BJs RESTAURANTS INC (BJRI)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations is intended to help you understand our Company, our operations and our current operating environment. For an understanding of the significant factors that influenced our performance, the MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes to Consolidated Financial Statements included in Part II, Item 8 - Financial Statements and Supplementary Data of our Annual Report. Our MD&A consists of the following sections:

•
Overview - a brief description of our business, financial highlights, strategy to increase shareholder value, key performance indicators, known and anticipated trends

•
Results of Operations - an analysis of our Consolidated Statements of Operations for fiscal year 2024 compared to fiscal year 2023

•
Liquidity and Capital Resources - an analysis of cash flows, including capital expenditures, share issuance and repurchase activity, dividends, contractual obligations and commitments, and known trends that may impact liquidity

•
Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical judgments and estimates, including new accounting standards, when applicable

OVERVIEW

As of February 26, 2025, we owned and operated 218 restaurants located in 31 states as described in Item 2 - Properties - “Restaurant Locations” in this Form 10-K. Our restaurants are open every day of the year except for Thanksgiving and Christmas. All of our restaurants currently offer take-out and delivery services. Additionally, all of our restaurants offer a call-ahead or online wait list, on-line ordering for dine-in, guest pick-up or curbside delivery and reservations for large parties.

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. Our proprietary craft beer is produced at several of our locations, our Texas brewpub locations and by independent third-party brewers using our proprietary recipes.

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Financial Highlights for Fiscal 2024

Notable fiscal 2024 financial highlights compared to fiscal 2023 include:

•
Total revenues increased 1.8% to $1.4 billion

•
Total restaurant operating weeks increased 0.3%

•
Comparable restaurant sales increased 1.2%

•
Net income of $16.7 million compared to $19.7 million

•
Diluted net income per share of $0.70 compared to $0.82

Strategy to Increase Shareholder Value

Our goal is to increase shareholder value by increasing our adjusted earnings before depreciation and amortization (Adjusted EBITDA), earnings per share and return on invested capital through:

•
Growing restaurant revenue through positive comparable sales and new restaurant growth

•
Increasing restaurant margins through sales leverage, cost savings and culinary and menu strategies

•
Enhancing new restaurant economics through restaurant margin improvement and new restaurant prototype optimization

•
Returning capital to shareholders through share repurchase program

Key Performance Indicators and Non-GAAP Financial Measures

Key measures that we use in evaluating our restaurants and assessing our business include the following:

Comparable Restaurant Sales. In calculating comparable restaurant sales, we include a restaurant in the comparable base once it has been open for 18 months. This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and closures. Comparable restaurant sales increased 1.2% for fiscal 2024.

Restaurant Level Operating Profit. This non-GAAP financial measure is equal to the revenues generated by our restaurants, less their direct operating costs which consist of cost of sales, labor and benefits, and occupancy and operating costs. This performance measure primarily includes the costs that restaurant level managers can directly control and excludes other operating costs that are essential to conduct the Company’s business. We, similar to most of our competitors, use restaurant level operating profit as a supplemental measure of restaurant performance and believe restaurant level operating profit is useful to investors in that it highlights trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures. Because other companies may calculate restaurant level operating profit differently than we do, our restaurant level operating profit calculation may not be comparable to similarly titled measures reported by other companies. A reconciliation of income (loss) from operations to restaurant level operating profit for fiscal 2024, 2023 and 2022 is set forth below:

Adjusted Diluted Net Income Per Share. This is a non-GAAP financial measure that represents net income excluding net loss on disposal and impairment of assets, net leadership transition expenses and the related stock-based compensation credit, and charges associated with the extension of an outstanding warrant held by Act III. These adjustments are intended to provide greater transparency of underlying performance and to allow investors to evaluate our business on the same basis as our management. Because other companies may calculate this measure differently than we do, our adjusted diluted net income per share calculation may not be comparable to similarly titled measures reported by other companies. A reconciliation of net income to adjusted diluted net income per share for fiscal 2024, 2023 and 2022 is set forth below:

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(1)
Amount relates to stock-based compensation forfeited due to leadership transition.

(2)
The tax effect is based on the Company’s annual statutory tax rate of 24.2% for fiscal years ending December 31, 2024, January 2, 2024 and January 3, 2023.

Adjusted EBITDA. This non-GAAP financial measure represents the sum of net income adjusted for certain expenses and gains/losses detailed within the reconciliation below. We use Adjusted EBITDA as a supplemental measure of our operating performance and believe this measure is useful to investors in that it highlights cash flow and trends in our business operations that may not otherwise be apparent to investors when relying solely on GAAP financial measures. Because other companies may calculate this measure differently than we do, our Adjusted EBITDA calculation may not be comparable to similarly titled measures reported by other companies. A reconciliation of net income to Adjusted EBITDA for fiscal 2024, 2023 and 2022 is set forth below:

(1)
Amount relates to severance, relocation, signing bonus and bonus expenses related to our leadership transition.

(2)
Amount relates to stock-based compensation forfeited due to leadership transition.

Weekly Sales Average. We calculate each restaurant’s average weekly revenue to understand and manage the business trends and expectations. Our weekly sales average was approximately $120,000, $118,000 and $113,000 for fiscal 2024, 2023 and 2022, respectively.

Known or Anticipated Trends

Sales Growth. While most of our established restaurants operate close to full capacity during peak demand periods, we will continue to focus on ways to build sales, positively impact guest traffic and grow average check and weekly sales averages. We continue to focus on sales building initiatives to create more guest loyalty, increase the frequency of guest visits, further build our off-premise sales channel, better optimize our menu sales mix and develop other incremental opportunities to allow guests

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to utilize BJ’s. We believe that all of these efforts combined with new restaurant openings offer significant growth opportunities and upside for weekly sales averages and comparable restaurant sales.

Restaurant Opening. 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.

Impacts of Inflation. Inflation has had an impact on our operations, new restaurant construction and corresponding return on invested capital. While we have been able to partially offset inflation and other changes in the costs of key operating inputs by gradually increasing menu prices, 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. Increases in inflation could have a severe impact on the United States and global economies, which will have an adverse impact on our business, financial condition and results of operations. In addition, macroeconomic conditions that impact consumer discretionary spending for food away from home could make additional menu price increases imprudent. Whether we are able to continue to offset the effects of inflation will determine to what extent, if any, inflation affects our restaurant profitability in future periods.

Accounting Terms and Characteristics

Revenues. Our revenues are comprised of food and beverage sales from our restaurants, including takeout, delivery and catering sales. Revenues from restaurant sales are recognized when payment is tendered. Amounts paid with a credit card are recorded in accounts and other receivables until payment is collected from the credit card processor. We sell gift cards which do not have an expiration date, and we do not deduct non-usage fees from outstanding gift card balances. Gift card sales are recorded as a liability and recognized as revenues upon redemption in our restaurants. Based on historical redemption rates, a portion of our gift card sales are not expected to be redeemed and will be recognized as gift card “breakage.” Estimated gift card breakage is recorded as revenue and recognized in proportion to our historical redemption pattern, unless there is a legal obligation to remit the unredeemed gift cards to government authorities.

Guest Loyalty Program. Our program enables participants to earn points for qualifying purchases that can be redeemed for food and beverages in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered, on a relative standalone selling price basis, and defer the revenues allocated to the points until such points are redeemed.

Comparable Sales and Guest Traffic. 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. Guest traffic for our restaurants is estimated based on the number of guest checks.

