Chili’s treads cautiously on gaming

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Chili’s is looking at ways it can benefit from legalized sports betting without plunging into that business and blurring the casual-dining concept’s image as a family place, the CEO of the brand’s parent company told Wall Street on Tuesday.

“There’s not a positioning that would allow us to heavily lean into some gaming options,” Wyman Roberts, CEO of Brinker International, told financial analysts. However, he added that the brand “will continue to explore, on a smaller basis, opportunities within the building that may allow us to take advantage of it, or [for] our franchisees to take advantage of some state and local opportunities that don’t reposition the brand but may provide some alternative revenue sources for them.”

He didn’t clarify his statements, but the comments seemed to indicate that Chili’s isn’t interested in forming a partnership with an established online gambling company, an option that Buffalo Wild Wings’ parent cited as a possibility for that chain.

A U.S. Supreme Court decision in May essentially opened the door for states to legalize sports betting. New Jersey, Mississippi and Delaware are already allowing businesses to branch into that field. West Virginia is expected to have options available to local businesses by the start of the NFL season, and financial analysts have voiced expectations that sports books might be legalized in at least 25 states by 2023.

Brinker’s comments on gaming came during a discussion with analysts of the company’s financial results for the fourth quarter ended June 27. Other highlights of the conference call include:

  • Both 1,686-unit Chili’s and its sister brand, 52-restaurant Maggiano’s Little Italy, posted positive same-store sales growth for the period, of 0.4% and 0.3%, respectively. Brinker noted that traffic at company-operated Chili’s branches rose 08%, which was offset by a 1% decline in pricing. Roberts explained that the chain is pushing bargain-priced options to draw more value-conscious customers.
  • Roberts said the traffic and sales gains for Chili’s were the strongest in more than three years. He attributed the results to a change in strategy during fiscal 2018 for Chili’s, which he says has been three-quarters implemented. The new approach pivots on menu simplification, more consistent operations, a push for off-premise business and an emphasis on value.
  • The off-premise piece was particularly successful during Q4, Roberts noted. Sales from takeout and limited delivery tests rose by double digits, he said.
  • A previously revealed data security breach at Chili’s cost Brinker $2 million in direct expenses.
  • Wages for Brinker employees rose 3% year over year during the quarter, and executives expect that rise to continue or slightly accelerate in fiscal 2019.
  • Brinker is accelerating expansion of Maggiano’s, in part because the brand has just named a new president, Kelly Baltes. Roberts noted that Baltes has proven during his extensive career that he can expand a brand while simultaneously improving its image.
  • Chili’s priorities going forward will include a reimaging program and a continued shift to nontraditional forms of marketing, including more reliance on the brand’s relaunched loyalty program.

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