New value platforms at Chili’s Grill & Bar, introduced systemwide in October, have given the brand some new levers to drive traffic, executives at parent Brinker International Inc. said Tuesday.
The Dallas-based casual-dining company, which also owns Maggiano’s Little Italy, saw same-store sales and traffic increase at both its brands in the second quarter ended Dec. 26 with the help of value platforms like “3 for $10,” lunch combos and the three-course “2 for $25” offering.
Same-store sales at company-owned Chili’s rose 2.7 percent in the quarter and traffic at those stores was up 2.8 percent.
Wyman Roberts, Brinker president and CEO, said restaurant brands need to take advantage of the current positive economic environment of low unemployment and income growth.
“If you are not getting traffic growth in today’s environment, I’d be concerned,” Roberts said on an analyst conference call Tuesday. “As pressure mounts on the category and you don’t have that established — the value proposition, that loyalty from your frequent guests and traffic-driving strategies — then what’s going to happen as things start to turn?”
“Now is the time to be really building your base,” Roberts said, so you have loyal customers in the portfolio.
Roberts said Chili’s was working to firm up that loyalty with value platforms, an emphasis on take-out orders and improved execution.
The Chili’s value platforms were expanded systemwide in early October with the introduction of the “3 for $10” offerings, said Joe Taylor, Brinker chief financial officer, and that helped top-line sales growth in the second quarter.
Taylor said the value offerings built around the 3 for $10, lunch combos and the $25 three-course menu for two, produced positive same-store sales in each month of the quarter.
“Three for $10 is a relevant and compelling offering that is sustainable into the foreseeable future,” Roberts said. The promotion is driving traffic “because it meets the needs of our lunch, our dinner, as well as our takeout guests,” he said.
The portions are ample and the offer is flexible for the operators, Roberts noted. “It is simple for our operators to execute consistently and our margins are solid,” Roberts said.
The “3 for $10” provides a beverage, appetizer and entrée from a dedicated menu.
“The beauty of it is that it works across all the dayparts, so there’s not a need from a marketing perspective to be out there with multiple messages,” Roberts said.
Roberts said the Chili’s brand remains cautious on third-party delivery.
“We, like many in the industry, have been engaged in delivery, and we are cautious on it,” he said. “The business-model implications are significant with the fees that third-party partners are charging.”
Perhaps more important, Roberts said, is third-party delivery’s impact on operations.
“Their integration into our systems isn’t great,” he said. “From a technology standpoint, given that so many of these third parties are priding themselves on being technology experts. We’re challenging them to integrate better so the impact it has to the operations side of the business is minimized.”
Chili’s continues to look at third-party delivery, he said, as convenience needs continue to grow in the restaurant industry.
Maggiano’s has its own delivery system, which has been in place for about a decade, but Roberts cautioned that Chili’s wanted to make sure it was confident in the platforms before “we get too far out in front of our skis with these partners.”
Chili’s curbside take-out offer continues to grow, increasing 20 percent in the second quarter, Roberts said.
“At 12 percent of our business today, we believe takeout still has plenty of upside and we plan to leverage that,” he said.
For the second quarter ended Dec. 26, Brinker reported net income rose 26.5 percent to $32 million, or 83 cents a share, from $25.3 million, or 54 cents a share, in the prior-year period. Revenues rose 3.2 percent to $799.7 million from $766.4 million in the same quarter last year.
Maggiano's company-owned same-store sales increased 1.8 percent in the second quarter and traffic was up 1.3 percent.
The company opened its first franchised Maggiano’s location at DFW International Airport in November. “Later this year we will open our second airport location,” Roberts said.
Brinker International owns and franchises 1,685 restaurants, including 1,632 Chili’s and 53 Maggiano’s.
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