Chili’s quarterly comp performance included a price impact of 3.9 percent, which was a reflection of its year-over-year decrease in promotional, direct marketing activity.
Improving its base business allowed Chili’s to reduce promotional activity and the related comp expense. Chili’s accounts for year-over-year changes in comp expense as an adjustment in price. So, in this case, the lower number in Q4 resulted in an increase in net price. The actual menu price uptick was 3.3 percent. That’s higher than Chili’s annual range of 1.5–2 percent. The chain expects to maintain that lower breakout moving forward.
Here’s a look at domestic same-store sales trends for Chili’s (1,242 stores are in the U.S.):
- 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 (at company stores)
- 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
When Chili’s first laid out its turnaround strategy, it took aim at three targets—strengthen its value proposition, improve operational execution, and leverage digital technology to increase convenience.
For years, Chili’s led with 2 for $20. Roberts said it needed a more flexible platform that could work across both dayparts. And thus, the 3 for $10 was born.
Roberts said it plays well at lunch and dinner and works within Chili’s margin structure. It’s mixing in the mid-teens currently and continues to hold cost of sales. Moving forward, Chili’s can work to build check off the base, Roberts said.
Returning to the lapping concern, Robert said Chili’s still has room to grow in and around the architecture of the 3 for $10.
Brinker CFO Joe Taylor said one of the mistakes people make when looking at the deal is viewing it as a promotional lap. It’s a core value platform, he said, and “we have well over 10 years experience on how to manage that and bring that forward.”
Unlike a pulsed offer that drives guests through barrage marketing, Taylor said the 3 for $10 will offer incrementality out of a platform that sticks to everyday value. “It's a solid base business that we can grow as we move forward,” he said. A reason it’s been so successful, and has long-term legs, is because it’s consistent, and something customers can count on whether they show up in January or April, Monday at 2 p.m. or Saturday at 7 p.m.
“With the strength of our value proposition, now we can layer-in innovation and marketing support, targeting the value-oriented segment of our guests, which will encourage them to return more often and with stronger operational execution, our guests are having better experiences and fewer problems, which help us drive frequency as we challenge ourselves to take our guest metrics to new heights,” Roberts added.
The 3 for $10 also opens doors to ladder-up opportunities for Chili’s. It can market to value-oriented consumers to get them through the lobby. Then put message, offers, and appeal behind the other end of the menu from a quality perspective. Bigger portions, abundance. “We’re looking at the various guest segments and going to put offerings out there that are, we think, appropriate and compelling for each of those and that drives the business.”
And, Roberts said, Chili’s has not gone “pedal to the metal” on loyalty yet, which it could save for a future date if it needs it.