Pizza and beer are a tasty pairing. A profitable one too.
BJ's Restaurants Inc. specializes in deep-dish pizza and offers its own brand of craft-brewed beer, a combination that has helped it grow from a single restaurant in Santa Ana to 132 locations in 15 states.
After its start in 1978, the Huntington Beach company grew slowly in Southern California. In 1996, it opened its first brewery — at its restaurant in Brea — and began selling beers that carried the BJ's name. That was also the year it went public.
Today, BJ's has an expanded menu. In addition to its deep-dish pizza, its restaurants offer hand-tossed pizza, burgers, salads and pasta dishes in an environment it describes as "high-energy, casual dining."
Three of its restaurants have on-site brewing facilities. It also contracts with outside brewers to produce BJ's branded beers for the other restaurants. Its beers have been awarded 30 Great American Beer Festival medals.
The company expects to open 17 new restaurants this year.
"There is a long runway of expansion ahead," said Greg Trojan, the company's chief executive. "We continue to believe there is room for at least 425 BJ's restaurants domestically and that we are one of a few publicly held casual dining restaurant companies with this kind of growth opportunity."
BJ's expansion plan targets the East, with restaurants to open this year in Virginia and Maryland.
"We believe the mid-Atlantic region will give us another solid base to build out the BJ's concept and clustering strategy, and give us a launching ground to eventually begin opening restaurants in the Northeast," said Gregory Lynd, the company's chief development officer.
BJ's sales have more than doubled in the last four years to an all-time high of $708 million last year from $374 million in 2008. In the same time, its profit rose to $31 million last year from $10 million.
The company was recognized last year by the National Retail Federation as one of the 10 fastest-growing national restaurant chains, along with such eateries as Five Guys Burgers & Fries and Chipotle Mexican Grill.
The company is not as known as some of its competitors.
"Our research tells us time and again that we lag our bigger national competitors in awareness levels," Trojan said during a conference call with analysts in April. "The good news is that our retention and adoption rates, once people try us, are very, very high."
BJ's is turning to television advertising to improve its brand recognition. One new television ad focuses on its hand-tossed, thin-crust pizza, which, the company says, "is just one more reason to say, 'Wow, I love this place.'"
Seven analysts rate the stock as a buy, 12 suggest holding the stock and one says investors should sell it. They estimate the stock will be trading at $38 in 12 months.
"We believe BJ's has developed a compelling niche within the attractive upscale-casual category by offering an extensive selection of freshly prepared food and proprietary hand-crafted beer in an appealing atmosphere," said David Tarantino, an analyst with financial services firm Robert W. Baird & Co.
"Ongoing investments in food quality, interior designs and service have led to a premium casual dining experience at a moderate average check, providing a strong value proposition that can attract a wide audience," Tarantino said.
Although the first quarter "didn't produce big numbers, we were encouraged by sales and cost improvements made during the quarter. More importantly, we think the stock should be bought here," said Stephens Inc. analyst Will Slabaugh.
"The company's industry-leading growth profile and value proposition remain intact, and we believe the company is well-positioned to drive sales and gain share despite a difficult environment over the course of the year," said Nicole Miller Regan of Piper Jaffray & Co.