Chili’s and Maggiano’s parent company, Brinker International, swung to a profit in the first quarter of the fiscal year despite continued challenges with traffic, which was down 5.8% overall, driven mostly by a de-emphasis on virtual brands. Brinker CEO Kevin Hochman did note during the earnings call on Nov. 1, that the traffic gap compared with the rest of the industry continues to narrow, and that he predicts the traffic for both brands will continue to grow into the fiscal year, starting with October, which saw positive traffic. Same-store sales, meanwhile, were positive, driven mainly by price increases and positive sales mix.
The strategy for continuing to steadily improve traffic, Brinker CFO Joe Taylor said during Wednesday’s earnings call, is to focus on ramped-up advertising and continued menu simplification, particularly for Chili’s which emphasizes its “core four” menu categories: fajitas, margaritas, burgers, and Chicken Crispers.
“The results represent a solid start to the fiscal year for us, focused on simplified operations, improved guest experience and learning to speak with a louder voice about Chili’s has to offer,” Tayor said.
Moving forward, the company’s pricing strategy is going to be a little tamer as Brinker looks to “meet the customer where they are,” Taylor noted, adding that customers are responding well to the 3 for Me $10.99 value menu, and notes that they are keeping pace with the company’s quick-service colleagues in the industry, in terms of everyday value. Still though, Brinker’s leaders emphasized that just because the company is price-conscious, does not mean that it is changing its demographic push:
“The good thing about getting out of deep discount game is that over time your guest becomes more affluent and less elastic to price,” Taylor said. “When you go to the everyday lower price strategy, you see guests move to middle and higher income and over time you become less reliant on deep discounting.”
Accompanying Brinker’s strategic approach to pricing is its equally careful approach to menu innovation. Right now, even though Chili’s is focused on menu simplification and emphasis of the core menu items like the sales of chicken crispers, which are up 40%. Beyond that, Chili’s is also innovating on the bar menu side, including the introduction on It’s Just Wings’ menu items, which came out of the ghost kitchen for the first time in August.
“We’re working on ideation of what’s next in burgers, crispers, and fajitas, but just because we talk about the core four doesn’t mean you can’t innovate in spaces outside of those categories,” Hochman said. “But the job is to make sure those products are as good as they can be, to allow guests to trade up and have premiums. We’re 15 months away from completing that and then you’ll see more variety in the menu moving forward.”
Beyond the customer experience and menu strategies, Brinker also mentioned that the company is working on employee experience—specifically on lowering the high turnover rate. This quarter, the manager turnover rate was down to industry-wide levels, and Brinker predicts that hourly workers will be soon to follow, as hourly worker turnover rate dropped from 188% to 144%. One strategy the company might employ is to bring back individualized jobs in the back and front of house, like the busser position.
For the first quarter of 2024, ended Sept. 27, Brinker International reported same-store sales growth of 5.8% (6.1% for Chili’s and 2.6% for Maggiano’s) and revenues of approximately $1 billion, compared with $955.5 million the same quarter the year prior. The Dallas-based company reported an income of $7.2 million or 16 cents per share, following a loss Q1 of last year of $30.2 million or 69 cents per share. Brinker opened three restaurants for the quarter for a total of 1.651 stores in its portfolio.
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