Brinker International Inc. executives said Wednesday they would continue to grow the casual-dining company’s revenue through a variety of avenues, including new pizza and flatbread products at Chili’s Grill & Bar, a smaller prototype for Maggiano’s Little Italy and continued international expansion.
The 1,593-unit company also revealed an expanded home-delivery test for Chili’s and a fast-casual Chili’s Express unit for nontraditional and expensive real estate sites during its Investor Conference, which was held at the company’s headquarters in Dallas and aired via a webcast.
Wyman Roberts, Brinker’s president and chief executive, acknowledged that the casual-dining category faces pressures, but the company still intended to make targets of 3–5 percent revenue growth.
“The category is under attack,” Roberts said. “We know casual-dining is not the bright, shining star that it used to be and that there is pressure. There is pressure from fast casual. There is pressure from casual-plus.”
However, he said, “We believe that casual dining — and bar and grill — is still a very viable category. It’s big. And more importantly, everything we know about the consumer says that they still want to use casual dining and dining out as a place where they connect with family and friends and fulfill this emotional need they have. And this need isn’t getting less important in people’s lives; it’s getting more important in people’s lives.”
Like many restaurant companies, Chili’s saw sales “significantly soften” in January, Roberts said, citing the Jan. 1 lifting of the payroll tax holiday, delayed federal tax returns and rising gasoline prices. He added that February saw some improvement.
Guy Constant, Brinker’s chief financial officer, said, “As of Feb. 24, quarter-to-date comp sales at Chili’s are running at negative 2.2 percent. Sales at Maggiano’s are essentially flat. And sales in our global system are up more than 4 percent.”
That led Brinker to revise its full-year guidance downward, with comp sales now at 1 percent, down from 2–3 percent. However, cost of sales are expected to be favorable by about 50 basis points and restaurant labor to be favorable by 50 basis points, Constant said.
Roberts said the Chili’s brand, which dominates Brinker’s stable with about 1,550 units, would put “relentless focus” on the guest experience. That experience, he said, is being aided by the two-year-old “team service” model, as well as reimaged restaurants and new menu items from new kitchen equipment that includes combi and impinger ovens.
The following is a breakdown of some of the innovations and growth plans Brinker has in the works.
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• New menu items: Chili’s has introduced a pizza platform to all corporate restaurants which have the new kitchen equipment, and intends to complete the rollout to all domestic franchised units by April. A new flatbread offering will supplant pizza. Grilled California and Margherita versions of the flatbread were cited during the presentation.
The flatbread platform borrows from the “casual-plus” category, Roberts said. “And guess what? It’s a lot more affordable at Chili’s,” he said. “And the margins on that, for us, are significantly better than what we get off our base menu. So it opens up windows of opportunity to drive guests, it helps our cost of sales. And it keeps us relevant and more competitive in the field.”
Pizzas and flatbreads can be added to the popular “2 for $20” dinner promotion, as well as appetizer, lunch entrée and kids’ meal categories, Roberts said.
In addition, the new kitchens give Chili’s the potential to expand on its Tex-Mex platform, with enchiladas in addition to the quesadillas and tacos that are offered now, Roberts said.
• Chili’s Express: Going beyond airport Chili’s Too units, Brinker has been testing a counter-service fast-casual version of Chili’s in one international airport location. Executives see the potential for expanding that in global markets where real estate prices are expensive.
• Chili’s delivery test: Chili’s is increasingly seeing its to-go business as an alternative to fast-casual competition, and a test of delivery services is building upon that. “Chili’s is going to take some lessons from the Maggiano’s playbook. Maggiano’s introduced delivery about four years ago. The business has grown about 20 percent-plus over the last four years, every year,” Roberts said. “We are in test in a few restaurants, and we will accelerate that test to a significant number of restaurants in the fourth quarter.” He suggested delivery would expand in to a market with 50-plus Chili’s units in the fourth quarter.
• Maggiano’s growth: While the 44-unit big-box Italian concept has not added units in the past several years, Steve Provost, president of that division, said a new 8,000-square-foot, 250-seat prototype is set to launch at an East Coast location in the fall at a cost of $2–4 million. Typical Maggiano’s have been 15,000 to 20,000 square feet, with a cost range of $4–8 million. Much of the reduction is in kitchen space, about 60 percent, and far less banquet space.
Provost said the company anticipates it can build four new Maggiano’s in each of the next five years, steering banquet bookings to the larger restaurants. “We are going to have to, if want to realize our dreams of being The Cheesecake Factory of Italian, shrink the building,” Provost said.
• Chili’s growth: Domestically, Brinker foresees building 12 new Chili’s units over the next year, or about one a month. This “moderate” growth plan, Roberts said, is small but manageable. “We think we can find really good sites when we are only looking for 12,” he said.
• International growth: Constant, who also heads Brinker’s global development, said the company sees growing its current 274 international units to 425–450 by 2017.
Chili’s, which has been in the international market for more than 20 years, continues to look for regions with relatively low real estate and labor costs and with established supply chains. Chili’s global units are currently concentrated in Mexico, with 91 locations, and the Middle East, with 78. The company recently entered Brazil and plans to open soon in Colombia.
“There’s still a great deal of growth opportunity for Chili’s internationally,” Constant said, citing only seven locations in the BRIC, markets with one in Brazil, two in Russia, four in India and none in China. The company is eyeing the higher-growth, emerging markets of Indonesia, Colombia, South Korea, Vietnam and .
• Continued value offerings: Roberts said Chili’s, which has transitioned away from limited-time offers to more general value offerings, has found about 30 percent of guests order from the “lunch combos” and dinner “2 for $20” menus. He said Brinker will continue to offer that value along with speed and convenience.
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