension of the rent holiday period due to delays in a restaurant opening will result in greater
preopening rent expense recognized during the rent holiday period and lesser occupancy expense during the remainder of the
lease term (post-opening).
For leases that contain rent escalations in which the amount of future rent can be reasonably calculated, we record the total rent
payable under the lease on a straight-line basis over the probable term (including the rent holiday period beginning upon our
possession of the premises). Differences between rent payments and the straight-line rent expense are recorded as deferred rent.
Certain leases contain provisions that require additional rent payments based upon a restaurant’s sales volume (“contingent
rent”). Contingent rent is accrued each period based on the actual sales, in addition to the straight-line rent expense noted
above. This results in some variability in occupancy expense over the term of the lease in restaurants where we pay contingent
rent.
Management makes judgments regarding the probable term for each restaurant property lease and applies these selected terms
consistently to each lease. These judgments can impact the classification and accounting for a lease as capital or operating, the
calculation of straight-line rent, and the term over which leasehold improvements are amortized. These judgments produce
materially different amounts of depreciation, amortization and rent expense than would be reported if different lease terms
were used.
F-10
Net Income Per Share
Basic net income per share is computed by dividing the net income by the weighted average number of common shares
outstanding during the period. Diluted net income per share reflects the potential dilution that could occur if in-the-money
stock options issued by us to sell common stock at set prices were exercised and if restrictions on restricted stock units issued
by us were to lapse (collectively, equity awards) using the treasury stock method. Performance-based restricted stock units
have been excluded from the diluted income per share computation because the performance-based criteria have not yet been
met.
The following table presents a reconciliation of basic and diluted net income per share, including the number of dilutive equity
awards that were included in the dilutive net income per share computation (in thousands):
2017
Fiscal Year
2016
2015
Numerator:
Net income for basic and diluted net income per share $
44,780 $
45,557 $
45,325
Denominator:
Weighted-average shares outstanding - basic
Dilutive effect of equity awards
Weighted-average shares outstanding - diluted
21,374
398
21,772
23,824
409
24,233
25,718
513
26,231
At January 2, 2018, January 3, 2017, and December 29, 2015, there were approximately 0.6 million, 0.3 million, and 0.2
million shares of common stock equivalents, respectively, that have been excluded from the calculation of diluted net income
per share because they are anti-dilutive.
Stock-Based Compensation
Under our shareholder approved stock-based compensation plans, we have granted incentive stock options, non-qualified stock
options, and restricted stock units (“RSUs”), including performance and time-based restricted stock units, that generally vest
over three to five years and expire ten years from the date of grant. Stock-based compensation is recorded in accordance with
U.S. GAAP based on the underlying estimated fair value of the awards granted. In valuing stock options, we are required to
make certain assumptions and judgments regarding the inputs to the Black-Scholes option-pricing model. These inputs include
expected volatility, risk free interest rate, expected option life, dividend yield and expected vesting percentage. These
estimations and judgments involve many different variables that, in many cases, are outside of our control. Changes in these
variables may significantly impact the compensation cost recognized for these grants resulting in a significant impact to our
financial results. The tax benefits resulting from tax deductions in excess of the compensation cost recognized for stock options
(excess tax benefits) are classified as financing cash flows within our Consolidated Statements of Cash Flows.
