Chili’s Grill & Bar intends to expand its value positioning and enhance technology in its restaurants this year, executives said Thursday during an investors’ day presentation.
Executives at Chili’s, owned by Dallas-based Brinker International Inc., said they would launch next month a new value platform that includes Hand-Crafted Burgers, apply changes to the brand’s bar program, and expand technology for both customers and staff as the company replaces its in-house My Chili’s Rewards loyalty program with a new coalition-based Plenti rewards partnership.
Wyman Roberts, Brinker president and CEO, acknowledged that 2016 “was not a good year for Brinker.” In April, the company said Chili’s company-owned same-store sales fell 4.1 percent in the third quarter ended March 23.
Brinker said late Wednesday that it expected fourth-quarter same-store sales to improve, although they were anticipated to be negative.
“As of June 2, quarter-to-date Brinker International company-owned comparable restaurant sales decreased 2 percent, which includes a 2-percent and 1.5-percent decrease for Chili's and Maggiano's company-owned restaurants, respectively, as of that date,” Brinker said.
“It wasn’t a fundamental brand deterioration,” Roberts said Thursday. “It wasn’t the competition doing something to us.”
Roberts said Brinker put “too many eggs into one basket,” such as beefing up its My Chili’s Rewards program, which took marketing dollars away from media promotions.
Roberts said Brinker has “rebuilt as a plug-and-play business” its information technology department, replacing 50 to 60 percent of the IT workforce to accommodate new initiatives, including online ordering through third-party Olo, delivery through Postmates, and rewards through Plenti and other changes.
Krista Gibson, Brinker chief marketing officer, said Chili’s maintains its “strong family position,” with 40 percent of parties including children under age 17, and value positioning with such programs as kids-eat-free offers, $6-$7-$8 weekday lunch combos, and longstanding 2 for $20 meal deals.
For instance, in the fourth quarter, Chili’s offered a $10.99 bundle of a half rack of ribs with fries, salad and a mini molten chocolate cake. About 20 percent of customers order from the 2 for $20 platform, Gibson said, and 30 percent of Chili’s visitors seek some sort of menu deal.
“Affordability at Chili’s is a strength compared to rest of the category,” she said.
To expand those deals, Chili’s will roll out a fixed-price happy hour with appetizers priced at $3, $4 and $5, and introduce a new Hand-Crafted Burger platform in July.
John Cywinski, executive vice president of strategic innovation, said that Hand-Crafted Burgers will include the option of a grass-fed beef patty with no added hormones or antibiotics for a $1 upcharge.
The burger menu will also include an Ultimate Bacon Burger and a new Sunrise Burger with a fried egg, marking the first time the brand has offered the egg option.
Chili’s is also looking to enhance craft beers and margaritas in its bars. Currently, Cywinski said Chili’s bars post about $430,000 in average annual revenue per restaurant, depending on geography. But the brand’s alcohol sales mix of 14 percent of sales lags behind such casual-dining competitors as TGI Fridays, at 21 percent, and Applebee’s Grill & Bar, at 15 percent.
“We believe strongly as a team that we are staring at incremental growth potential here with the bar,” Cywinski said, adding that the bar could enhance Chili’s atmosphere. Bar sales have what Cywinski called “headroom,” with 70 percent of sales currently in margaritas and beer.
Chili’s is testing doubling its tap beers from six to 12 offerings at 20 restaurants dispersed geographically. Cywinski said he expects the expanded bar offerings, which might also include margaritas on tap, to debut between October and December.
The brand is also exploring physical changes in some bars, including the use of reclaimed wood, new lighting, fixtures, staff attire, music and sporting events to “energize it, make it more vibrant,” Cywinski said.
Gibson said Chili’s is also recalibrating off-premise sales with Olo; testing delivery with Postmates, which offers flat-fee delivery of $3.99; and adding appetizer ordering and smartphone wallet payments to its tabletop Ziosk tablets.
While the company has 5 million members in its loyalty database, Gibson said the shift from the in-house My Chili’s Rewards program to Plenti will free marketing dollars to promote new initiatives such as the Hand-Crafted Burgers.
“The costs of My Chili’s Rewards were just to high,” Gibson said. “With Plenti, the costs are substantially less.”
The reallocated dollars will be put toward promotional incentives rather than rewarding current behavior, she said.
Gibson added that Chili’s is excited to be the first restaurant chain in the Plenti rewards program.
“Our check size is small enough that it can be a reward, a treat,” she said. “We’re quite excited about getting converted over to that.”
Chili’s joins other companies from which customers can earn loyalty rewards, including AT&T, ExxonMobil, Macy’s, Nationwide, Rite Aid, Direct Energy, Enterprise Rent-A-Car and Hulu.
Brinker is also looking at new technologies to reduce labor costs.
Kelli Valade, president and chief operating officer of Chili’s, said the company is testing waiter hand-held devices, which she said are basically an iPad mini with a version of the chain’s point-of-sale system on it.
“Our services love it because it looks just like our POS, but they don’t have to go to the POS,” Valade said. “We are really excited about our test.”
The company would likely roll out the hand-held waiter devices in California first, she added.
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.