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Brinker recalibrates Chili’s value positioning

Third-quarter same-store sales at company-owned stores fell 4.1 percent

Brinker International Inc. is recalibrating value offerings at Chili’s Grill & Bar after company-owned same-store sales fell 4.1 percent in the third quarter ended March 23, executives said Tuesday.

“The third quarter was a tough quarter for Chili’s,” said Wyman Roberts, president and CEO of Dallas-based Brinker, in a conference call with analysts.

The quarter was “choppy,” Roberts said. The same-store sales decline at company-owned Chili’s units came with a 4.9-percent decline in customer traffic. Chili’s franchised locations saw a 1.7-percent decline in same-store sales, including a 2.2-percent decrease domestically and a 0.7-percent drop abroad.

Brinker’s second concept, Maggiano’s Little Italy, logged a 0.2-percent increase in same-store sales in the quarter, and a 1.1-percent increase in traffic.

Roberts said Chili’s introduction of a new Sizzling Steak menu platform was intended to create consumer interest. “But at the end of the day, it wasn’t enough to drive the incremental traffic we needed,” he said.

“Our takeaway is: We have to be even more aggressive with our value proposition and the message and media through this environment,” he said.

“We thought the industry would actually improve overall, and it got softer,” Roberts said, citing challenging weather and “the continued economic malaise that’s created a drag on the industry.”

Roberts also said that value-pricing strategies by quick-service restaurants impacted casual dining, and oil-patch economies saw declines amid petroleum pressures.

One “compelling” Chili’s offer, Roberts said, features new flavor profiles in its Baby Back Ribs bundled with fries, salad and dessert for $10.99. The new rib bundle started Monday. The company is also bringing back the iconic “Baby Back Ribs” jingle. 

Other changes will include re-evaluating the “2 for $20” value platform, he said.

“Some of these platforms are getting five, six years old, and they either need to be refreshed, I think, to get some energy and excitement to remind the consumers about what a great proposition they are,” Roberts said. “Or we need to find some new ways to do that.”

Roberts said quick-service restaurants had success in the past quarter with bundle offers, especially for the lunch daypart. 

“Those are limited-time offers, but the QSR category is kind of showing us they are rethinking how they deliver value and their value proposition, and that’s a great lesson for us to consider as well,” Roberts said.

The company will also beef up its loyalty offers by partnering with Plenti, the multi-brand third-party rewards program, in the first quarter of fiscal 2017, Roberts said.

“What’s happening right now is the technological linkage, if you will, between My Chili’s Rewards, our in-house loyalty program, and the Plenti system is being developed,” Roberts said. The transition should happen this summer.

Roberts said the Plenti rewards program will give Brinker a robust and flexible marketing database. “We know consumers care about it,” he said, adding that 5 million consumers were signed up for the loyalty program, and about 20 percent of transactions engaged a loyalty component.

The Plenti program will employ the chain’s tabletop Ziosk devices, Roberts said. “We’ll have access to this massive database through Ziosk.”

Brinker’s third-quarter net income fell 12.1 percent, to $57.5 million, or $1 a share, from $65.4 million, or $1.02 a share, the prior year. Revenue rose 5.2 percent, to $824.6 million, from $784.2 million in the same period last year.

As of March 23, Brinker owned or franchised 1,647 restaurants, including 1,596 Chili's units and 51 Maggiano’s locations.

Contact Ron Ruggless at [email protected]
Follow him on Twitter: @RonRuggless

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