Brinker International reported a comparable sales increase of 3.4% during its Q3 earnings call Tuesday morning, including a 3.5% increase at Chili’s and a 1.7% increase at Maggiano’s. While Chili’s sales primarily came from pricing, the chain also experienced strong dine-in traffic in the quarter, despite a January challenged by bad weather.
Overall traffic declined by 1.8% primarily due to the company’s continuing pullback on its virtual brands. Otherwise, CEO Kevin Hochman noted that Chili’s outperformed the industry on sales by more than 7% and on traffic by nearly 4% during the quarter. The chain continues to grow its traffic across all income demographics, driven by its advertising and marketing efforts put into place last year with a return to TV advertising after a three-year hiatus. Hochman said Chili’s earned its highest level of buzz in Q3 since it started tracking the metric.
“When we ask guests to name a brand they’ve heard good things about, they’re saying Chili’s more. They’re thinking about us in a good light,” he said.
Much of that buzz has come from the company’s intentional focus on value, including through its 3 for Me platform, which added a new Big Smasher Burger just this week. The company has taken direct aim at some of its quick-service peers by noting their price increases have eroded their value proposition, to Brinker’s full-service benefit.
“We think we have exactly the right item at exactly the right time and exactly the right price point with a loaded marketing plan to get after it over the next five weeks,” Hochman said. “What’s happening with the dialogue on value is we’re showing up really strong and delivering a better experience than we ever had. Everybody wants great value and great service.”
On the service side, Brinker has benefited from lower turnover rates, which has yielded more efficiencies.
“We’ve just become better operators. Labor gets more efficient when you see turnover levels come down,” CFO Joe Turner said.
Restaurant operating margins are also improving, to 14.2%, versus 13.4% a year ago, illustrating progress from the company’s focus on simplification efforts. During the quarter, those simplification efforts, fueled by employee input, included removing a sauce SKU and removing a skinny burger patty SKU. Chili’s replaced the latter with its existing patty SKU, which gives guests more meat, slightly lowers food costs, and allows operators to execute with just one product, Hochman said.
Additionally, Chili’s new chicken sandwich, expected to launch this summer, doesn’t require employees to pound the chicken breast anymore – a task Hochman called “one of the worst jobs ever.”
“We found a chicken sandwich that is juicer and tastier when you don’t pound it,” he said. The sandwich has also been moved off of the fry zone and will be built where burgers are built, which “takes a lot of pressure off the fry zone.”
“I anticipate momentum to continue as long as we put simplifications into the restaurants,” Hochman said.
Toward the end of the year, Brinker will press the gas on its menu innovation with a new fajita platform, which will include upgraded proteins and tortillas.
“This is a large project. Fajitas are over a $200 million business for us,” Hochman said. “We’re bullish on this large business we think can get bigger and more profitable.”
By the numbers
- Company sales were $1.108 billion in Q3, versus $1.072 billion in Q3 2023.
- Comp sales increased 3.3%, including 3.5% at Chili’s and 1.7% at Maggiano’s.
- The overall decline of traffic of 1.8% includes a negative impact of approximately 2.5% from the company’s strategc decision to de-emphasize virtual brands.
- The company raised its full-year guidance, with revenues expected to be in the $4.33 billion to $4.35 billion range.
Contact Alicia Kelso at [email protected]