2. Accounts and Other Receivables
Accounts and other receivables consisted of the following (in thousands):
Credit cards
Third party gift card sales
Tenant improvement allowances
Income taxes
Other
January 2,
2018
January 3,
2017
$
$
5,723 $
3,669
2,952
145
1,376
13,865 $
5,272
3,016
4,517
1,255
638
14,698
F-11
3. Property and Equipment
Property and equipment consisted of the following (in thousands):
Land
Building improvements
Leasehold improvements
Furniture and fixtures
Equipment
Less accumulated depreciation and amortization
Construction in progress
Property and equipment, net
4. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
January 2,
2018
January 3,
2017
$
5,701 $
362,986
256,415
136,771
283,265
1,045,138
(464,661)
580,477
9,367
589,844 $
$
10,933
344,450
240,811
128,582
258,356
983,132
(404,702 )
578,430
22,894
601,324
Payroll related
Workers’ compensation
Deferred revenue from gift cards
Sales taxes
Other taxes
Deferred lease incentives - current
Other current rent related
Utilities
Customer loyalty program
Merchant cards
Other
January 2,
2018
January 3,
2017
$
$
24,861 $
19,026
14,955
7,117
7,232
4,595
2,469
2,177
3,080
1,643
10,111
97,266 $
26,374
19,834
12,968
7,044
5,578
4,568
2,908
1,981
2,780
1,782
8,736
94,553
5. Commitments and Contingencies
Leases
We lease our restaurant and office facilities under non-cancelable operating leases with remaining terms ranging from
approximately 10 to 20 years and renewal options ranging from 5 to 20 years. Rent expense for fiscal 2017, 2016, and 2015
was $44.7 million, $42.8 million, and $39.4 million, respectively.
We have certain operating leases that contain fixed rent escalation clauses or rent escalation clauses in which the amount of the
future rent can be calculated. Total rent due for these leases is expensed on a straight-line basis over each respective lease term,
resulting in deferred rent of approximately $32.5 million and $30.4 million at January 2, 2018 and January 3, 2017,
respectively. The deferred rent will be amortized to rent expense over each respective lease term.
A number of our leases require us to pay contingent rent based on a percentage of sales above a specified minimum. Total
contingent rent included within rent expense for fiscal 2017, 2016, and 2015 was approximately $3.1 million, $3.8 million, and
$3.6 million, respectively.
F-12
Future minimum annual rent payments under non-cancelable operating leases are as follows (in thousands):
2018
2019
2020
2021
2022
Thereafter
$
$
46,766
45,336
44,505
43,747
42,578
380,591
603,523
Additionally, we have entered into lease agreements related to the construction of future restaurants with commencement dates
subsequent to January 2, 2018. Our aggregate future commitment relating to these leases is $7.7 million and is not included in
the above future minimum annual rent payments.
Legal Proceedings
We are subject to lawsuits, administrative proceedings and demands that arise in the ordinary course of our business and which
typically involve claims from customers, employees and others related to operational, employment, real estate and intellectual
property issues common to the foodservice industry. A number of these claims may exist at any given time. We are self-insured
for a portion of our general liability and our employee workers’ compensation requirements. We maintain coverage with a third
party insurer to limit our total exposure. We believe that most of our customer claims will be covered by our general liability
insurance, subject to coverage limits and the portion of such claims that are self-insured. Punitive damages awards and
employee unfair practice claims, however, are not covered by our general liability insurance. To date, we have not been
ordered to pay punitive damages with respect to any claims, but there can be no assurance that punitive damages will not be
awarded with respect to any future claims. We could be affected by adverse publicity resulting from allegations in lawsuits,
claims and proceedings, regardless of whether these allegations are valid or whether we are ultimately determined to be liable.
We currently believe that the final disposition of these types of lawsuits, proceedings and claims will not have a material
adverse effect on our financial position, results of operations or liquidity. It is possible, however, that our future results of
operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits,
proceedings or claims.
Letters of Credit
We have irrevocable standby letters of credit outstanding, as required under our workers’ compensation insurance
arrangements, of $14.4 million as of January 2, 2018. Our standby letters of credit automatically renew each October 31 for
one year unless 30 days’ notice, prior to such renewal date, is given by the financial institution that provides the letters. The
standby letters of credit issued under our Credit Facility reduce the amount available for borrowing.
6. Long-Term Debt
Line of Credit
Our Credit Facility, which matures on November 18, 2021, provides us with revolving loan commitments totaling $250
million, of which $50 million may be used for the issuance of letters of credit. Availability under the Credit Facility is reduced
by outstanding letters of credit, which are used to support our self-insurance programs. Our obligations under the Credit
Facility are unsecured. As of January 2, 2018, there were borrowings of $163.5 million and letters of credit totaling
approximately $14.4 million outstanding under the Credit Facility. Available borrowings under the Credit Facility were $72.1
million as of January 2, 2018. The Credit Facility bears interest at our choice of LIBOR plus a percentage not to exceed 1.75%,
or at a rate ranging from Bank of America’s prime rate to 0.75% above Bank of America’s prime rate, based on our level of
lease and debt obligations as compared to EBITDA plus lease expenses. The weighted average interest rate during fiscal 2017
was approximately 2.3%.
