The concept was tested in seven Dallas stores for about two months. Roberts said Brinker was encouraged enough by consumer acceptance and operational ability that they launched it in more than 1,000 units in one day.
“It’s proven out to be exactly what we thought it would do, and then some,” Roberts said. “I’m not saying that’s an ideal way to test nationally rolled out concepts, but I would say in the middle of a pandemic that our people were excited about stepping up and not holding back, and we weren’t just looking to cut costs and hunker down. We were looking to grow the business and again prove to ourselves that success for casual dining and bar and grill is to get more capacity into the buildings and the kitchens we already have and not build more of those.”
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Roberts indicated that building It’s Just Wings is a priority, but Brinker is also looking to add more virtual brands in the future. The company views this channel as one way to continue building margins, which stood at 6.4 percent for the entire quarter and 12.2 percent in June.
Brinker attributed the improved margins to finding operational efficiencies in areas such as labor, advertising, and repair and maintenance. CFO Joe Taylor said Brinker is identifying millions of dollars worth of opportunity and are set up for additional gains as the company finds more efficiencies, leverages virtual brand sales, and grows dining room capacity.
From a cost structure perspective, Roberts said the pandemic has allowed Brinker to reset the business.
“As we start to build back into the dining room and build the business back up, you have this very unique opportunity to say hey, I mean, I got rid of all these costs because I didn’t have my dining rooms open, so I’m going to build the costs back in,” Roberts said. “Let’s evaluate each of these investments again to make sure that what we’ve been doing for years really does make sense or that maybe somebody that was doing it slightly different in one part of the country, we now have better visibility into it. And while some of these things seem small, when you’ve got over 1,000 restaurants, they add up quickly.”
For Q4, U.S. Chili’s units saw same-store sales drop 33 percent while U.S. franchises decreased 39.9 percent. Company-owned Chili’s stores slumped 32.2 percent, including a 0.8 percent increase in price, 15.1 percent decline in mix-shift and 27.6 percent drop in traffic. Company-owned Maggiano’s stores dropped 66.7 percent.
In fiscal year 2020, U.S. Chili’s restaurants decreased 8.8 percent, and U.S. franchises dropped 10.1 percent. Company-owned Chili’s locations slipped 8.6 percent, including a 1.3 percent increase in price, 1.1 percent decrease in mix-shift, and 8.8 percent decline in traffic. Corporate Maggiano’s units declined 19.9 percent.
Q4 Revenue slipped from $834.1 million in Q4 2019 to $563.2 million this year, or a 32.5 percent decrease. For fiscal 2020, revenue dropped from $3.12 billion to $3 billion.
Chili’s ended Q4 with 1,059 company-owned and 174 franchised stores in the U.S and 377 internationally. Maggiano’s has 52 company stores and one franchise domestically.
In fiscal 2021, Brinker expects comps to be down in the low-to-mid teens.
Roberts said the team was nervous and curious as to how the termination of enhanced unemployment benefits—which expired July 31—would impact business. Two weeks into August, results have gotten better and trends have strengthened.
But the company isn’t going to fool itself into believing that won’t change. Robert said he knows there’s tough economic times ahead for parts of the country, and that’s where Chili’s value proposition and convenience will play a vital role.
“I think we’re in good position to give the consumer what they need as things tighten up a little bit without having to resort to some limited-time offer stuff or slashing prices,” Roberts said. “We have just a great value proposition embedded in our concepts. It’s Just Wings just builds on that.”
August 13, 2020 at 03:30AM
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