Chili’s Grill & Bar is putting renewed emphasis on increasing traffic in the lunch daypart, which has been challenged in casual dining amid fast-casual competition, executives at parent Brinker International Inc. said Tuesday.
“The team is going to really focus on driving some traffic back into the lunch daypart for us,” said Wyman Roberts, CEO and president of the Dallas-based casual-dining company, which also owns the Maggiano’s Little Italy brand, in a third-quarter earnings call with analysts.
Roberts said the casual-dining segment has seen lunch, especially early in the week, suffer as fast-casual restaurants upped the quality and convenience of their offerings.
Chili’s is now promoting its “3 for $10” offer, which includes a non-alcoholic beverage and the choice of an appetizer and an entrée, such as Classic Bacon Burger, Classic Sirloin, Chicken Crispers and Cajun Chicken Pasta.
During the third quarter, Chili’s invested in broadcast advertising “to remind people about our lunch combo offering, and we drove several percentage points of improvement in lunch traffic,” Roberts said. “Then we followed that up with our ‘3 for $10’ promotion, which is driving traffic at lunch and dinner. We also added our $5 marketing platform with new innovation every month, which is growing alcohol sales and contributing to traffic growth as well.”
Investments in marketing proved effective, he added.
“Just turning the marketing on and reminding people what a great offering Chili's has at lunch every day was impactfully,” Roberts said, and it has increased traffic in March and April from levels in December and January.
“That early week lunch is still the more challenged daypart,” Roberts said.
Generally, the economy remains solid, he added. “Low unemployment, more people in the workforce, higher household incomes and a consumer confidence level that's getting back to some historic levels — those are all good for the economy,” Roberts said. “They're good for the restaurant industry.
“What we're really more focused on is how do we gain share and grow in a very competitive environment regardless of what the economy is doing, and that's through focus on quality consistency and value,” he said.
Chili’s last September reduced its number of menu items by 40 percent to focus on the core categories of burgers, ribs and fajitas.
The promotional activity in the third quarter helped Brinker improve its same-store sales, said Joseph Taylor, Brinker chief financial officer. The company reported a 0.3 percent decline in the third quarter ended March 28 compared to a 2.2 percent decline in the same quarter last year.
“More aggressive value promotional activity drove comp sales with traffic as opposed to check,” Taylor said. He offered same-store guidance for the full 2018 year of negative 0.5 percent to negative 1 percent.
For the third quarter, Chili's company-owned comparable restaurant sales declined 0.4 percent and U.S. franchised same-store sales decreased 3.2 percent. International Chili’s same-store sales were down 0.2 percent. Maggiano’s same-store sales were up 0.5 percent in the quarter.
Maggiano’s saw double-digit increase in take-out and delivery, Roberts said. “We see even more opportunity to expand our off-premise business moving forward especially since Maggiano's food is so appealing to take out,” he said. “We're working to add individual delivery to our already strong catering business.”
The company is testing more a more individualized delivery in Nashville, Roberts said. “We're looking at ways to broaden the appeal of what's already a very popular program within Maggiano's to a much broader base of individual consumers,” he said.
Taylor also said Chili’s will be remodeling 200 to 250 older restaurants in 2019. “We have expectations for the decent mid-single-digit [sales] lift from that kind of program,” he said. Average costs of the remodeling are between $200,000 and $250,000 per restaurant.
Executives said recent remodels including more focus on the bar, which they said is “more relevant for today's consumers.”
In the third quarter, Brinker’s net income was up 10.7 percent to $46.9 million, or $1.02 a share, from $42.4 million, or 86 cents a share, in the prior-year period. Revenues increase 0.2 percent to $812.5 million from $810.6 million in the same quarter last year.
As of March 28, Brinker International owned, operated and franchised 1,686 restaurants, including 1,634 Chili’s and 52 Maggiano’s.
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