The Credit Facility contains provisions requiring us to maintain compliance with certain covenants, including a Fixed Charge
Coverage Ratio and a Lease Adjusted Leverage Ratio. At January 2, 2018, we were in compliance with these covenants.
Interest expense and commitment fees, under the Credit Facility, were approximately $4.5 million, $1.7 million and $1.0
million, for fiscal 2017, 2016 and 2015, respectively. We also capitalized approximately $0.1 million and $0.2 million of
interest expense related to new restaurant construction during fiscal 2017 and 2016, respectively.
F-13
7. Shareholders’ Equity
Preferred Stock
We are authorized to issue 5.0 million shares of one or more series of preferred stock and we are authorized to determine the
rights, preferences, privileges and restrictions to be granted to, or imposed upon, any such series, including the voting rights,
redemption provisions (including sinking fund provisions), dividend rights, dividend rates, liquidation rates, liquidation
preferences, conversion rights and the description and number of shares constituting any wholly unissued series of preferred
stock. No shares of preferred stock were issued or outstanding at January 2, 2018 or January 3, 2017. We currently have no
plans to issue shares of preferred stock.
Common Stock
Shareholders are entitled to one vote for each share of common stock held of record. Pursuant to the requirements of California
law, shareholders are entitled to accumulate votes in connection with the election of directors. Shareholders of our outstanding
common stock are entitled to receive dividends if and when declared by the Board of Directors. We have no plans to pay any
cash dividends in the foreseeable future.
Cash Dividends
On October 24, 2017, our Board of Directors authorized and declared a quarterly cash dividend of $0.11 per share of common
stock payable on December 4, 2017, to shareholders of record at the close of business on November 13, 2017. While we intend
to pay quarterly cash dividends, any future decisions to pay, increase or decrease cash dividends will be reviewed quarterly and
declared by the Board of Directors at its discretion. Our Credit Facility contains, and debt instruments that we enter into in the
future may contain, covenants that place limitations on the amount of dividends we may pay.
Stock Repurchases
During fiscal 2017, we repurchased and retired approximately 2.0 million shares of our common stock at an average price of
$33.74 per share for a total of $66.9 million, which is recorded as a reduction in common stock, with any excess charged to
retained earnings. In March 2017, our Board of Directors approved an expansion of the authorized share repurchase program
by $50 million to $400 million in the aggregate. As of January 2, 2018, approximately $42.5 million remains available for
additional repurchases under our share repurchase program.
8. Income Taxes
Income tax (benefit) expense for the last three fiscal years consists of the following (in thousands):
Current:
Federal
State
Deferred:
Federal
State
2017
Fiscal Year
2016
2015
$
4,631 $
2,465
7,096
6,034 $
2,427
8,461
8,161
3,302
11,463
(15,727)
(759)
(16,486)
6,869
204
7,073
5,278
41
5,319
Income tax expense
$
(9,390) $
15,534 $
16,782
F-14
Income tax expense for the last three fiscal years differs from the amount that would result from applying the federal statutory rate
as follows:
Income tax at statutory rates
State income taxes, net of federal benefit
Permanent differences
Income tax credits
Prior year tax credit true-up
Change in statutory rate
Other, net
2017
Fiscal Year
2016
2015
35.0%
3.5
(0.4)
(18.7)
(1.1)
(44.4)
(0.4)
(26.5)%
35.0 %
3.3
—
(10.6 )
(1.3 )
—
(1.0 )
25.4 %
35.0%
3.7
0.2
(9.4)
(3.1)
—
0.6
27.0%
The net deferred tax liability at January 2, 2018 and January 3, 2017 were presented as follows on the balance sheet:
Other assets
Deferred tax liability
Net deferred income tax liability
January 2,
2018
January 3,
2017
$
$
1,408 $
(21,694 )
(20,286 ) $
816
(37,587)
(36,771)
The components of the deferred income tax asset (liability) consist of the following (in thousands):
Deferred income tax asset:
Gift cards
Accrued expenses
Other
Deferred Revenues
Stock-based compensation
Deferred rent
Income tax credits
Net operating losses
Other
State tax