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 also 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 Benefits. Labor and benefit costs include direct hourly and management wages, bonuses, payroll taxes, fringe benefits and stock-based compensation, and workers’ compensation expense that are directly related to restaurant level team members.

Occupancy and Operating. Occupancy and operating expenses include restaurant supplies, credit card fees, third-party delivery company commissions, 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. General and administrative expenses include costs for our corporate 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 team member benefits (including stock-based compensation expense and cash-based incentive compensation), travel and relocation costs, information systems, the cost to recruit and train new restaurant management team members, corporate rent, certain brand marketing-related expenses and legal and consulting fees.

Depreciation and Amortization. Depreciation and amortization are composed primarily of depreciation of capital expenditures for restaurant and brewing equipment and leasehold improvements.

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Restaurant Opening. 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.

RESULTS OF OPERATIONS

The following table sets forth, for the years indicated, our Consolidated Statements of Operations both in dollars and as percentages of total revenues. All fiscal years presented consist of 52 weeks with the exception of fiscal year 2022, which consists of 53 weeks. Percentages below may not reconcile due to rounding.

52 WEEKS ENDED DECEMBER 31, 2024 (FISCAL 2024) COMPARED TO THE 52 WEEKS ENDED JANUARY 2, 2024 (FISCAL 2023)

Revenues. Total revenues increased by $24.1 million, or 1.8%, to $1.4 billion during fiscal 2024, compared to $1.3 billion during fiscal 2023. The increase in revenues primarily consisted of a 1.2%, or $15.1 million, increase in comparable restaurant sales, and a $23.6 million increase in sales from new restaurants not yet in our comparable restaurant sales base. Revenue increases were offset primarily by a $12.7 million decrease related to closed restaurants and $1.9 million primarily related to lower gift card breakage and loyalty redemptions. The increase in comparable restaurant sales was the result of an increase in average check of approximately 1.8%, due to menu price increases coupled with changes in mix, offset by a decrease in guest traffic of approximately 0.6%.

Cost of Sales. Cost of sales increased by $4.0 million, or 1.2%, to $350.6 million during fiscal 2024, compared to $346.6 million during fiscal 2023. This increase was primarily due to higher revenues, commodity cost increases and costs related to our three new restaurants opened during fiscal 2024. As a percentage of revenues, cost of sales decreased to 25.8% for fiscal 2024 from 26.0% for the prior fiscal year. This decrease was primarily due to a higher revenue base, menu price increases and the effectiveness of our cost savings initiatives, partially offset by higher commodity costs and a higher level of promotions.

Labor and Benefits. Labor and benefit costs for our restaurants increased by $4.2 million, or 0.8%, to $495.5 million during fiscal 2024, compared to $491.3 million during fiscal 2023. This was primarily due to $3.1 million related to increased management compensation costs, $1.8 million related to taxes and benefits and $0.6 million related to higher hourly labor, offset by $1.3 million related to lower workers’ compensation. As a percentage of revenues, labor and benefit costs decreased to 36.5% for fiscal 2024 from 36.9% for the prior fiscal year. This decrease was primarily due to improved labor efficiency and

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the effectiveness of our cost savings initiatives. Included in labor and benefits for fiscal 2024 and 2023 was approximately $2.5 million and $2.6 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 team members.

Occupancy and Operating. Occupancy and operating expenses decreased by $1.9 million, or 0.6%, to $315.7 million during fiscal 2024, compared to $317.6 million during fiscal 2023. This was primarily due to decreases of $4.4 million in restaurant facilities expenses, $1.1 million related to equipment rental, $1.4 million in utilities and $0.4 million in supplies, offset by a $1.5 million increase in credit card processing fees, $3.1 million in marketing expenditures and $0.9 million in rent and related costs. As a percentage of revenues, occupancy and operating expenses decreased to 23.3% for fiscal 2024 from 23.8% for the prior fiscal year. This decrease was primarily related to improved operational efficiency and the effectiveness of our cost savings initiatives.

General and Administrative. General and administrative expenses increased by $6.2 million, or 7.5%, to $88.3 million during fiscal 2024, compared to $82.1 million during fiscal 2023. This was primarily due to increases of $2.6 million in personnel related costs, $2.1 million in corporate expenses related to meeting costs and software amortization, $2.0 million related to consulting fees, $1.6 million in legal fees, $0.5 million in medical insurance, $0.5 million in office expenses, $0.4 million in travel related expenses, $0.3 million related to our deferred compensation liability, and $0.2 million related to recruiting, offset by a $2.3 million decrease in incentive compensation, and lower stock-based compensation expense of $2.1 million. General and administrative costs for fiscal 2024 included a net charge of $3.2 million related to our leadership transition expenses, $1.5 million of legal costs related to shareholder cooperation agreements and related matters, and $0.3 million in severance related to personnel changes, offset by a $2.1 million stock-based compensation credit related to the reversal of previously awarded stock-based compensation expense in conjunction with our leadership transition. As a percentage of revenues, general and administrative expenses increased to 6.5% for fiscal 2024 from 6.2% for the prior fiscal year. This increase was primarily related to increased legal and corporate expenses arising in connection with our previously announced cooperation agreements with certain investors and related matters. Included in general and administrative costs for fiscal 2024 and 2023 was approximately $6.2 million and $8.3 million, or 0.5% and 0.6% of revenues, of stock-based compensation expense, respectively.

Depreciation and Amortization. Depreciation and amortization increased by $1.8 million, or 2.5%, to $72.7 million during fiscal 2024, compared to $71.0 million during fiscal 2023. This increase is related to the restaurants opened during fiscal 2024, offset by the decrease in deprecation related to the impairment and disposal charges taken in the current year as well as the prior year, coupled with the closure of one restaurant during fiscal 2024. As a percentage of revenues, depreciation and amortization increased to 5.4% for fiscal 2024 from 5.3% for the prior fiscal year.

Restaurant Opening. Restaurant opening expense decreased by $0.7 million, or 25.9%, to $2.1 million during fiscal 2024, compared to $2.8 million during fiscal 2023. This decrease was primarily due to two less restaurant openings in fiscal 2024, coupled with the timing of our openings.

Loss on Disposal and Impairment of Assets, Net. Loss on disposal and impairment of assets, net, was $18.4 million during fiscal 2024, compared to $8.1 million during fiscal 2023. In fiscal 2024, these costs primarily related to the impairment and reduction in the carrying value of the long-lived assets related to six of our restaurants, coupled with the disposals of assets in conjunction with initiatives to keep our restaurants up to date and the closure of one of our restaurants. In fiscal 2023, these costs primarily relate to disposals of assets in conjunction with initiatives to keep our restaurants up to date, including our restaurant remodel initiative and the removal of glass partitions in our dining rooms that were installed during the pandemic, as well as the closure of five under-performing restaurants.

Interest Expense, Net. Interest expense, net, increased by $0.6 million to $5.5 million during fiscal 2024, compared to $4.9 million during fiscal 2023. This increase was primarily due a higher average outstanding debt balance and weighted average interest rate during the year, as compared to fiscal 2023.

Other (Expense) Income, Net. Other (expense) income, net, was an expense of $0.3 million during fiscal 2024, compared to income of $1.3 million. This was primarily due to the charge associated with extension of an outstanding warrant held by Act III, offset by income related to a payroll tax credit and two favorable settlements with our landlords.

