Brinker International, the parent company of Chili’s Grill and Bar and Maggiano’s Little Italy, is showing signs of improvement.
Although the company still faces considerable challenges ahead as the industry climbs out of a protracted recession, Brinker is making progress despite profits remaining sharply below its 2007 level.
Lisa Dickson, an adjunct lecturer at SMU, worked at Brinker for 14 years and spent her last two years there as the vice president of strategic sourcing.
“Brinker, or other well branded companies, survive during a recession because they know their customer, work hard to keep them during tough times, and appeal to the customers trading down,” Dickson said.
Brinker increased its revenue by 1.5% to $681.9 million in the company’s fiscal second quarter, which ended December 28.
However, net income fell 4.8 percent to $35.7 million.
“The last two years there’s been a huge refocus on the way we’re doing business and identifying the areas we needed to improve because we want to get back out there and be the leader in casual dining,” said Helen Logan, the talent acquisition manager at Brinker.
Growth and expansion occurred predominantly through the company’s royalties and franchises, which generated a 2.5 percent increase from the prior year to $16.2 million for the quarter.
Brinker attributes this growth to 22 international net openings beginning in the second quarter of fiscal 2011.
Overall international franchise sales increased 4.8 percent compared to a 1.7 percent increase in domestic franchise sales.
“That’s been our growth for the last three plus years,” said Logan. “It didn’t make sense to be building new restaurants in a bad economy, but you take it internationally, and it was a great plan.”
Brinker’s cost of sales increased by 3.3 percent due to an increase in the price of commodities like oils, produce, meat and dairy.
However, while the company’s cost of labor also increased by 0.4 percent, its total restaurant expenses decreased by 1.2 percent.
One restaurant manager says the company’s cost cuts were made carefully.
“A credit to Brinker, they didn’t cut operations, ” said Ty Varner, one of the managing partners at Maggiano’s NorthPark.
“They made the hard choice and cut the people they knew at the corporate level so we could hit our budgets and to take off that overhead.”
The company says that cost controls on labor and food preparation have improved Chili’s operating margin, especially with regards to the new kitchens that will be installed gradually through the end of year.
Although expensive, at $100,000 per upgrade, the newly revamped kitchens will ultimately make food production more efficient by lowering the number of personnel required in the kitchen and producing a more quality product, according to Logan.
“We’re doing some re-facing to be more competitive,” said Heather Malcolm, the general manager of Chili’s at Knox Henderson. “We’re revamping our training team, redoing our bar area, we’ve done our To Go area, as well as our heart of the house area.”
Both brands have also utilized coupons and meal deals to drive customers into their restaurants and build up their email databases.
“When we started doing this we probably had 10,000 to 15,000 names per restaurant,” said Varner of the Maggiano’s email database. “And now we’re probably up to 30,000 or 40,000 maybe per restaurant.”
Although the smaller of the two brands, Maggiano’s second quarter revenues increased by 2.9 percent to $110.9 million, according to a press release from Brinker dated January 24.
The same press release shows a marked improvement in revenue for Chili’s second quarter with a 1.2 percent increase from $548.3 million in 2010 to $554.8 million.
Malcolm says that Chili’s customers are primarily driven by the desire to get a good meal at a good price.
“I’m not just a restaurant manager, I’m a mother of three,” said Malcolm. “And so, my husband and I, it’s five of us, so when we go out to eat, we have to choose what is the best value for us.”
Logan says Brinker will soon build restaurants domestically again, ending a three-year stalemate in domestic restaurant construction.
“Sure we have a long way to go, but we’ve certainly turned things around in the last 24 months,” said Logan.