Subtotal current deferred income tax asset
Valuation Allowance
Total current deferred income tax asset
Deferred income tax liability:
Property and equipment
Intangible assets
Smallwares
Total non-current deferred income tax liability
January 2,
2018
January 3,
2017
$
2,047 $
8,936
1,639
7,039
4,767
7,977
3,266
1,196
1,714
472
39,053
(161 )
38,892
1,521
13,752
2,193
6,255
6,152
11,637
6,559
785
2,071
985
51,910
(266)
51,644
(53,964 )
(1,400 )
(3,814 )
(59,178 )
(80,842)
(2,085)
(5,488)
(88,415)
Net deferred income tax liability
$
(20,286 ) $
(36,771)
At January 2, 2018, we had federal and California income tax credit carryforwards of approximately $3.3 million and $1.2
million, respectively, consisting primarily of the credit for FICA taxes paid on reported employee tip income and California
enterprise zone credits. The FICA tax credits will begin to expire in 2036 and the California enterprise zone credits will begin
to expire in 2023.
As of January 2, 2018, and January 3, 2017, we have recorded a valuation allowance against certain state net operating loss and
tax credit carryforwards of $0.2 million and $0.3 million, respectively, net of federal benefit which are not more likely than not
F-15
to be realized prior to expiration. We recognize interest and penalties related to uncertain tax positions in income tax expense.
As of January 2, 2018 and January 3, 2017, we had accrued $0.1 million for interest and penalties with respect to uncertain tax
positions.
As of January 2, 2018, unrecognized tax benefits recorded was approximately $1.5 million, of which approximately $1.0
million, if reversed would impact our effective tax rate. We anticipate no change in our liability for unrecognized tax benefits
within the next twelve-month period.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Gross unrecognized tax benefits at beginning of year
Increases for tax positions taken in prior years
Decreases for tax positions taken in prior years
Increases for tax positions taken in the current year
Lapse in statute of limitations
Gross unrecognized tax benefits at end of year
2017
Fiscal Year
2016
2015
$
$
1,245 $
110
(4)
200
(35)
1,516 $
2,998 $
126
(2,037 )
188
(30 )
1,245 $
2,173
474
—
386
(35)
2,998
Our uncertain tax positions are related to tax years that remain subject to examination by tax agencies. As of January 2, 2018,
the earliest tax year still subject to examination by the Internal Revenue Service is 2014. The earliest year still subject to
examination by a significant state or local taxing jurisdiction is 2013.
Tax Reform Act
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law substantially amending the Internal Revenue
Code of 1986. The TCJA made significant changes to the taxation of corporations such as a reduction in the highest corporate
marginal tax rate from 35% to 21%, additional limitations on certain deductions for executive compensation, introducing an
additional capital investment deduction, modifying rules for the deduction of interest expense, and modifying the rules
regarding the utilization of net operating loss carryforwards.
The SEC staff issued Staff Accounting Bulletin 118 providing guidance on accounting for the tax effects of the TCJA. To the
extent that a company's accounting for certain income tax effects of the TCJA is incomplete, but it is able to determine a
reasonable estimate, then the company must record a provisional estimate in the financial statements. If a company cannot
determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of
the provisions of the tax laws that were in effect immediately prior to the enactment of the TCJA.
We have reviewed and will continue to monitor the impact the legislation has on our business. As of January 2, 2018, we
recorded a tax benefit of $15.7 million related to the re-measurement of deferred tax assets and liabilities at the new federal
income tax rate provided by the TCJA. In addition, we will benefit from the ability to immediately expense the majority of
capital expenditures placed in service after September 27, 2017. In accordance with Staff Accounting Bulletin 118, as of
December 31, 2017, we have not completed our accounting for the tax effect of the enactment of the TCJA; however we have
made a reasonable estimate of the impact on our deferred tax balances.
