Chili's going to school

by Monica Watrous
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The chain recently introduced a craft burger platform, featuring the Guacamole Burger.

DALLAS — Forget the old school business model. Chili’s is all about the New School.

To lure more millennial consumers to the casual dining chain, parent company Brinker International is executing a five-prong plan designed to create a more relevant and contemporary experience in its restaurants. So far, the efforts appear to be working. The company reported higher earnings and revenues for the first half of the fiscal year.

Strategies under the New School plan include menu innovation, technology, customer service, marketing, and pursuing additional revenue streams, such as retail and gaming.

“These five strategies are delivering solid results from both a top- and bottom-line perspective,” said Wyman Roberts, president and chief executive officer of Brinker, during a Jan. 28 conference call with financial analysts to discuss second-quarter performance.

Net income for the second quarter ended Dec. 24, 2014, was $41,306,000, equal to 65c per share on the common stock, up 3.9% from $39,744,000, or 59c per share, in the prior-year period. Revenues totaled $742,898,000, marking a 5.3% increase from $705,662,000 for the comparable quarter.

Comparable restaurant sales rose 4% at company-owned Chili’s outlets during the quarter, with a 2.1% increase in traffic.

Menu innovation during the quarter included the introduction of a craft burger category, which features a Guacamole Burger topped with fresh guacamole, melted Monterey Jack cheese, jalapeños, sautéed bell peppers, caramelized onions and cumin-lime sour cream. There’s also a Southern Smokehouse Burger, topped with four slices of Applewood-smoked bacon, melted sharp cheddar, housemade garlic dill pickles and spiced panko onion rings, lettuce, tomato and Chili’s new signature sauce.

“We’ve seen burger preference increase 60%, and guest satisfaction has risen significantly with the improvements to this foundational category,” Mr. Roberts said. “Looking longer term, our culinary vision is comprised of two core platforms: Fresh Mex and Fresh Tex, which lean into our heritage as a brand and convey a distinct point of view that is authentically Chili’s.

“We rolled out Fresh Mex last year with items like mix-and-match fajitas, Fresh Mex bowls, enchiladas and tableside guacamole.”

Earlier in the month, the chain introduced the new Fresh Tex menu, featuring such items as ribs, steaks and burgers with Texas flavors, like Dr Pepper and a local craft beer.

“We also introduced some really bold sides like smoked potato wedges, grilled asparagus and skillet jalapeño cornbread,” Mr. Roberts said. “The culinary pipeline is full of innovative Fresh Mex and Fresh Tex offerings as we continue our journey towards a New School Chili’s.”

On the technology front, Chili’s domestic franchise partners completed the roll-out of the chain’s tabletop technology. Going forward, the company plans to integrate its loyalty program with the devices.

“With the data that we have about our guests, we are able to more customize the offer, if you will, to compel them to come back,” Mr. Roberts said. “And so that’s how we are going to focus on making it compelling, to drive incremental visits and frequency.”

Chili's is pursuing additional revenue in retail.

Outside of its restaurants, Chili’s is generating additional revenue from branded frozen entrees and appetizers in grocery stores. Last year, the company introduced 30 products at Wal-Mart and other retailers and is now carried in more than 13,000 stores across the United States.

“Our focus with retail has been not to replicate what we do in the restaurant in the retail space, but to leverage the heritage of the Chili’s what we call flavor DNA and the profile of Chili’s in products that make sense in retail for consumers,” Mr. Roberts said. “And so we’re not replicating the menu that we have in our restaurants in our retail freezer case. We’re really replicating the flavor profiles in items that consumers are looking for at home.

“And that’s resonating very well.”

For the first six months of the fiscal year, Brinker had net income of $74,044,000, equal to $1.15 per share on the common stock, up 7.4% from $68,956,000, or $1.03 per share, for the comparable period. Year-to-date revenues increased 4.6% to $1,453,916,000 from $1,390,322,000.
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