Income Tax Benefit. Our effective income tax rate for fiscal 2024 reflected a 101.9% tax benefit compared to a 94.7% tax benefit for fiscal 2023. The effective tax rate benefit for fiscal 2024 and 2023 was different than the statutory tax rate primarily due to Federal Insurance Contributions Act (“FICA”) tax tip credits.

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52 WEEKS ENDED JANUARY 2, 2024 (FISCAL 2023) COMPARED TO THE 53 WEEKS ENDED JANUARY 3, 2023 (FISCAL 2022)

For discussion related to the results of operations and changes in financial condition for fiscal 2023 compared to fiscal 2022 refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2023 Form 10-K, which was filed with the United States Securities and Exchange Commission on February 27, 2024.

LIQUIDITY AND CAPITAL RESOURCES

The following table provides, for the periods indicated, a summary of our key liquidity measurements (dollar amounts in thousands):

Our capital requirements are driven by our fundamental financial objective to improve total shareholder return through a balanced approach of new restaurant expansion plans, enhancements and initiatives focused on existing restaurants and return of capital to our shareholders through our share repurchase program. We expect to accelerate restaurant openings in 2026. Our capital expenditures in 2025, related to future restaurant openings, will depend on the speed at which we can develop a more robust and targeted pipeline that aligns with our refined criteria for new locations. 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 the restaurant industry. In order to achieve these objectives, we use a combination of operating cash flows, debt, and landlord allowances.

Based on current operations, we believe that our current cash and cash equivalents, coupled with cash generated from operations and availability under our credit agreement will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months. Our future operating performance will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

Similar to many restaurant chains, we typically utilize operating lease arrangements (principally ground leases) for 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. 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. 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 our Texas brewpub locations. We also own parcels of land adjacent to two of our restaurants. It is not our current strategy to own a large number of land parcels that underlie our restaurants. Therefore, in many cases we have subsequently entered into sale-leaseback arrangements for land parcels that we previously purchased. 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.

CASH FLOWS

The following tables set forth, for the years indicated, our cash flows from operating, investing, and financing activities (dollar amounts in thousands):

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Operating Cash Flows

Net cash provided by operating activities was $101.5 million during fiscal 2024, representing a $4.4 million decrease compared to the $105.8 million provided during fiscal 2023. The decrease over the prior year is primarily due to the timing of payments for accounts payable and the timing of receipts for accounts and other receivable, offset by higher impairments in the current year.

Investing Cash Flows

Net cash used in investing activities was $76.9 million during fiscal 2024, representing a $22.0 million decrease compared to the $98.9 million used in fiscal 2023. The decrease over prior year is primarily due to the number of new restaurant openings and fewer restaurant remodels and less maintenance incurred.

The following table provides, for the years indicated, the components of capital expenditures (dollar amounts in thousands):

During fiscal 2024, we opened three new restaurants and closed one restaurant. We currently plan to open one new restaurant and remodel up to 30 existing locations in fiscal 2025. We currently anticipate our total capital expenditures for fiscal 2025 to be approximately $65 million to $75 million. This estimate includes costs to open new restaurants and remodel existing locations and excludes anticipated proceeds from tenant improvement allowances. We expect to fund our net capital expenditures with our current cash balance on hand, cash flows from operations 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.

Financing Cash Flows

Net cash used in financing activities was $27.6 million during fiscal 2024, representing a $24.8 million increase in cash used compared to the $2.7 million used in fiscal 2023. This increase was primarily due to an increase in common stock repurchases, coupled with higher payments on our line of credit. We currently anticipate our common stock repurchases for fiscal 2025 to be approximately $40 million to $50 million.

Contractual Obligations and Commitments

We believe we have sufficient liquidity to fund our operations and meet our short-term and long-term obligations. Our cash requirements greater than twelve months from contractual obligations and commitments include:

•
Operating Leases — Refer to Note 1 and Note 6, Leases, of the notes to the Consolidated Financial Statements for further information of our obligations and the timing of expected payments.

•
Purchase Obligations— Refer to Note 7, Commitments and Contingencies, of the notes to the Consolidated Financial Statements for further detail of our obligations and the timing of expected future payments.

•
Long-term Debt, Standby Letters of Credit and Interest Payments — Refer to Note 8, Long-Term Debt, of the notes to the Consolidated Financial Statements for further information of our obligations and the timing of expected payments.

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 December 31, 2024, we are not involved in any off-balance sheet arrangements.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are more fully described in Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15. 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.

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 on a restaurant level basis, and inclusive of property and equipment and lease right-of-use assets; or at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. Factors considered include, but are not limited to, significant underperformance by the restaurant relative to historical operating results; significant changes in the manner of use of the assets or the strategy for the overall business; significant negative industry or economic trends; or our expectation to dispose of long-lived assets before the end of their previously estimated useful lives. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

Self-Insurance Liability

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 loss development factors, loss costs, history, case jurisdiction, related legislation, and our claims settlement practice. Significant judgment is required to estimate claims incurred but not yet reported to us (“IBNR claims”) as parties have yet to assert such claims. Should a greater number of claims occur compared to what was estimated, or should medical costs increase beyond what was expected, accruals might not be sufficient, and additional expense may be recorded.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations is intended to help you understand our Company, our operations and our current operating environment. For an understanding of the significant factors that influenced our performance, the MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes to Consolidated Financial Statements included in Part II, Item 8 - Financial Statements and Supplementary Data of our Annual Report. Our MD&A consists of the following sections:

•
Overview - a brief description of our business, financial highlights, strategy to increase shareholder value, key performance indicators, known and anticipated trends

•
Results of Operations - an analysis of our Consolidated Statements of Operations for fiscal year 2023 compared to fiscal year 2022

•
Liquidity and Capital Resources - an analysis of cash flows, including capital expenditures, share issuance and repurchase activity, dividends, contractual obligations and commitments, and known trends that may impact liquidity

•
Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical judgments and estimates, including new accounting standards, when applicable

OVERVIEW

As of February 27, 2024, we owned and operated 216 restaurants located in 30 states as described in Item 2 - Properties - “Restaurant Locations” in this Form 10-K. Our restaurants are open every day of the year except for Thanksgiving and Christmas. All of our restaurants currently offer take-out and delivery services. Additionally, all of our restaurants offer a call-ahead or online wait list, on-line ordering for dine-in, guest pick-up or curbside delivery and reservations for large parties.

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. Our proprietary craft beer is produced at several of our locations, our Texas brewpub locations and by independent third-party brewers using our proprietary recipes.

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Financial Highlights for Fiscal 2023

Notable fiscal 2023 financial highlights compared to fiscal 2022 include:

•
Total revenues increased 3.8% to $1.3 billion (52 weeks vs. 53 weeks)

•
Total restaurant operating weeks decreased 0.5% (52 weeks vs. 53 weeks)

•
Comparable restaurant sales increased 3.7% (52 weeks vs. 52 weeks)

•
Net income of $19.7 million compared to $4.1 million (52 weeks vs. 53 weeks)

•
Diluted net income per share of $0.82 compared to $0.17 (52 weeks vs. 53 weeks)

Strategy to Increase Shareholder Value

Our goal is to increase shareholder value by increasing our adjusted earnings before depreciation and amortization (Adjusted EBITDA), earnings per share and return on invested capital through:

•
Growing restaurant revenue through positive comparable sales and new restaurant growth

•
Increasing restaurant margins through sales leverage, cost savings and culinary and menu strategies

•
Enhancing new restaurant economics through restaurant margin improvement and new restaurant prototype optimization

•
Returning capital to shareholders through share repurchase program

Key Performance Indicators and Non-GAAP Financial Measures

Key measures that we use in evaluating our restaurants and assessing our business include the following:

Comparable Restaurant Sales. In calculating comparable restaurant sales, we include a restaurant in the comparable base once it has been open for 18 months. This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and closures. Comparable restaurant sales increased 3.7% for fiscal 2023 on a 52-week basis.