9. Stock-Based Compensation Plans
Our current shareholder approved stock-based compensation plan is the 2005 Equity Incentive Plan (as amended from time to
time, “the Plan”). Under the Plan, we may issue shares of our common stock to employees, officers, directors and consultants.
We have granted incentive stock options, non-qualified stock options, and performance and time-based restricted stock units.
Stock options and stock appreciation rights, if any, are charged against the Plan share reserve on the basis of one share for each
share granted. Other types of grants, including restricted stock units (“RSUs”), are currently charged against the Plan share
reserve on the basis of 1.5 shares for each share granted. The Plan also contains other limits on the terms of incentive grants
such as limits on the number that can be granted to an employee during any fiscal year. All options granted under the Plan
expire within 10 years of their date of grant.
Under the Plan, we issue non-qualified stock options as well as time-based and performance-based RSUs to vice presidents and
above. We issue time-based RSUs, and/or non-qualified stock options to other support employees. We also issue RSUs and
non-qualified stock options in connection with the BJ’s Gold Standard Stock Ownership Program (the “GSSOP”). The GSSOP
is a long-term equity incentive program for our restaurant general managers, executive kitchen mangers, directors of operations
F-16
and directors of kitchen operations. GSSOP grants are dependent on the length of each participant’s service with us and
position. All GSSOP participants are required to remain in good standing during their service period.
The Plan permits us to set the vesting terms and exercise period for awards at our discretion. Stock options and time-based
RSUs vest ratably over three or five years for non-GSSOP participants and either cliff vest at five years or cliff vest at 33% on
the third anniversary and 67% on the fifth anniversary for GSSOP participants. Performance-based RSUs generally cliff vest
on the third anniversary of the grant date in an amount from 0% to 150% of the grant quantity, dependent on the level of
performance target achievement.
The following table presents the stock-based compensation recognized within our consolidated financial statements (in
thousands):
Labor and benefits
General and administrative
Capitalized (1)
2017
Fiscal Year
2016
2015
$
$
$
1,877 $
5,069 $
298 $
1,786 $
3,741 $
180 $
1,427
3,968
285
(1) Capitalized stock-based compensation relates to our restaurant development personnel and is included in “Property
and equipment, net” on our Consolidated Balance Sheets.
Stock Options
The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions:
Expected volatility
Risk free interest rate
Expected option life
Dividend yield
Fair value of options granted
2017
Fiscal Year
2016
34.7%
1.87%
5 years
1.60%
12.02 $
35.8 %
1.51 %
5 years
0.00 %
14.08 $
2015
37.0%
1.39%
5 years
0.00%
16.33
$
The exercise price of our stock options under our stock-based compensation plan is required to equal or exceed the market
close fair value of our shares on the option grant date or the most recent trading day when grants take place on market holidays.
The following table presents stock option activity:
Options Outstanding
Options Exercisable
Shares
(in thousands)
Weighted
Average Exercise
Price
Shares
(in thousands)
Weighted
Average Exercise
Price
1,008 $
21.46
Weighted
Average
Remaining
Contractual Life
4.2
Outstanding at December 30, 2014
Granted
Exercised
Forfeited
Outstanding at December 29, 2015
Granted
Exercised
Forfeited
Outstanding at January 3, 2017
Granted
Exercised
Forfeited
Outstanding at January 2, 2018
1,522 $
175 $
(432) $
(41) $
1,224 $
146 $
(88) $
(55) $
1,227 $
173 $
(57) $
(32) $
1,311 $
25.62
47.38
19.46
35.02
30.59
41.78
24.03
40.56
31.95
36.08
24.07
38.83
32.68
F-17
729 $
25.41
802 $
27.73
4.9
4.5
926 $
30.02
4.0
Information relating to significant option groups outstanding as of January 2, 2018, is as follows (shares in thousands):
Range of
Exercise Prices
Outstanding
Options Outstanding
Options Exercisable
Weighted
Average
Remaining
Contractual Life
Weighted
Average Exercise
Price
Weighted
Average Exercise
Price
Exercisable
$9.37 – $12.78
$18.86 – $18.86
$22.14 – $30.05
$30.39 – $34.24
$34.29 – $34.29
$34.89 – $35.78
$35.95 – $35.95
$37.03 – $42.41
$42.94 – $47.04
$48.64 – $52.98
$9.37 – $52.98
34
274
134
99
245
31
151
149
167
27
1,311
0.81 $
1.99 $
5.35 $
5.28 $
4.92 $
4.60 $
9.04 $
7.36 $
6.28 $
5.86 $
5.21 $
10.51
18.86
28.35
33.40
34.29
35.60
35.95
41.28
46.29
51.39
32.68
34 $
274 $
93 $
87 $
245 $
24 $
— $
59 $
95 $
16 $
926 $
10.51
18.86
27.70
33.50
34.29
35.68
—
40.27
46.03
50.83
30.02
As of January 2, 2018, total unrecognized stock-based compensation expense related to non-vested stock options was $3.0 million,
which is generally expected to be recognized over the next five years.
