Mexican casual-dining brand plans to offset increased commodity, labor costs with expanded February offerings, executives tell ICR Conference
Chuy’s Holdings Inc. expects to raise menu prices 3% or 3%-plus with the introduction of a new menu in February, executives said Tuesday.
Steve Hislop, CEO and president of the Austin, Texas-based casual-dining Mexican brand, said inflation in commodities and labor would lead the company to evaluate menu prices later in the year.
“I'm pretty stubborn in my approach that I only like to do it once a year,” Hislop told a 2020 Virtual ICR Conference on Tuesday, “but as we go through the year will continue to look at the pressures of inflation on wages and our products — and will look at it and continue to look at the value proposition in all our markets — and I'm not averse to saying that I won't take a second one.”
Jon Howie, Chuy’s chief financial officer, said that commodity inflation ran between 7% and 9% in last half of 2021.
“What we've heard from our people in purchasing is they think maybe those prices will come down in last half of the year [but] still stay elevated on the five-year average standpoint,” Howie said.
Labor inflation was about 8% in the third quarter, he added.
The planned price increases include about a half a percentage point in delivery, he said.
Howie added that about 70% of delivery charges are being covered now. “With our price increase, we intend to cover 100% here in February,” he said, “so moving forward we should be able to offset all of those delivery charges.”
Hislop said the brand’s restaurants are about 85% staffed and he was comfortable with that level. The company has worked at retaining employees, offering bonuses during the pandemic, he said.
The company attracts new workers through current-employee referral bonuses and deploying newer methods like TikTok videos and recruiting at schools, colleges and even day-care centers, where moms can be found to work several hours, Hislop said.
The omicron variant of the COVID-19 pandemic has led to some shift exclusions, closed stations and isolated delivery-only hours, he said, but generally it has not posed a large problem. “It's been crazy on the front lines, making sure we're keeping these doors open and given the hospitality that everybody is expecting,” Hislop said.
Turnover, however, has remained less than in comparable periods of 2019, he said.
With the upcoming new menu introduction, Hislop said the brand is expecting to bring some menu items, seven or eight, back that were trimmed during the height of the pandemic.
Those will “mostly be our combination sections of our menu,” he added.
Catering had been a Chuy’s initiative before the pandemic was declared in March 2020, and the company is slowly bringing those options back, Hislop noted.
“I think in 2019 we ended the year with about 13 catering markets,” he said, “and we finally got back to that now. As we end this year, we'll have six to seven more.”
Catering orders have gotten smaller, he added, with fewer parties in the hundreds and more in the range of 25-50 people.
During the third quarter ended Sept. 26, Chuy’s opened one new restaurant in Brentwood, Tenn., bringing the total restaurant count to 96. Chuy’s was founded in Austin in 1982 and has full-service restaurants in 17 states.
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