Restaurant Level Operating Margin. This non-GAAP financial measure is equal to the revenues generated by our restaurants, less their direct operating costs which consist of cost of sales, labor and benefits, and occupancy and operating costs. This performance measure primarily includes the costs that restaurant level managers can directly control and excludes other operating costs that are essential to conduct the Company’s business. We, similar to most of our competitors, use restaurant level operating margin as a supplemental measure of restaurant performance and believe restaurant level operating margin is useful to investors in that it highlights trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures. Because other companies may calculate restaurant level operating margin differently than we do, our restaurant level operating margin calculation may not be comparable to similarly titled measures reported by other companies. A reconciliation of income (loss) from operations to restaurant level operating margin for fiscal 2023, 2022 and 2021 is set forth below:

Adjusted EBITDA. This non-GAAP financial measure represents the sum of net income (loss) adjusted for certain expenses and gains/losses detailed within the reconciliation below. We use Adjusted EBITDA as a supplemental measure of our operating performance and believe this measure is useful to investors in that it highlights cash flow and trends in our business operations that may not otherwise be apparent to investors when relying solely on GAAP financial measures. Because other companies may calculate this measure differently than we do, our Adjusted EBITDA calculation may not be comparable to similarly titled measures reported by other companies. A reconciliation of net income (loss) to Adjusted EBITDA for fiscal 2023, 2022 and 2021 is set forth below:

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Weekly Sales Average. We calculate each restaurant’s average weekly revenue to understand and manage the business trends and expectations. Our weekly sales average was approximately $118,000, $113,000 and $99,000 for fiscal 2023, 2022 and 2021, respectively.

Known or Anticipated Trends

Sales Growth. While most of our established restaurants operate close to full capacity during peak demand periods, we will continue to focus on ways to build sales, positively impact guest traffic and grow average check and weekly sales averages. We continue to focus on sales building initiatives to create more guest loyalty, increase the frequency of guest visits, further build our off-premise sales channel, better optimize our menu sales mix and develop other incremental opportunities to allow guests to utilize BJ’s. We believe that all of these efforts combined with new restaurant openings offer significant growth opportunities and upside for weekly sales averages and comparable restaurant sales.

Restaurant Opening. 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.

Impacts of Inflation. Inflation has had an impact on our operations, new restaurant construction and corresponding return on invested capital. While we have been able to partially offset inflation and other changes in the costs of key operating inputs by gradually increasing menu prices, 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. Increases in inflation could have a severe impact on the United States and global economies, which will have an adverse impact on our business, financial condition and results of operations. In addition, macroeconomic conditions that impact consumer discretionary spending for food away from home could make additional menu price increases imprudent. Whether we are able to continue to offset the effects of inflation will determine to what extent, if any, inflation affects our restaurant profitability in future periods.

Accounting Terms and Characteristics

Revenues. Our revenues are comprised of food and beverage sales from our restaurants, including takeout, delivery and catering sales. Revenues from restaurant sales are recognized when payment is tendered. Amounts paid with a credit card are recorded in accounts and other receivables until payment is collected from the credit card processor. We sell gift cards which do not have an expiration date, and we do not deduct non-usage fees from outstanding gift card balances. Gift card sales are recorded as a liability and recognized as revenues upon redemption in our restaurants. Based on historical redemption rates, a portion of our gift card sales are not expected to be redeemed and will be recognized as gift card “breakage.” Estimated gift card breakage is recorded as revenue and recognized in proportion to our historical redemption pattern, unless there is a legal obligation to remit the unredeemed gift cards to government authorities.

Guest Loyalty Program. Our program enables participants to earn points for qualifying purchases that can be redeemed for food and beverages in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered, on a relative standalone selling price basis, and defer the revenues allocated to the points until such points are redeemed.

Comparable Sales and Guest Traffic. 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. Guest traffic for our restaurants is estimated based on the number of guest checks.

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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 also 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 Benefits. Labor and benefit costs include direct hourly and management wages, bonuses, payroll taxes, fringe benefits and stock-based compensation, and workers’ compensation expense that are directly related to restaurant level team members.

Occupancy and Operating. Occupancy and operating expenses include restaurant supplies, credit card fees, third-party delivery company commissions, marketing costs, fixed rent, percentage rent, common area maintenance charges, utilities, real estate taxes, repairs and maintenance and other related restaurant costs. During fiscal 2021, occupancy and operating expenses also include COVID-19 related costs such as temporary patios and safety related items.

General and Administrative. General and administrative expenses include costs for our corporate 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 team member benefits (including stock-based compensation expense and cash-based incentive compensation), travel and relocation costs, information systems, the cost to recruit and train new restaurant management team members, corporate rent, certain brand marketing-related expenses and legal and consulting fees.

Depreciation and Amortization. Depreciation and amortization are composed primarily of depreciation of capital expenditures for restaurant and brewing equipment and leasehold improvements.

Restaurant Opening. 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.

RESULTS OF OPERATIONS

The following table sets forth, for the years indicated, our Consolidated Statements of Operations both in dollars and as percentages of total revenues. All fiscal years presented consist of 52 weeks with the exception of fiscal year 2022, which consists of 53 weeks. Percentages below may not reconcile due to rounding.

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52 WEEKS ENDED JANUARY 2, 2024 (FISCAL 2023) COMPARED TO THE 53 WEEKS ENDED JANUARY 3, 2023 (FISCAL 2022)

Revenues. Total revenues increased by $49.3 million, or 3.8%, to $1.33 billion during fiscal 2023, compared to $1.28 billion during fiscal 2022. The increase in revenues primarily consisted of a 3.7%, or $45.1 million, increase in comparable restaurant sales, and a $42.5 million increase in sales from new restaurants not yet in our comparable restaurant sales base. Revenue increases were offset primarily by a $20.8 million decrease related to the shift in weeks due to the 53rd week in fiscal 2022 and an $11.1 million decrease related to closed restaurants. The increase in comparable restaurant sales was the result of an increase in average check of approximately 6.5%, due to menu price increases coupled with changes in mix, offset by a decrease in guest traffic of approximately 2.8%.

Cost of Sales. Cost of sales decreased by $3.1 million, or 0.9%, to $346.6 million during fiscal 2023, compared to $349.6 million during fiscal 2022. This decrease was primarily due to the impact of the 53rd week in fiscal 2022 and the closure of five restaurants since fiscal 2022, offset by costs of sales for our five new restaurants opened during fiscal 2023. As a percentage of revenues, cost of sales decreased to 26.0% for fiscal 2023 from 27.2% for the prior fiscal year. This decrease was primarily due to the easing of inflationary pressure on food costs, coupled with increased revenues from menu price increases and the effects of our cost savings initiatives.

Labor and Benefits. Labor and benefit costs for our restaurants increased by $7.9 million, or 1.6%, to $491.3 million during fiscal 2022, compared to $483.4 million during fiscal 2022. This was primarily due to $1.3 million related to higher hourly labor, $4.6 million related to higher management labor and incentive compensation, and the additional labor related to our five new restaurants opened during fiscal 2023. As a percentage of revenues, labor and benefit costs decreased to 36.9% for fiscal 2023 from 37.6% for the prior fiscal year. This decrease was primarily due to our ability to leverage certain fixed costs over a higher revenue base, improved labor efficiency, better team member retention, and the effectiveness of our cost savings initiatives. Included in labor and benefits for fiscal 2023 and 2022 was approximately $2.6 million and $2.9 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 team members.