Time-Based Restricted Stock Units
The following table presents time-based restricted stock unit activity:
Outstanding at December 30, 2014
Granted
Vested or released
Forfeited
Outstanding at December 29, 2015
Granted
Vested or released
Forfeited
Outstanding at January 3, 2017
Granted
Vested or released
Forfeited
Outstanding at January 2, 2018
Shares
(in thousands)
Weighted
Average
Fair Value
34.66
47.99
29.75
39.43
39.63
40.82
39.47
42.12
39.75
35.72
42.34
39.51
37.72
427 $
148 $
(89) $
(57) $
429 $
155 $
(63) $
(61) $
460 $
200 $
(89) $
(71) $
500 $
The fair value of our time-based RSUs is equal to the fair value of our common stock at market close on the date of grant or the
most recent trading day when grants take place on market holidays. The fair value of each time-based RSU is expensed over
the vesting period (e.g., three or five years). As of January 2, 2018, total unrecognized stock-based compensation expense
related to non-vested RSUs was approximately $9.0 million, which is generally expected to be recognized over the next five
years.
F-18
Performance-Based Restricted Stock Units
The following table presents performance-based restricted stock unit activity:
Outstanding at December 30, 2014
Granted
Vested or released
Forfeited
Outstanding at December 29, 2015
Granted
Vested or released
Forfeited
Outstanding at January 3, 2017
Granted
Vested or released
Forfeited
Outstanding at January 2, 2018
Shares
(in thousands)
Weighted
Average
Fair Value
32.49
—
—
32.49
32.49
42.41
—
36.37
37.87
35.95
—
39.12
38.68
30 $
— $
— $
(1) $
29 $
32 $
— $
(7) $
54 $
40 $
— $
(26) $
68 $
The fair value of our performance-based RSUs is equal to the fair value of our common stock at market close on the date of
grant or the most recent trading day when grants take place on market holidays. The fair value of each performance-based RSU
is expensed based on management’s current estimate of the level that the performance goal will be achieved. As of January 2,
2018, based on the target level of performance, the total unrecognized stock-based compensation expense related to non-vested
performance-based RSUs was approximately $1.1 million, which is generally expected to be recognized over the next three
years.
10. Employee Benefit Plans
We maintain a voluntary, contributory 401(k) plan for eligible employees. Employees may elect to contribute up to the IRS
maximum for the plan year. Additionally, eligible participants may also elect catch-up contributions as provided for by the
IRS. Our executive officers and other highly compensated employees are not eligible to participate in the 401(k) plan.
Employee contributions are matched by us at a rate of 33% for the first 6% of deferred earnings. We contributed approximately
$0.6 million, $0.5 million, and $0.6 million in fiscal 2017, 2016, and 2015, respectively.
