Casual dining restaurant operator,
BJ's Restaurants Inc.
), recently announced the opening of a new unit in Waco, Texas. The
opening marks the sixth of the company's targeted 16 openings for
The latest restaurant at Richland Mall, is spread across
approximately 8,500 square feet and accommodates around 280 guests.
We expect the variety of menu offered at the new unit that includes
BJ's signature deep-dish pizzas, hand-crafted beers and Pizookie
dessert to attract guests. Some other restaurants with units in
Richland Mall are Starbucks Coffee, China Max, TGI Friday's.
We view the recent opening as a strategic one as Texas has the
second largest BJ's pipeline after Californa and enjoys customers'
fondness. The new spot, Waco, is located between the DFW metroplex
and Austin, where the company operates various other restaurants
with strong sales record. In fact, another BJ's unit will come up
in Round Rock, Texas later this month. This area is also the
northern zone of the Austin market.
Over the last two years ended 2011, BJ's Restaurants mainly
expanded in its existing arenas like California and Texas citing
plenty of growth opportunities. According to management, an opening
in existing markets gives them the benefit of support
infrastructure, familiar market sentiment, less tenant improvement
allowance and lower construction period rent. The company currently
functions 26 giants in Texas.
While the aforesaid fundamentals come as advantages, there is a
disadvantage also. The company's newer restaurants in existing
markets are appearing in mature, thickly populated retail
commercial localities. Footfall is likely to be higher in those
units. This will likely create a honeymoon effect putting the
comparable store sales of the older restaurants at stake.
The Orange County, California-based company is considering other
potential new markets for entry in 2013 and 2014 that could involve
some risk for BJ's restaurant.
BJ's, which competes with the likes of
Kona Grill Inc.
), currently retains a Zacks #4 Rank that implies a Sell rating
over the short term. We reiterate our long-term Neutral
recommendation on the stock.
BJ'S RESTAURANT (BJRI): Free Stock Analysis
KONA GRILL INC (KONA): Free Stock Analysis
To read this article on Zacks.com click here.