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BJ's Debuts in Dayton, Ohio

Zacks Equity Research

Orange County, Calif.-based casual dining restaurant operator, BJ’s Restaurants Inc. (BJRI) recently unveiled a BJ's Restaurant & Brewhouse unit in Dayton, Ohio. The 10th of the company’s targeted 17 openings in 2013 is a clear evidence of its strategy of expanding in the lucrative domestic market.

The restaurant, positioned at the juncture of Austin Blvd. and I-75, marks BJ's Restaurant & Brewhouse’s debut in Dayton. The 8,500 square feet unit can accommodate around 280 diners at a time. We believe that the strategic location, along with the restaurant’s attractive menu and contemporary ambience, will drive sales, going ahead.

Though in the past few years BJ’s was concentrating on strengthening its presence in the California and Texas markets, it is now entering into other potential markets. Ohio is a relatively newer market for the company with only four restaurants compared to 63 units in California.

According to the National Restaurant Association, the restaurant industry of Ohio acts as a major catalyst to its economic development. The state’s restaurant industry is projected to generate around $17.4 billion in revenues in 2013. We believe BJ’s venture into the untapped market of Ohio, one of the most densely populated U.S. states, will immensely benefit it in boosting revenues.

Among the casual dining chains, BJ’s is one of the few chains that has been expanding in an uncertain economy. However, we believe that penetration into new markets will involve some risk for the Zacks Rank #4 (Sell) company. There will be a persistent headwind of higher pre-opening costs in these areas compared with matured trade areas in which the company already has support infrastructure.

Restaurant companies worth mentioning at current levels include Red Robin Gourmet Burgers Inc. (RRGB), AFC Enterprises Inc. (AFCE) and The Cheesecake Factory Inc. (CAKE). All these restaurateurs carry a Zacks Rank #2 (Buy).

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