Brinker International Inc. will be reducing reliance on virtual brands, phasing out its two-year-old Maggiano’s Italian Classics as part of its effort to simplify restaurant operations, executives said Wednesday.
The Dallas-based parent to Chili’s Grill & Bar expects to complete the phase-out by mid-year, said Joe Taylor, Brinker chief financial officer, in a third-quarter earnings call, who added that it was “recognition of less demand for virtual brands in the post-COVID environment.”
Brinker introduced Maggiano’s Italian Classics in 2021 after expanding the Chili’s-focused It’s Just Wings virtual brand in the prior year.
The Maggiano’s Classics virtual brand’s shut down will be completed by June, the end of the Brinker’s fiscal year. “In the third quarter,” Taylor added, “this removal negatively impacted year-over-year traffic by approximately 60 basis points.”
Brinker executive said off-premises in the quarter for Chili's was around 29% of sales and off-premises for Maggiano's was 25%. The breakdown was about 50-50 in the delivery and to-go channels, they said.
In the third quarter, Chili’s returned to the television airwaves with its first national campaign in three years. It also featured a digital-only twist with a “3 for Me” remix with R&B singer Brian McKnight on its digital channels.
Kevin Hochman, Brinker CEO and president, said Chili’s ‘launched a new campaign at the end of February and continued that campaign through all of March.
“The strategy for advertising was simple: with more and more guests looking for great value given the macro environment, we believe we could drive traffic through hard-hitting food spots that showcased our leadership value,” Hochman said.
The “3 for Me” campaign, featuring the entry-level $10.99 meal, offered the trade-up potential to $13.99 and $15.99. Hochman said those higher-priced bundles were popular.
“We got more traffic than we had banked on,” he said, “and we got less trade down than we had budgeted, for which means more sales and more profits.”
Hochman said Chili’s “aired ads with high-impact spots for high-visibility prime time TV March Madness and the major streaming sites like Hulu and Paramount.”
The concerted effort produced “very encouraging our data,” Hochman added, indicating campaign drove more frequency with existing guests as well as brought back lapsed guests back in the Chili's.
“This drove a significant narrowing of the traffic gap and a significant acceleration in Chili's market share growth versus casual-dining,” Hochman said, referring to Black Box Intelligence data. “And that market share acceleration has continued throughout April.”
Hochman said Chili’s plans to leverage the multi-platform model going forward. “In the next fiscal year,” he said, “I expect more regular bursts of national advertising to accelerate traffic growth.
“But TV advertising isn't the only tool we have to drive traffic,” he said. “We know that most that our most powerful traffic driving tools have to work together to supplement our national ad windows for us that's an effective CRM [customer relationship management] program and digital advertising that drives frequency through targeted relevant messaging.
“We need more out of our CRM program to accelerate progress,” Hochman explained, “so during the quarter I made structural changes to consolidate our marketing teams now our social media digital and national marketing teams are all working together to drive traffic and frequency under the leadership of chief marketing officer George Felix.” He said the company would explain the marketing changes at an investor day in June.
Chili’s plans to introduce a new menu in the next few weeks, and it includes new bundles of chicken crispers and the removal of the tempura breading option to simplify kitchen operations, Hochman said.
For the third quarter ended March 29, Brinker reported net income of $50.7 million, or $1.12 a share, compared to $36.6 million, or 81 cents a share, in the prior-year period. Revenues rose to $1.083 billion from $980.4 million in the same quarter last year.
Combined Brinker same-store sales were up 10.8% in the quarter, with increases of 9.6% at Chili’s and 21.6% at Maggiano’s.
As of March 29, Brinker owned and franchised 1,654 restaurants, including 1,602 Chili’s and 52 Maggiano’s.
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