Occupancy and Operating. Occupancy and operating expenses increased by $11.4 million, or 3.7%, to $317.6 million during fiscal 2023, compared to $306.1 million during fiscal 2022. This was primarily due to increases of $3.5 million in rent-related expenses, $2.3 million related to restaurant facilities expenses, $3.1 million in third-party delivery company fees and expenses, $0.6 million in utilities, $2.1 million in marketing expenditures, and $1.8 million in merchant credit card fees, offset by a decrease of $2.1 million in supplies. As a percentage of revenues, occupancy and operating expenses remained consistent at 23.8% for fiscal 2023 and the prior fiscal year.

General and Administrative. General and administrative expenses increased by $8.8 million, or 12.0%, to $82.1 million during fiscal 2023, compared to $73.3 million during fiscal 2022. This was primarily due to increases of $7.4 million in personnel costs, including a $3.0 million increase related to our deferred compensation liability and $2.1 million related to incentive compensation, a $1.7 million increase in corporate expenses, and a $1.3 million increase in legal expenses offset by decreases of $0.4 million in rent related expenses, $0.5 million in office expenses, $0.4 million in recruiting related expenses and $0.4 million in outside services. Included in general and administrative costs for fiscal 2023 and 2022 was approximately $8.3 million and $7.2 million, respectively, or 0.6% of revenues, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses increased to 6.2% for fiscal 2023 from 5.7% for the prior fiscal year. This increase was primarily related to our increased deferred compensation liability and incentive compensation.

Depreciation and Amortization. Depreciation and amortization increased by $0.6 million, or 0.9%, to $71.0 million during fiscal 2023, compared to $70.4 million during fiscal 2022. This increase in depreciation and amortization is related to our restaurants opened during fiscal 2023. This increase was offset by the decrease in depreciation and amortization related to impairment and disposal charges taken in the prior year, including the impairment and reduction of carrying value for the closure of five restaurants during fiscal 2023. As a percentage of revenues, depreciation and amortization decreased to 5.3% for fiscal 2023 from 5.5% for the prior fiscal year. This decrease was primarily due to a higher revenue base.

Restaurant Opening. Restaurant opening expense decreased by $0.8 million, or 22.9%, to $2.8 million during fiscal 2023, compared to $3.6 million during fiscal 2022. This decrease was primarily due to one less restaurant opening in fiscal 2023, coupled with the timing of our openings.

Loss on Disposal and Impairment of Assets, Net. Loss on disposal and impairment of assets, net, was $8.1 million during fiscal 2023, compared to $6.2 million during fiscal 2022. In fiscal 2023, these costs primarily relate to disposals of assets in conjunction with initiatives to keep our restaurants up to date, including our restaurant remodel initiative and the removal of glass partitions in our dining rooms that were installed during the pandemic, as well as the closure of five under-performing restaurants. In fiscal 2022, these costs primarily relate to the impairment and reduction in the carrying value of the long-lived assets related to eight restaurants, coupled with the disposals of assets in conjunction with initiatives to keep our restaurants up to date, offset by the $4.9 million gain on disposal of an internally developed software.

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Gain on Lease Transactions, Net. Gain on lease transactions, net, was $3.3 million during fiscal 2022, which related to the sale of the land underlying one of our restaurants.

Interest Expense, Net. Interest expense, net, increased by $2.0 million to $4.9 million during fiscal 2023, compared to $2.9 million during fiscal 2022. This increase was primarily due to the increase in our weighted average interest rate year over year, coupled with a higher average outstanding debt balance.

Other Income, Net. Other income, net, was $1.3 million during fiscal 2023, which related to the gain associated with the cash surrender value of certain life insurance policies under our deferred compensation plan.

Income Tax Benefit. Our effective income tax rate for fiscal 2023 reflected a 94.7% tax benefit compared to a 149.1% tax benefit for fiscal 2022. The effective tax rate benefit for fiscal 2023 and 2022 was different than the statutory tax rate primarily due to Federal Insurance Contributions Act (“FICA”) tax tip credits.

53 WEEKS ENDED JANUARY 3, 2023 (FISCAL 2022) COMPARED TO THE 52 WEEKS ENDED DECEMBER 28, 2021 (FISCAL 2021)

For discussion related to the results of operations and changes in financial condition for fiscal 2022 compared to fiscal 2021 refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2022 Form 10-K, which was filed with the United States Securities and Exchange Commission on February 28, 2023.

LIQUIDITY AND CAPITAL RESOURCES

The following table provides, for the periods indicated, a summary of our key liquidity measurements (dollar amounts in thousands):

Our capital requirements are driven by our fundamental financial objective to improve total shareholder return through a balanced approach of new restaurant expansion plans, enhancements and initiatives on existing restaurants, and return of capital to our shareholders through our share repurchase program. 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, landlord allowances and proceeds from stock option exercises.

Based on current operations, we believe that our current cash and cash equivalents, coupled with cash generated from operations and availability under our credit agreement will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months. Our future operating performance will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

Similar to many restaurant chains, we typically utilize operating lease arrangements (principally ground leases) for 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. 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. 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 our Texas brewpub locations. We also own parcels of land adjacent to two of our restaurants. It is not our current strategy to own a large number of land parcels that underlie our restaurants. Therefore, in many cases we have subsequently entered into sale-leaseback arrangements for land parcels that we previously purchased. 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.

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CASH FLOWS

The following tables set forth, for the years indicated, our cash flows from operating, investing, and financing activities (dollar amounts in thousands):

Operating Cash Flows

Net cash provided by operating activities was $105.8 million during fiscal 2023, representing a $54.7 million increase compared to the $51.1 million provided during fiscal 2022. The increase over the prior year is primarily due to an increase in net income, coupled with the timing of payments for accrued expenses.

Investing Cash Flows

Net cash used in investing activities was $98.9 million during fiscal 2023, representing a $27.0 million increase compared to the $71.9 million used in fiscal 2022. The increase over prior year is primarily due an increase in restaurant remodel activity, offset by the timing of new restaurants opened.

The following table provides, for the years indicated, the components of capital expenditures (dollar amounts in thousands):

During fiscal 2023, we opened five new restaurants and closed five restaurants. We currently plan to open three new restaurants in fiscal 2024, and we have entered into signed leases, land purchase agreements or letters of intent for all of our 2024 new restaurant locations.

We currently anticipate our total capital expenditures for fiscal 2024 to be approximately $70 million to $75 million. This estimate includes costs to open new restaurants and remodel existing locations and excludes anticipated proceeds from tenant improvement allowances. We expect to fund our net capital expenditures with our current cash balance on hand, cash flows from operations 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.

Financing Cash Flows

Net cash used in financing activities was $2.7 million during fiscal 2023, representing a $9.9 million increase in cash used compared to the $7.1 million provided by in fiscal 2022. This increase was primarily due to an increase in common stock repurchases.

Contractual Obligations and Commitments

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We believe we have sufficient liquidity to fund our operations and meet our short-term and long-term obligations. The following table summarizes our future estimated cash payments under existing contractual obligations as of January 2, 2024, including estimated cash payments due by period (in thousands).

(1)
For a more detailed description of our operating leases, refer to Note 1 in the accompanying Consolidated Financial Statements.

