Chili's Latest Brand, Maggiano's Italian Classics, Preps for Growth

The virtual brand is in more than 250 restaurants.

August 18, 2021 Ben Coley

Brinker International CEO Wyman Roberts hinted in January that once virtual concept It’s Just Wings was built out, Chili’s would look toward its next one.

Months later, the wing brand launched takeout through both Google and its own native website. It’s Just Wings surpassed $170 million in the U.S. during the fiscal 2021 calendar (which ended in June), exceeding Brinker's original goal of $150 million. The brand first arrived in June 2020 at more than 1,000 restaurants simultaneously.

Chili’s is still building awareness around the brand, but infrastructure is set. And as promised, the company has now kicked its second virtual brand, Maggiano’s Italian Classics, into a higher gear.

The concept is in more than 250 restaurants and performing well, Roberts said. While the roll out has been slower than It’s Just Wings because of complexity and caution around upholding the dine-in experience, particularly since full capacity returned to most of the U.S., Chilis expects the virtual brand to be in 900 restaurants by the end of the 2022 fiscal year.

“What’s got us excited about Maggiano’s Classics is first the quality of the product. Before we put the Maggiano’s brand on a virtual brand, we wanted to make sure that we could deliver against the standards, and we’ve done that,” Roberts said Wednesday during Brinker’s Q4 earnings call. “The team’s done a really great job of developing a great lineup. It is a little bit more complicated than a wings product because it’s got a little more breadth to the offering and so we’re making sure that as we bring it to the restaurants, we’re training, we’re setting up that part of the line to support this business ,and not be detrimental to what we’re doing in our dining rooms in Chili’s every day.”

The menu comprises Italian entrees like chicken parmesan, fettuccine Alfredo, spaghetti and meatballs, and lasagna, as well as lunch combos, salads, appetizers, and family meals. Similar to It’s Just Wings, Maggiano’s Italian Classics has its own website and is available for delivery through DoorDash.

However, while It’s Just Wings is more of a value-based concept (it’s tagline is “Killer Wings at Stupid Prices"), Maggiano’s Italian Classics serves products that push a higher average check. The two virtual concepts also work against different demographics, Roberts said, so there isn’t much crossover. The push for wings tends to come on weekends during sporting events, while Maggiano’s Italian Classics is used on Sundays for family offerings.

Off-premises sales have hiked from mid-teens prior to the pandemic to more than 30 percent nearly a year and a half later. However, Chili's isn’t looking to have a huge portfolio of virtual brands; Roberts said these two will most likely be the focus long-term.

“We always said we were never going to put a brand out there that didn’t have at least $100 million worth of sales potential, and we’ll build from there,” Roberts said. “Obviously [It’s Just Wings] has proven that, and we think Maggiano’s will build through the year as we roll this thing out over the next few quarters.”

Brinker International

Chili’s same-store sales lifted 8.5 percent in the fourth quarter versus 2019 and grew 8.7 percent from July 1 to August 4 compared to the same period last year. On an absolute dollar basis, Q4 was the chain’s largest sales quarter on record, topping $900 million. Maggiano’s same-store sales dropped 17.5 percent against 2019, but grew 1.6 percent from July to August year-over-year.

Roberts emphasized Chili’s ability to handle four brands under one roof is only possible with best-in-class workers. And during the ongoing labor crisis, the company implemented a “full-court press” to hire, train, and retain employees. In Q4, Chili’s saw labor inflation grow in the mid-single digit range, which is a dynamic the company expects to continue in the near-term. Roberts noted that as government stimulus went away, servers became more available, but there are still pockets of challenges with back-of-house staff.

To reward managers and hourly workers, the company provided incremental bonuses in Q4 totaling $4 million beyond the normal payout formula. To support operators even further, Chili’s is rolling out handheld server devices that've been worked on for three years. The technology helps with execution, saves labor costs, delivers a quality guest experience, and puts more money in the pockets of workers. The devices are in more than 250 restaurants, and the company anticipates full implementation by November.

In addition to labor, commodity inflation—especially chicken and pork—has caused a notable headwind. Although Chili’s held prices during the pandemic to recoup traffic, Robert foresees the brand pricing more than its historical 1 to 2 percent in fiscal 2022. The company will move forward cautiously as it tries to maintain its value proposition.

“The value positioning of both of our brands is an important dynamic, and we want to continue to maintain that,” said CFO Joe Taylor. “We’re very aware of what’s going on in the industry, and you’re seeing some fairly aggressive moves on pricing. But I always go back to, the strategy drives traffic. And this is particularly a sector that has seen negative traffic trends really for a long period of time now, and that’s not something we want to fall into to. We’re going to be very focused on our ability to continue to drive traffic and price may or may not intersect with that thought process. “

Chili’s ended Q4 with 1,594 units systemwide, including 1,235 in the U.S. and 359 internationally. Maggiano’s has 54 locations domestically. Brinker is back to a pipeline of more than 20 restaurants, which will start to fall in place in the back half of fiscal 2022 and into 2023. The goal is to maintain that pipeline and build it into the 20-25 range in the years thereafter.

Restaurant operating margin in the fourth quarter increased to 16.9 percent compared to 6.4 percent last year. Operating income rose to $100.6 million versus an operating loss of $53.2 million in 2020.