Traditional Menus Will Suffer Under Shifting Consumer Preferences

Key Takeaways

• Shifting consumer preferences, digital dining trends, and operational complexity threaten BJ’s traditional dine-in model, limiting growth and making market share losses likely.
  
• Persistent labor pressures, rising costs, and limited geographic expansion constrain margin gains and restrict the company’s long-term earnings potential.
  
• Enhanced menu innovation, cost efficiencies, and targeted expansion position BJ’s for sustainable revenue growth, margin improvement, and strengthened competitive standing amid shifting consumer trends.

Catalysts

Operates full-service restaurants in the United States.

• The ongoing shift in consumer preferences towards healthier, minimally processed, and plant-based foods poses a fundamental long-term challenge to BJ's core menu of traditional pizza, wings, and dessert offerings. Over time this secular shift is likely to erode traffic and make attempts at menu innovation less effective, ultimately constraining BJ's ability to grow its revenues and making same-store sales growth harder to sustain.
  
• Rising labor market tightness, including persistent difficulties in hiring and retaining affordable restaurant staff, along with increasing wage expectations, threatens to permanently elevate BJ’s labor expenses. This structural pressure on operational costs will likely limit future margin expansion and compress net earnings even if traffic gains occur.
  
• The acceleration of digital-first dining and the growing dominance of delivery-heavy models signal an increasing loss of relevance for BJ's large footprint, experiential dine-in concept. As off-premise dining becomes the consumer standard, BJ’s heavy reliance on in-person dining will likely result in shrinking market share, sluggish top-line growth, and long-term vulnerability to more agile fast-casual and delivery competitors.
  
• BJ’s complex, scratch kitchen operations and broad menu, once a differentiator, now create operational challenges that will grow as food inflation and regulatory burdens escalate. Ongoing industry pressure from rising commodity prices, new tariffs, and regulatory costs is likely to erode margins and make it harder for the company to deliver consistent increases in earnings.
  
• Geographic concentration and a slow pace of new unit development place an effective ceiling on BJ’s expansion story. By focusing on infill growth rather than true market expansion—and with long lead times for new sites—the company risks saturating its current core markets, diminishing incremental revenue opportunities and stalling long-term earnings per share growth.

BJ's Restaurants Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on BJ's Restaurants compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming BJ's Restaurants's revenue will grow by 3.4% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 1.6% today to 3.8% in 3 years time.
• The bearish analysts expect earnings to reach $57.7 million (and earnings per share of $2.77) by about July 2028, up from $22.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 15.5x on those 2028 earnings, down from 40.1x today. This future PE is lower than the current PE for the US Hospitality industry at 24.5x.
• Analysts expect the number of shares outstanding to decline by 4.49% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.39%, as per the Simply Wall St company report.

BJ's Restaurants Future Earnings Per Share Growth

Risks

• Sustained traffic growth well above industry averages, combined with expanded margins and robust guest satisfaction, indicates BJ’s is strengthening its competitive position, potentially driving higher revenues and earnings.
  
• Strategic investments in menu innovation, particularly a comprehensive overhaul of core offerings like pizza and wings, are revitalizing customer engagement and may increase average check and future top-line growth.
  
• The brand’s targeted unit expansion strategy—focused on infill within regions of established infrastructure and customer awareness—offers a playbook for compounding same-store sales and contributing to long-term revenue and operating profit expansion.
  
• Implementation of practical cost-saving initiatives, including POS and kitchen system upgrades and AI-driven labor management, has already lifted restaurant-level margins and is expected to deliver durable future improvements in net margins.
  
• A growing off-premise and delivery business, along with a strong marketing presence in social and digital channels, positions BJ’s to capitalize on emerging consumer trends and expand its addressable market, supporting both sales growth and earnings resilience over time.

Valuation

• The assumed bearish price target for BJ's Restaurants is $36.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of BJ's Restaurants's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $50.0, and the most bearish reporting a price target of just $36.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $1.5 billion, earnings will come to $57.7 million, and it would be trading on a PE ratio of 15.5x, assuming you use a discount rate of 9.4%.
• Given the current share price of $40.69, the bearish analyst price target of $36.0 is 13.0% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.