(2)
Amounts represent non-cancelable commitments for the purchase of goods and other services.

(3)
We have assumed that $68.0 million remains outstanding under our Credit Facility until the maturity date of November 3, 2026, using the interest rate in effect on January 2, 2024, which was approximately 6.9%.

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, 2024, we are not involved in any off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are more fully described in Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15. 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.

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 on a restaurant level basis, and inclusive of property and equipment and lease right-of-use assets; or at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. Factors considered include, but are not limited to, significant underperformance by the restaurant relative to historical or projected future operating results; significant changes in the manner of use of the assets or the strategy for the overall business; significant negative industry or economic trends; or our expectation to dispose of long-lived assets before the end of their previously estimated useful lives. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

Self-Insurance Liability

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 loss development factors, loss costs, history, case jurisdiction, related legislation, and our claims settlement practice. Significant judgment is required to estimate claims incurred but not yet reported to us (“IBNR claims”) as parties have yet to assert such claims. Should a greater number of claims occur compared to what was estimated, or should medical costs increase beyond what was expected, accruals might not be sufficient, and additional expense may be recorded.

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NEW ACCOUNTING STANDARDS

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations is intended to help you understand our Company, our operations and our current operating environment. For an understanding of the significant factors that influenced our performance, the MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes to Consolidated Financial Statements included in Part II, Item 8 - Financial Statements and Supplementary Data of our Annual Report. Our MD&A consists of the following sections:

•
Overview - a brief description of our business, financial highlights, key performance indicators, known and anticipated trends

•
Results of Operations - an analysis of our Consolidated Statements of Operations for fiscal year 2022 compared to fiscal year 2021

•
Liquidity and Capital Resources - an analysis of cash flows, including capital expenditures, share issuance and repurchase activity, dividends, contractual obligations and commitments, and known trends that may impact liquidity

•
Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical judgments and estimates, including new accounting standards

OVERVIEW

As of February 27, 2023, we owned and operated 216 restaurants located in 30 states as described in Item 2 - Properties - “Restaurant Locations” in this Form 10-K. Our restaurants are typically open every day of the year except for Thanksgiving and Christmas. All of our restaurants currently offer take-out and delivery services. Additionally, all of our restaurants offer a call-ahead or online wait list, on-line ordering for dine-in, guest pick-up or curbside delivery and reservations for large parties.

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. Our proprietary craft beer is produced at several of our locations, our Texas brewpub locations and by independent third-party brewers using our proprietary recipes.

Financial Highlights for Fiscal 2022

Notable fiscal 2022 financial highlights compared to fiscal 2021 include:

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Total revenues increased 18.1% to $1.3 billion (53 weeks vs. 52 weeks)

•
Total restaurant operating weeks increased 3.1% (53 weeks vs. 52 weeks)

•
Comparable restaurant sales increased 14.0% (53 weeks vs. 53 weeks)

•
Net income of $4.1 million compared to net loss of $3.6 million (53 weeks vs. 52 weeks)

•
Diluted net income per share of $0.17 compared to diluted net loss per share of $0.16 (53 weeks vs. 52 weeks)

Key Performance Indicators and Non-GAAP Financial Measures

Key measures that we use in evaluating our restaurants and assessing our business include the following:

Comparable Restaurant Sales. In calculating comparable restaurant sales, we include a restaurant in the comparable base once it has been open for 18 months. This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and closures. Comparable restaurant sales increased 14.0% for fiscal 2022 on a 53 week basis.

Restaurant Level Operating Margin. This non-GAAP financial measure is equal to the revenues generated by our restaurants, less their direct operating costs which consist of cost of sales, labor and benefits, and occupancy and operating costs. This performance measure primarily includes the costs that restaurant level managers can directly control and excludes other operating costs that are essential to conduct the Company’s business. We, similar to most of our competitors, use restaurant level operating margin as a supplemental measure of restaurant performance and believe restaurant level operating margin is useful to investors in that it highlights trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures. Because other companies may calculate restaurant level operating margin differently than we do, our restaurant level operating margin calculation may not be comparable to similarly titled measures reported by other companies. A reconciliation of loss from operations to restaurant level operating margin for fiscal 2022, 2021 and 2020 is set forth below:

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Adjusted EBITDA. This non-GAAP financial measure represents the sum of net income (loss) adjusted for certain expenses and gains/losses detailed within the reconciliation below. We use Adjusted EBITDA as a supplemental measure of our operating performance and believe this measure is useful to investors in that it highlights cash flow and trends in our business operations that may not otherwise be apparent to investors when relying solely on GAAP financial measures. Because other companies may calculate this measure differently than we do, our Adjusted EBITDA calculation may not be comparable to similarly titled measures reported by other companies. A reconciliation of net income (loss) to adjusted EBITDA for fiscal 2022, 2021 and 2020 is set forth below:

Weekly Sales Average. We calculate each restaurant’s average weekly revenue to understand and manage the business trends and expectations. Our weekly sales average was approximately $113,000, $99,000 and $72,000 for fiscal 2022, 2021 and 2020, respectively.

Known or Anticipated Trends

Sales Growth. While most of our established restaurants operate close to full capacity during peak demand periods, we will continue to focus on ways to build sales, positively impact guest traffic and grow average check and weekly sales averages. We continue to focus on sales building initiatives to create more guest loyalty, increase the frequency of guest visits, further build our off-premise sales channel, better optimize our menu sales mix and develop other incremental opportunities to allow guests to utilize BJ’s. We believe that all of these efforts combined with new restaurant openings offer significant growth opportunities and upside for weekly sales averages and comparable restaurant sales.

Restaurant Opening. 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.

Impacts of Inflation. During fiscal 2021 and 2022, heightened inflation had a material impact on our operations, new restaurant construction and corresponding return on invested capital. While we have been able to partially offset inflation and other changes in the costs of key operating inputs by gradually increasing menu prices, 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. Increases in inflation could have a severe impact on the United States and global economies, which will have an adverse impact on our business, financial condition and results of operations. 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

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guests 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.

Accounting Terms and Characteristics

Revenues. Our revenues are comprised of food and beverage sales from our restaurants. Revenues from restaurant sales are recognized when payment is tendered. Amounts paid with a credit card are recorded in accounts and other receivables until payment is collected from the credit card processor. We sell gift cards which do not have an expiration date, and we do not deduct non-usage fees from outstanding gift card balances. Gift card sales are recorded as a liability and recognized as revenues upon redemption in our restaurants. Based on historical redemption rates, a portion of our gift card sales are not expected to be redeemed and will be recognized as gift card “breakage.” Estimated gift card breakage is recorded as revenue and recognized in proportion to our historical redemption pattern, unless there is a legal obligation to remit the unredeemed gift cards to government authorities.

Guest Loyalty Program. Our program enables participants to earn points for qualifying purchases that can be redeemed for food and beverages in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered, on a relative standalone selling price basis, and defer the revenues allocated to the points until such points are redeemed.

Comparable Sales and Guest Traffic. 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. Guest traffic for our restaurants is estimated based on the number of guest checks.

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, a shift in sales mix to higher cost proteins or other higher cost items, or varying levels of promotional activities.

Labor and Benefits. 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 team members.

Occupancy and Operating. Occupancy and operating expenses include restaurant supplies, credit card fees, third-party delivery company commissions, marketing costs, fixed rent, percentage rent, common area maintenance charges, utilities, real estate taxes, repairs and maintenance and other related restaurant costs. During fiscal 2020 and 2021, occupancy and operating expense also include COVID-19 related costs such as temporary patios and safety related items.

