Brinker International Inc. is steering clear of deal-driven promotions, instead relying on menu, marketing and technology initiatives to drive traffic, company executives said Tuesday.
The Dallas-based parent of Chili’s Grill & Bar and Maggiano’s Little Italy reported a 12.1-percent increase in profit for the Sept. 24-ended first quarter, with slight traffic increases at both chains.
Systemwide same-store sales rose 2.4 percent, with gains of 2.6 percent at company-owned Chili’s restaurants, 1 percent at franchised Chili’s locations and 0.6 percent at Maggiano’s units. Traffic ticked up slightly 0.1 percent at company-owned Chili’s locations and 0.9 percent at Maggiano’s units.
“The casual-dining industry showed signs of a sales rebound this summer with positive comps, which is encouraging,” said Brinker president and chief executive Wyman Roberts in a call with analysts.
He added that promotions drove some of the segment’s strength, including what he called “aggressive” deals. For instance, Carrollton, Texas-based competitor TGI Fridays continued its $10 Endless Appetizers promotion through the summer.
“We chose to stay our course and not adopt that strategy,” Roberts said, saying Brinker is targeting menu, marketing and technology.
Chili’s has expanded its Fresh Mex platform, introduced last year, with bowls, mix-and-match fajitas and tableside guacamole. In the first quarter, Chili’s introduced Top Shelf Enchiladas.
The enchiladas proved “very popular” with customers, Roberts said, adding that nearly one of every four Chili’s customers has tried a Fresh Mex entrée.
Roberts said Chili’s also improved margins by renovating its “foundational” burger category with new Craft Burgers.
“Every burger now features a new potato bun, lettuce grown specifically for Chili’s and garlic pickles made fresh each day in-house,” Roberts said.
The chain also added a Double Burger to its lunch combo platform, part of Chili’s value program that includes its $20 Dinner for Two offer.
“We obviously had a big business in burgers to begin with, so this was a renovation,” Roberts said. “We’ve changed the burger and made it significantly better and maintained the margins — actually made the margins a little better — [with] some of that through incremental pricing and some of that in tradeoffs on some items.”
Chili’s is taking a cautious approach to pricing, Roberts told analysts, despite some volatility in commodity costs.
“We are committed to a relatively consistent pricing strategy,” he said. “We believe our guests aren’t accepting significant price increases outside of this 1-percent-to-2-percent range. We like to stay in that 1-percent-to-2-percent range. We try to do everything we can to give them a consistent experience with reasonable pricing and don’t try to adjust aggressively for commodity shifts.”
Roberts said Chili’s culinary team is working on a new platform to launch later in the year that intends to follow the success of Fresh Mex. He did not reveal details of the platform.
Chili’s marketing will continue to focus on a brand message, he said, such as the “Fresh Is Happening Now” campaign, rather than limited-time offers.
Completing tabletop tablet rollout
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A new Chili’s loyalty program, which has been discussed in previous quarters, will likely employ the chain’s tabletop tablets, Roberts said. The tabletops should be in all domestic locations by the end of November.
“Next month, we will complete the installation of Ziosk tablets in all of our domestic franchised Chili’s restaurants, further extending our national footprint and leadership in this space,” Roberts said. Chili’s franchises 439 of its 1,263 domestic Chili’s restaurants.
The tabletop devices now allow for orders of drinks and desserts, games, coupon redemption and check payment.
“The next phase will be linking our new loyalty program to Ziosk, enabling us to connect with our guest at the table with their mobile phones,” Roberts said.
The tabletop initiative has been “revenue positive” for the brand, Roberts said. “We’re more than offsetting the expense,” he noted.
Though the company did not provide a timetable for the loyalty program rollout, Roberts said, “It’s not going to be the typical program. It will be unique to Chili’s and to how we see our ability to connect with our guests on a direct basis.”
He said it would likely include offers and rewards for heavy loyalty, “but we don’t think it will be a significant drain,” and will be incremental to the bottom line.
During the first quarter, Brinker opened two new Maggiano’s Little Italy restaurants, in Sacramento, Calif., and Vernon Hills, Ill. They are the new, smaller prototype of the Italian brand.
Maggiano’s also introduced a Lighter Take menu, with menu items that have a third fewer calories than standard dishes, Roberts said. About 18 percent of guests are selecting the “Lighter Take” entrées, he added.
For the first quarter, Brinker reported net income of $32.7 million, or 49 cents per share, rising from $29.2 million, or 42 cents per share, the previous year. Revenue in the quarter was $711 million, increasing 3.8 percent, from $684.7 million the previous year.
Brinker owns and franchises 1,574 Chili’s restaurants and 48 Maggiano’s units.
Contact Ron Ruggless at [email protected].
Follow him on Twitter: @RonRuggless
