Customers eat guacamole at Chili's restaurant.

Company-owned off-premises captured 57 percent of prior year’s total sales last week.

Chili’s CEO: No One Will Get More Out of Half a Dining Room Than Us

Hundreds of dining rooms were set to reopen over the weekend.

As a handful of states cautiously plan for reopening, Chili’s parent Brinker International anticipated that dining rooms at more than 300 restaurants would reopen this past weekend. 

Around a dozen states have announced some form of reopening restaurant dining rooms. Georgia and Tennessee have already done so and Texas, Oklahoma, Utah, and more will allow restaurants to reopen dining rooms Friday. 

CEO Wyman Roberts said the company furloughed a large share of employees, but as sales have increased, more than 10 percent of furloughed workers have returned. That amount is expected to increase as more dining rooms reopen. The CEO indicated that Brinker may pay bonuses to employees to “really recognize the sacrifices they're making during this crisis.” Brinker set up a relief fund and spent more than $15 million to support hourly workers it couldn't schedule.

In the past few weeks, nearly all of Brinker’s stores have remained in operation via takeout and delivery. CEO Wyman Roberts said he anticipates that a majority of the system’s dining rooms will be open by June. 

“It'll be very interesting. Obviously, we along with everyone in the country will be watching the spread and the cases,” Roberts said Wednesday during the company’s Q3 review. “And these openings are—we don't know if they're premature. Those are big questions. Those are questions above our pay grade. … We'll monitor that with everybody else in the country to see if we're too fast. And we'll probably end up dialing it back. … I feel really good that the distancing in our restaurants is safe.”

He also believes employees will want to return to work despite the increase in unemployment benefits from the federal government. 

“They have a commitment to this company,” Roberts said. “And they have been in some cases part of this company for many, many years, and they are looking to get back to work.”

Roberts said when customers walk in, the doors will be open and there will be sanitizer near the front. For the most part, he said, the two tables next to consumers will be empty. One table may be a sanitation station with paper towels and sanitizer. He added that the menus (either paper or easily cleanable) will have one or two pages. Servers wear masks and gloves and their temperature is taken prior to shifts. 

No one will be allowed to sit at the bar. Some tables will be pushed up to the bar to create room and to allow the bartender to interact with the guests within a safe, 6-feet distance. In places like Texas, where the capacity limit is 25 percent, or Georgia, where the restriction is 10 customers per 500 square feet, Roberts said restaurants will transition well because dining rooms are fairly larger. 

“No one knows for sure what lies ahead,” Roberts said. “But I know this—if it's a half a dining room scenario, no one will get more out of a half a dining room than we will. When we return to full dining rooms, no one will outperform us.”

Roberts said he doesn’t expect a significant tradeoff between off-premises and in-restaurant sales once dining rooms reopen.

“We're confident that it's going to be fairly incremental,” Roberts said. “And so we don't think that the cannibalization will be large up front. Because again, every restaurant is opened, under as you mentioned some restricted capacity guidelines.”

Through March 8, before the nationwide closure of dining rooms, Brinker was experiencing a promising Q3. Company-owned Chili’s restaurants saw growth of 3.3 percent while company-owned Maggiano’s units saw a lift of 0.6 percent. Off-premises sales at Chili’s grew to 20 percent. 

By the end of Q3, comp sales dropped 5.4 percent at U.S. Chili’s locations. Domestic franchised Chili’s restaurants dropped by 6.3 percent, while company-owned stores decreased 5.3 percent. Same-store sales at company-owned Maggiano’s locations declined 9.9 percent. At internationally franchised Chili’s units, comps dropped 9.5 percent. 

For corporate Chili’s stores, traffic dropped 6.3 percent, compared to 3 percent growth in the year-ago period. At corporate Maggiano’s, traffic lowered 10.2 percent year-over year. 

Chili’s ended Q3 with 1,060 company-owned stores and 178 franchises in the U.S. Systemwide, the brand has 1,622 restaurants. Maggiano’s has 53 domestic units, 52 of which are company-owned. 

Here’s a look at U.S. same-store sales trends for Chili’s:

  • Q3 2020: –5.4 percent
  • Q2 2020: 1.7 percent
  • Q1 2020: 2.3 percent
  • Q4 2019: 1.3 percent
  • Q3 2019: 2.7 percent
  • Q2 2019: 3 percent
  • Q1 2019: 1.9 percent
  • Q4 2018: 0.4 percent
  • Q3 2018: –1.1 percent
  • Q2 2018: –1.6 percent
  • Q1 2018: –3 percent
  • Q4 2017: –1.7 percent
  • Q3 2017: –1.7 percent
  • Q2 2017: –3.2 percent
  • Q1 2017: –1.3 percent

And traffic (company-owned)

  • Q3 2020: –6.3 percent
  • Q2 2020: 0.1 percent
  • Q1 2020: Flat
  • Q4 2019: –0.5 percent
  • Q3 2019: 3 percent
  • Q2 2019: 2.9 percent
  • Q1 2019: 4 percent
  • Q4 2018: 0.8 percent
  • Q3 2018: –2.1 percent
  • Q2 2018: –4.4 percent
  • Q1 2018: –8.7 percent
  • Q4 2017: –6.5 percent
  • Q3 2017: –6.2 percent
  • Q2 2017: –6.5 percent
  • Q1 2017: –4.1 percent

Systemwide, off-premises business captured 57 percent of the prior year’s total sales at company-owned restaurants during the week ending April 22. From March 26 to April 22, online ordering at Chili’s represented 70 percent of off-premises orders. Delivery mixed 20 percent between March 26 and April 22. 

Here’s how same-store sales at company-owned stores have fared thus far in Q4:

Week ending April 1

  • Company-owned overall: (64.6 percent)
  • Chili’s: (62.9 percent)
  • Maggiano’s (77 percent)

Week ending April 8

  • Company-owned overall: (59.7 percent)
  • Chili’s: (57.8 percent)
  • Maggiano’s: (73.7 percent)

Week ending April 15

  • Company-owned overall: (53.1 percent)
  • Chili’s: (51.6 percent)
  • Maggiano’s (64.6 percent)

Week ending April 22

  • Company-owned overall: (46.8 percent)
  • Chili’s (42.5 percent)
  • Maggiano’s (73.7 percent)

While other brands have curated their menus, Chili’s opted to keep its full selection of offerings. The mix leans toward value, which is a strength of the company, Robert said. Chili’s didn’t have to create many packages, new deals, or family bundles. 

“When we went into the crisis, we thought we were going to have to simplify our menu, like many have done,” Roberts said. “And then we actually challenged ourselves to say hey, listen, that creates a lot of problems for our guests who love their favorites and for our supply chain. Because there is a lot of product out there that if we simplify the menu what's going to happen to that product? So we challenged ourselves to run the full menu and we've done that.”

As of last week, Brinker had about $175 million in available cash. The company is burning around $5 million per week. In April, the company paid around 56 to 57 percent in expected rent. 

Roberts showed much optimism for the future, saying that Brinker’s brands have resonated with consumers during the pandemic. 

“Guests know they can trust us to provide great food at a great value in a safe environment. And our team has demonstrated their strength, resilience, and commitment during this crisis,” Roberts said. “So I'm confident that whatever environment comes, we will over-perform just like we have over the past few years and especially during the past couple of months.”