General and Administrative. General and administrative costs include all corporate 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 team member benefits (including stock-based compensation expense and cash-based incentive compensation), travel and relocation costs, information systems, the cost to recruit and train new restaurant management team members, corporate rent, certain brand marketing-related expenses and legal, professional and consulting fees.

Depreciation and Amortization. Depreciation and amortization are composed primarily of depreciation of capital expenditures for restaurant and brewing equipment and leasehold improvements.

Restaurant Opening. 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.

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RESULTS OF OPERATIONS

The following table sets forth, for the years indicated, our Consolidated Statements of Operations both in dollars and as percentages of total revenues. All fiscal years presented consist of 52 weeks with the exception of fiscal year 2022, which consists of 53 weeks. Percentages below may not reconcile due to rounding.

53 WEEKS ENDED JANUARY 3, 2023 (FISCAL 2022) COMPARED TO THE 52 WEEKS ENDED DECEMBER 28, 2021 (FISCAL 2021)

Revenues. Total revenues increased by $197.0 million, or 18.1%, to $1.3 billion during fiscal 2022, compared to $1.1 billion during fiscal 2021. The increase in revenues primarily consisted of a $172.8 million increase in sales from our restaurants in our comparable sales base, and a $21.0 million increase in sales from new restaurants not yet in our comparable restaurant sales base. This increase was partially offset by $3.4 million related to the closure of two restaurants in fiscal 2022. The effect of the 53rd week in fiscal 2022 was $26.5 million in additional revenues. On a 53 week basis, comparable restaurant sales increased 14.0%. This increase in comparable restaurant sales was the result of an increase in guest traffic of approximately 9.3% and an increase in average check of approximately 4.7%, due to menu price increases partially offset by changes in mix. The increase in guest traffic was primarily due to the re-opening of our dining rooms, which were closed or restricted in operation during portions of the same period in 2021.

Cost of Sales. Cost of sales increased by $61.5 million, or 21.4%, to $349.6 million during fiscal 2022, compared to $288.1 million during fiscal 2021. This increase was primarily due to the increase in revenue, commodity cost increases and costs related to our six new restaurants opened during fiscal 2022, coupled with the impact of the 53rd week. As a percentage of revenues, cost of sales increased to 27.2% for fiscal 2022 from 26.5% for the prior fiscal year. This increase was primarily due to inflationary pressure on food costs, partially mitigated by menu price increases.

Labor and Benefits. Labor and benefit costs for our restaurants increased by $82.0 million, or 20.4%, to $483.4 million during fiscal 2022, compared to $401.4 million during fiscal 2021. This increase was primarily due to an increase in the number of team members, $64.4 million related to higher wages, $14.4 million related to taxes and benefits, and $3.7 million related to higher training costs due to the re-opening of our dining rooms, which were closed or had restricted operations during a portion of the same period in 2021, offset by lower workers compensation related costs. These increases include the impact related to the six new restaurants opened during fiscal 2022, and the 53rd week. Increases in labor and benefit costs were offset in part by the closure of two restaurants during fiscal 2022. As a percentage of revenues, labor and benefit costs increased to 37.6% for fiscal 2022 from 36.9% for the prior fiscal year. This increase was primarily due to higher wages, training and overtime hours due to increased hiring activities, the deleveraging impact from the COVID-19 Omicron variant wave, which severely

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impacted sales in January 2022, and the benefit from our Employee Retention Tax Credit recognized during fiscal 2021. Included in labor and benefits for fiscal 2022 and 2021 was approximately $2.9 million and $2.7 million, respectively, or 0.2% and 0.3%, 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 team members.

Occupancy and Operating. Occupancy and operating expenses increased by $38.3 million, or 14.3%, to $306.1 million during fiscal 2022, compared to $267.9 million during fiscal 2021. This was primarily due to increases of $9.0 million in utilities, $7.0 million in supply costs, $6.6 million in marketing expenses, $4.6 million in merchant credit card fees, $3.5 million in janitorial services related to the re-opening of our dining rooms, and $3.8 million in rent related expenses. These increases include the impact related to the six new restaurants opened during fiscal 2022, the 53rd week, and one restaurant that was re-opened in August 2021, partially offset by the closure of two restaurants during fiscal 2022. As a percentage of revenues, occupancy and operating expenses decreased to 23.8% for fiscal 2022 from 24.6% for the prior fiscal year. This decrease was primarily due to our ability to leverage certain fixed operating and occupancy costs over a higher revenue base.

General and Administrative. General and administrative expenses increased by $5.4 million, or 7.9%, to $73.3 million during fiscal 2022, compared to $68.0 million during fiscal 2021. This was primarily due to increases of $4.7 million in personnel costs, $1.5 million in outside services as we returned closer to pre-pandemic operations and have invested in growth initiatives, and $1.2 million in travel expenses, offset by a $2.7 million decrease in our deferred compensation plan liability. These increases include the impact of the 53rd week. Included in general and administrative costs for fiscal 2022 and 2021 was approximately $7.2 million and $7.6 million, respectively, or 0.6% and 0.7% of revenues, respectively, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses decreased to 5.7% for fiscal 2022 from 6.3% for the prior fiscal year. This decrease was primarily due to a higher revenue base.

Depreciation and Amortization. Depreciation and amortization decreased by $2.4 million, or 3.3%, to $70.4 million during fiscal 2022, compared to $72.8 million during fiscal 2021. This decrease was primarily related to impairment and disposal charges taken in fiscal 2021, including the impairment and reduction of carrying value related to the closure of one restaurant at the beginning of the current fiscal year. The decrease in depreciation and amortization was partially offset by depreciation expense related to our six new restaurants opened during fiscal 2022 and the impact of the 53rd week. As a percentage of revenues, depreciation and amortization decreased to 5.5% for fiscal 2022 from 6.7% for the prior fiscal year. This decrease was primarily due to a higher revenue base and lower depreciation and amortization.

Restaurant Opening. Restaurant opening expense increased by $2.2 million, or 145.6%, to $3.6 million during fiscal 2022, compared to $1.5 million during fiscal 2021. This increase was primarily due to the timing of our openings and increased costs. We opened six new restaurants during fiscal 2022, compared to two new restaurants during fiscal 2021.

Loss on Disposal and Impairment of Assets, Net. Loss on disposal and impairment of assets, net, was $6.2 million during fiscal 2022, compared to $3.9 million during fiscal 2021. In fiscal 2022, these costs primarily relate to the impairment and reduction in the carrying value of the long-lived related to eight restaurants, coupled with the disposals of assets in conjunction with initiatives to keep our restaurants up to date, offset by the $4.9 million gain on disposal of an internally developed software. In fiscal 2021, these costs were primarily related to the impairment and reduction in the carrying value of the long-lived and operating lease assets related to one of our restaurants, coupled with the disposals of assets in conjunction with initiatives to keep our restaurants up to date and the disposal of certain unproductive restaurant assets.

Gain on Lease Transactions, Net. Gain on lease transactions, net, was $3.3 million during fiscal 2022, which related to the sale of the land underlying one of our restaurants.

Interest Expense, Net. Interest expense, net, decreased by $2.1 million to $2.9 million during fiscal 2022, compared to $5.0 million during fiscal 2021. This decrease was primarily due to lower average debt balance during fiscal 2022, compared to fiscal 2021.