We also maintain a non-qualified deferred compensation plan (the “DCP”) for our executive officers and other highly
compensated employees, as defined in the DCP, who are otherwise ineligible for participation in our 401(k) plan. The DCP
allows participating employees to defer the receipt of a portion of their base compensation and up to 100% of their eligible
bonuses. Additionally, the DCP allows for a voluntary company match as determined by our compensation committee. During
fiscal 2017, there were no Company contributions made or accrued. We pay for related administrative costs, which were not
significant during fiscal 2017. Employee deferrals are deposited into a rabbi trust and the funds are generally invested in
individual variable life insurance contracts owned by us that are specifically designed to informally fund savings plans of this
nature. Our investment in variable life insurance contracts, reflected in “Other assets, net” on our Consolidated Balance Sheets,
was $7.8 million and $6.2 million as of January 2, 2018 and January 3, 2017, respectively. Our obligation to participating
employees, included in “Other liabilities” on the accompanying Consolidated Balance Sheets, was $7.5 million and $6.0
million as of January 2, 2018 and January 3, 2017, respectively. All income and expenses related to the rabbi trust are reflected
in our Consolidated Statements of Income.
11. Related Party Transactions
James Dal Pozzo, the Chief Executive Officer of the Jacmar Companies (“Jacmar”), is a member of our Board of Directors.
Jacmar, through its affiliation with DMA, a consortium of large, regional food distributors located throughout the United
States, is currently our largest distributor of food, beverage, paper products and supplies. In 2006, we began using DMA to
deliver the majority of our food products to our restaurants. In July 2017, after conducting a market evaluation, we entered into
a new five-year agreement with DMA. The new agreement expires in June 2022.
Jacmar services our restaurants in California and Nevada, while other DMA distributors service our restaurants in all other
F-19
states. Under the terms of our agreement with DMA, Jacmar is required to sell products to us at the same prices as the other
DMA distributors. Jacmar does not provide us with any produce, liquor, wine or beer products, all of which are provided by
other third party vendors and are included in “Cost of sales” on our Consolidated Statements of Income.
The cost of food, beverage, paper products and supplies provided by Jacmar included within “Cost of sales” and “Occupancy
and operating” expenses consisted of the following (in thousands):
Cost of sales:
Third party suppliers
Jacmar
Cost of sales
Occupancy and operating:
Third party suppliers
Jacmar
Occupancy and operating
2017
Fiscal Year
2016
2015
$ 185,153
83,554
$ 268,707
68.9% $ 169,671
31.1 81,789
100.0% $ 251,460
67.5 % $ 148,055
32.5 78,887
100.0 % $ 226,942
65.2%
34.8
100.0%
$ 210,616
9,247
$ 219,863
95.8% $ 195,703
8,880
100.0% $ 204,583
4.2
95.7 % $ 184,361
8,378
100.0 % $ 192,739
4.3
95.7%
4.3
100.0%
The amounts included in trade payables related to Jacmar consisted of the following (in thousands):
Third party suppliers
Jacmar
Total Accounts Payable
January 2,
2018
January 3,
2017
$
$
18,738 $
6,537
25,275 $
25,363
5,782
31,145
12. Selected Consolidated Quarterly Financial Data (Unaudited)
Our summarized unaudited consolidated quarterly financial data is the following (in thousands, except per share data):
April 4,
2017
July 4,
2017
October 3,
2017
January 2,
2018
Total revenues
Income from operations
Net income
Basic net income per share (1)
Diluted net income per share (1)
Cash dividends declared per common share
Total revenues
Income from operations
Net income
Basic net income per share (1)
Diluted net income per share (1)
Cash dividends declared per common share
$ 257,816 $ 265,817 $ 247,009 $ 261,140
10,973
$
23,486
$
1.14
$
1.12
$
0.11
$
12,389 $
9,639 $
0.45 $
0.44 $
— $
12,949 $
9,266 $
0.42 $
0.42 $
— $
1,593 $
2,389 $
0.11 $
0.11 $
— $
March 29,
2016
June 28,
2016
September 27,
2016
January 3,
2017
$ 243,401 $ 250,328 $
19,561 $
$
13,789 $
$
0.57 $
$
0.56 $
$
— $
$
16,393 $
11,644 $
0.48 $
0.47 $
— $
233,702 $ 265,621
16,616
12,887
0.56
0.55
—
9,071 $
7,237 $
0.30 $
0.30 $
— $
(1) Basic and diluted net income per share calculations for each quarter is based on the weighted average diluted
shares outstanding for that quarter and may not sum to the full year total amount as presented on our Consolidated
Statements of Income.
F-20
13. Subsequent Event
On February 20, 2018, our Board of Directors authorized and declared a cash dividend of $0.11 per share of common stock
payable on March 27, 2018, to shareholders of record at the close of business on March 13, 2018. While we intend to pay
regular quarterly cash dividends in future periods, any decisions to pay or to increase or decrease cash dividends will be
reviewed quarterly and declared by the Board of Directors at its discretion.
F-21
Exhibit 21
BJ’S RESTAURANTS, INC.
List of Significant Subsidiaries
Chicago Pizza & Brewery, LP, a Texas limited partnership
Chicago America Holding, LLC, a Nevada limited liability company
Chicago Pizza Management, LLC, a Nevada limited liability company
Chicago Pizza Restaurant Holding, Inc., a Nevada corporation
Chicago Pizza Hospitality Holding, Inc., a Texas corporation
BJ’s Restaurant Operations Company, a California corporation
Reno Brewery Holding, Inc., a Nevada corporation
BJ’s Restaurant Operations Company of Kansas, LLC, a Kansas limited liability company
BJROC Maryland, LLC, a California limited liability company
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
1.
2.
3.
4.
5.
6.
7.
Registration Statement (Form S-3 No. 333-123913) of BJ’s Restaurants, Inc.,
Registration Statement (Form S-8 No. 333-125899) pertaining to the 2005 Equity Incentive Plan of BJ’s
Restaurants, Inc.,
Registration Statement (Form S-8 No. 333-172703) pertaining to the 2005 Equity Incentive Plan of BJ’s
Restaurants, Inc.,
Registration Statement (Form S-3 No. 333-139333) of BJ’s Restaurants, Inc.,
Registration Statement (Form S-3 No. 333-164242) of BJ’s Restaurants, Inc.,
Registration Statement (Form S-3 No. 333-158392) of BJ’s Restaurants, Inc., and,
Registration Statement (Form S-8 No. 333-206066) of BJ'S Restaurants, Inc. pertaining to the 2005
Equity Incentive Plan of BJ's Restaurants, Inc.
of our reports dated February 26, 2018, with respect to the consolidated financial statements of BJ’s Restaurants,
Inc. and the effectiveness of internal control over financial reporting of BJ’s Restaurants, Inc. included in this
Annual Report (Form 10-K) of BJ’s Restaurants, Inc. for the year ended January 2, 2018.
/s/Ernst & Young LLP
Irvine, California
February 26, 2018
Exhibit 31
I, Gregory A. Trojan, certify that:
BJ’S RESTAURANTS, INC.
Certification of Chief Executive Officer
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended January 2, 2018, of BJ’s
Restaurants, Inc. (the “registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 26, 2018
/s/ GREGORY A. TROJAN
Gregory A. Trojan
Chief Executive Officer and Director
(Principal Executive Officer)
BJ’S RESTAURANTS, INC.
Certification of Chief Financial Officer
I, Gregory S. Levin, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K for the fiscal year ended January 2, 2018, of BJ’s
Restaurants, Inc. (the “registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 26, 2018
/s/ GREGORY S. LEVIN
Gregory S. Levin
President, Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
Exhibit 32
BJ’S RESTAURANTS, INC.
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003
In accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003,
the undersigned, Gregory A. Trojan, Chief Executive Officer and Gregory S. Levin, Chief Financial Officer of BJ’s
Restaurants, Inc. (the “Company”), certify to their knowledge:
(1) The Annual Report on Form 10-K of the Company for the year ended January 2, 2018, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and,
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
In Witness Whereof, each of the undersigned has signed this Certification as of this February 26, 2018.
/s/ GREGORY A. TROJAN
Gregory A. Trojan
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ GREGORY S. LEVIN
Gregory S. Levin
President, Chief Financial Officer
and Secretary
(Principal Financial and Accounting Officer)
B J ’ S R E S T A U R A N T S , I N C .
7 7 5 5 C E N T E R A V E N U E , S T E 3 0 0
H U N T I N G T O N B E A C H , C A 9 2 6 4 7
W W W . B J S R E S T A U R A N T S . C O M