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Value still key at Chili's, Maggiano's

Promotions such as Chili’s “everyday value” meals, Maggiano’s Classic Pasta deal to continue

Brinker International plans to stick with “everyday value” messaging that contributed to a strong first quarter at its Chili’s Grill & Bar and Maggiano’s Little Italy chains, executives said Wednesday.

Brinker said profit rose 10.2 percent in the quarter ended Sept. 28, increasing to $23.6 million, or 28 cents a share, from $21.4 million, or 21 cents a share, a year ago. Revenue rose 2.1 percent to $668.4 million from $654.9 million.

The company now is extending its value messaging with menu packaging rather than discounting, Doug Brooks, chairman and chief executive of Dallas-based Brinker, told analysts in a call discussing the earnings.

For example, the 44-unit Maggiano’s began offering in August a new “Marco’s Meal for Two” for $39.95, he said. The meal includes an appetizer, flatbread or two side salads; two Classic Pastas for a main course; a shared dessert; and two Classic Pastas to take home.

The chain also continues to offer its Classic Pasta deal, which sends guests home with a pasta entrée in addition to their in-restaurant meal.

Maggiano’s same-store sales rose 3.5 percent and guest counts increased 2.1 percent in the first quarter.

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Chili’s will continue its “everyday value” meals of a “$20 Dinner for Two” and lunch combos, which were launched in January, Brooks said.

Chili’s president Wyman Roberts said the lunch combos, which recently were expanded with tacos and quesadillas, have given the chain more flexibility, and the value platforms are driving traffic at its 1,293 domestic units.

Chili's first-quarter same-store sales rose 1.7 percent at company-owned locations, with guest traffic up 1.9 percent.

“In the 36-year history of the brand, we’ve always had one all-day menu,” Roberts said. “There were a lot of beliefs within the organization that it was going to be difficult for our guests to accept a menu that was only available at lunch.”

However, Roberts added: “We created a very compelling lunch menu, and we’ve had absolutely no issues with our guests. It opens up the opportunity for us to be much more competitive at lunch, and our value scores are significantly higher than they have been in years.”

The Chili’s team now is focused on keeping the menu fresh rather than relying on limited-time offers, he added.

Analyst Stephen Anderson of Miller Tabak + Co. said in a research note: “We continue to be encouraged by the turnaround at Chili’s, even as some of its peers stumble. We think further consolidation in the mid-scale bar-and-grill segment will buttress [Brinker’s] ability to pass along menu price increases, and given our outlook for more moderate commodity prices in the next six to 12 months, thus fuel margin expansion.”

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Brinker executives also discussed:

Happy hour: Chili’s is testing Happy Hour daypart offerings.

“After a successful test phase, we are now rolling out a full-blown Happy Hour program that includes new food and beverage offerings, like our fresh Platinum Margaritas and sangrias, with operational training and marketing support behind it,” Roberts said.

Advertising: Chili’s took a rare network television hiatus for several weeks last month, Roberts said, relying instead on social-media and local marketing efforts.

RELATED: Ad spot: Chili’s touts ‘bold’ traits

“September is historically the lowest volume period in our restaurants,” he explained. “It’s also the most expensive quarter in network advertising. So we made the decision this year to take a three-week hiatus and augment our marketing strategy with more efficient social media and local marketing elements.”

He added that the chain plans to increasingly leverage social-media and direct marketing.

International expansion: With same-store sales up 7.5 percent in the first quarter at the 240 Chili’s and one Maggiano’s unit outside the United States, Brinker executives said international expansion would continue apace. Guy Constant, Brinker’s chief financial officers, said the company added 25 international restaurants in past year. The company said it expects to open between 37 and 42 Chili’s abroad in fiscal 2012.

Pricing: Roberts said Chili’s could raise prices 1 percent to 2 percent “while continuing to strengthen the value proposition.”

Team Service Model: Brinker is lapping savings from the team system, introduced in mid-year 2010, but Roberts said it has improved labor costs as well as sales skills.

“Being a server at Chili’s is about a $20-an-hour job now, so we are able to get more engaged, higher-quality team members who are capable of doing more,” Roberts said.

Brinker International has 1,578 casual-dining restaurants worldwide.

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

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