Income Tax (Benefit) Expense. Our effective income tax rate for fiscal 2022 reflected a 149.1% tax benefit compared to an 81.2% tax benefit for fiscal 2021. The effective tax rate benefit for fiscal 2022 and 2021 was different than the statutory tax rate primarily due to FICA tax tip credits.

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52 WEEKS ENDED DECEMBER 28, 2021 (FISCAL 2021) COMPARED TO THE 52 WEEKS ENDED DECEMBER 29, 2020 (FISCAL 2020)

For discussion related to the results of operations and changes in financial condition for fiscal 2021 compared to fiscal 2020 refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2021 Form 10-K, which was filed with the United States Securities and Exchange Commission on February 25, 2022.

LIQUIDITY AND CAPITAL RESOURCES

The following table provides, for the periods indicated, a summary of our key liquidity measurements (dollar amounts in thousands):

As a result of uncertainties in the near-term macro environment, including supply chain challenges, and commodity and labor inflation, we continue to focus on cash flow generation and maintaining a solid and flexible financial position to execute our long-term strategy of investing in our business and opening new restaurants. We continue to monitor the macro environment and will adjust our overall approach to capital allocation, including share repurchases and dividends, as the post-pandemic recovery unfolds.

We are taking what we believe to be reasonably necessary and appropriate measures to control costs and maximize liquidity. Based on the current level of operations, we believe that our current cash and cash equivalents, coupled with cash generated from operations and availability under our credit agreement will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months. Our future operating performance will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

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. 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. 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 our Texas brewpub locations. We also own two parcels of land adjacent to two of our restaurants. It is not our current strategy to own a large number of land parcels that underlie our restaurants. Therefore, in many cases we have subsequently entered into sale-leaseback arrangements for land parcels that we previously purchased. 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.

CASH FLOWS

The following tables set forth, for the years indicated, our cash flows from operating, investing, and financing activities (dollar amounts in thousands):

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Operating Cash Flows

Net cash provided by operating activities was $51.1 million during fiscal 2022, representing a $13.2 million decrease from the $64.3 million provided during fiscal 2021. The decrease over the prior year is primarily due to the timing of payments for accrued expenses, offset by current year net income as compared to the prior year net loss.

Investing Cash Flows

Net cash used in investing activities was $71.9 million during fiscal 2022, representing a $29.7 million increase from the $42.2 million used in fiscal 2021. The increase over prior year is primarily due to an increase in the number of new restaurant openings, new restaurants under construction and key productivity initiatives.

The following table provides, for the years indicated, the components of capital expenditures (dollar amounts in thousands):

During fiscal 2022, we opened six new restaurants and closed two restaurants. We currently plan to open as many as five new restaurants in fiscal 2023, and we have entered into signed leases, land purchase agreements or letters of intent for all of our 2023 new restaurant locations.

We currently anticipate our total capital expenditures for fiscal 2023 to be approximately $90 million to $95 million. This estimate includes costs to open five new restaurants and remodel more than 30 existing locations. Total capital expenditures exclude anticipated proceeds from tenant improvement allowances. We expect to fund our net capital expenditures with our current cash balance on hand, cash flows from operations 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.

Financing Cash Flows

Net cash provided by financing activities was $7.1 million during fiscal 2022, representing a $42.4 million increase from the $35.3 million used in fiscal 2021. This increase was primarily due to lower payments on our line of credit, partially offset by no common stock issuances or stock option exercises and repurchases of common stock.

Contractual Obligations and Commitments

We believe we have sufficient liquidity to fund our operations and meet our short-term and long-term obligations. The following table summarizes our future estimated cash payments under existing contractual obligations as of January 3, 2023, including estimated cash payments due by period (in thousands).

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(1)
For a more detailed description of our operating leases, refer to Note 6 in the accompanying Consolidated Financial Statements.

(2)
Amounts represent non-cancelable commitments for the purchase of goods and other services.

(3)
We have assumed that $60.0 million remains outstanding under our Credit Facility until the maturity date of November 3, 2026, using the interest rate in effect on January 3, 2023, which was approximately 6.4%.

Additionally, we have entered into lease agreements related to future restaurants with commencement dates subsequent to January 3, 2023. Our aggregate future commitment relating to these leases is $10.9 million and is not included in operating leases above.

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 3, 2023, we are not involved in any off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are more fully described in Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15. 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.

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 on a restaurant level basis, and inclusive of property and equipment and lease right-of-use assets; or at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. Factors considered include, but are not limited to, significant underperformance by the restaurant relative to historical or projected future operating results; significant changes in the manner of use of the assets or the strategy for the overall business; significant negative industry or economic trends; or our expectation to dispose of long-lived assets before the end of their previously estimated useful lives. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

Self-Insurance Liability

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 loss development factors, loss costs, history, case jurisdiction, related legislation, and our claims settlement practice. Significant judgment is required to estimate claims incurred but not yet reported to us (“IBNR claims”) as parties have yet to assert such claims. Should a greater number of claims occur compared to what was estimated, or should medical costs increase beyond what was expected, accruals might not be sufficient, and additional expense may be recorded.

NEW ACCOUNTING STANDARDS

See Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for a discussion of recently adopted accounting standards.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations is intended to help you understand our Company, our operations and our current operating environment. For an understanding of the significant factors that influenced our performance, the MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes to Consolidated Financial Statements included in Part II, Item 8 - Financial Statements and Supplementary Data of our Annual Report. Our MD&A consists of the following sections:

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OVERVIEW

As of February 24, 2022, we owned and operated 211 restaurants located in 29 states as described in Item 2 - Properties - “Restaurant Locations” in this Form 10-K. Our restaurants are typically open every day of the year except for Thanksgiving and Christmas. All of our restaurants currently offer take-out and delivery services. Additionally, all of our restaurants offer a call-ahead or online wait list, on-line ordering for dine-in, guest pick-up or curbside delivery and reservations for large parties.

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. Our proprietary craft beer is produced at several of our locations, our Temple, Texas brewpub locations and by independent third-party brewers using our proprietary recipes.

Financial Highlights for Fiscal 2021

While fiscal 2021 was a challenging year, we met these challenges with sales building initiatives, raising $30 million (before commissions and other fees) from the sale of our common stock through an at-the-market (“ATM”) offering program, amending our credit agreement, opening new restaurants and investing back into our existing restaurants. Notable 2021 financial highlights compared to fiscal 2020 include:

Key Performance Indicators and Non-GAAP Financial Measures

Key measures that we use in evaluating our restaurants and assessing our business include the following:

Comparable Restaurant Sales. In calculating comparable restaurant sales, we include a restaurant in the comparable base once it has been open for 18 months. This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and closures. Comparable restaurant sales increased 38.3% for fiscal 2021 with much of this improvement being due to lower sales in 2020 resulting from effects of the COVID-19 pandemic.

Restaurant Level Operating Margin. This non-GAAP financial measure is equal to the revenues generated by our restaurants, less their direct operating costs which consist of cost of sales, labor and benefits, and occupancy and operating costs. This performance measure primarily includes the costs that restaurant level managers can directly control and excludes other operating costs that are essential to conduct the Company’s business. We use restaurant level operating margin as a supplemental measure of restaurant performance and believe restaurant level operating margin is useful to investors in that it highlights trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures. Because other companies may calculate restaurant level operating margin differently than we do, our restaurant level operating margin calculation may not be comparable to similarly titled measures reported by other companies. A reconciliation of (loss) income from operations to restaurant level operating margin for fiscal 2021, 2020 and 2019 is set forth below: