A buzz word at Chuy’s lately has been “awareness.” And much of that is tied to how it’s grown. Also, a culprit for recent success.
In April, Chuy’s launched targeted marketing campaigns in Chicago and Houston. But to very different ends. In Chuy’s home state, where it has 37 restaurants, the push was intended to drive increased frequency. For Chicago, home to three stores, the program aimed to “better educate the market on Chuy’s experience.” This included promotional radio, strategic road and stadium signage, and digital advertising across YouTube, Hulu, Spotify, and other platforms. Orlando is up next, Hislop said, along with Dallas in Q4. At the same time, Chuy’s will continue to leverage paid search, social media campaigns, and location-based platforms. The chain noted earlier that it increased advertising spend about $1.35 million in 2019.
Chuy’s also pulsed value initiatives into less mature markets, like $5 margaritas and discounted fajita and taco nights on Tuesdays and Wednesdays, respectively. “We've increased some traffic in those stores, which is our main thing. Obviously, the most expensive seat is the one where no one's butt's in it. So that's what we're doing there,” Hislop said.
Like many brands, Chuy’s would rather focus on the traffic side of marketing than education. And that’s where the current strategy—developing in proven high AUV markets—and the analytical tool, comes into play, and sets Chuy’s up for sustained growth instead of just honeymoon booms or busts.
The brand has a growing digital story to tell, too. At the end of Q2, to-go sales through its website represented about 18 percent of all to-go ordering. Chuy’s ran a promotion to boost adoption rate, which powers through Olo.
Another part of Chuy’s relationship with Olo is “Dispatch,” which allows it to synchronize its online ordering and delivering process for better efficiency and accuracy. Customers are also given various delivery options directly from Chuy’s website. The brand plans to fully integrate the service systemwide by year’s end.
Catering, labor, more room to grow
As has been the case in recent quarters, Chuy’s witnessed solid progress in its catering arm. It rolled the platform to two additional markets in Q2. This, too, Hislop said, helps with awareness as well as giving Chuy’s another avenue for top-line growth.
Catering contributed roughly $1.5 million in revenue this past period. In the year-ago quarter, it was just $400,000. Chuy’s expects to add four more markets before 2020.
Chuy’s improved its restaurant-level operating profit by about 5 percent in Q2, despite a negative hit from continued hourly rate inflation. However, labor costs were down almost a full percentage point as a mix of total sales thanks to improved efficiency at new units and a more cost-effective approach to manager training. “As labor pressures continue, our glide path initiatives become more important than ever as it allows us to reduce opening labor new hires by approximately 20 percent and achieve system average labor targets by month seven,” Hislop said.
The exacts: Labor cost as a percentage of revenue decreased about 90 basis points to 34.3 percent, primarily due to mini price leverage, increased labor efficiency at new store openings, and lower training expense for new managers. This was partially offset by hourly labor rate inflation on comparable stores of about 3 percent and higher hourly rate in certain other markets.
In response to Q2 results, Chuy's increased guidance for the full year. It now expects earnings to report between 93–97 cents per share, up 2 cents from previous expectations. The company reaffirmed comps rising 1.5–2.5 percent.
