With help from a virtual brand, Chili's sees near-normal sales in January

Parent Brinker International revealed plans to expand It's Just Wing's reach and to digitize more of the Chili's experience.
Chilis Sales
Photo courtesy of Brinker International

The Chili’s casual-dining chain should finish January with same-store sales just five or six percentage points below the pre-pandemic level of a year ago—or up 2% if results from California and Illinois are factored out, management told investors Wednesday morning.

The executives of parent Brinker International attributed the signs of returning normalcy to a combination of pent-up demand and the considerable contribution of It’s Just Wings, a new virtual concept exceeding the operator’s bullish original projections. Management had forecast $150 million in annual revenues from the venture, and that sales clip is being eclipsed as professional sports resume and the brand exploits the off-premise opportunities that are generated, said Brinker CEO Wyman Roberts.

Brinker intends to bolster the sales generated by It’s Just Wings—and drop more of that intake to the bottom line—by offering takeout of the virtual brand’s products from Chili’s units. The margins on those orders stand to be considerably better than the profitability of delivered meals because the host Chili’s doesn’t have to pay a commission to its third-party partner, DoorDash.

Management also raised the possibility of adding “a physical presence” for It’s Just Wings, an apparent reference to opening an outlet in some brick-and-mortar form.

Roberts also revealed that Chili’s will test an all-digital set-up in its long-standing quest to give guests more control of their experience with a Chili’s. He explained that customers in a hurry, such as families with small children, could place their orders ahead of time via smartphone. A tabletop device would detect that the party has been seated, signaling the kitchen to get the order out.

The process should cut minutes off the visit, a benefit to the guests, while potentially boosting throughput for the restaurant. “We think it will be more efficient, especially on a busy Friday or Saturday night,” Roberts said.

Customers who preferred a more leisurely visit have that option since they control the placement of orders, he added.

Roberts said the rollout of the digital operating program would begin in the company’s fiscal fourth quarter, which begins in March.

Once It’s Just Wings is on the trajectory envisioned by Brinker, the company will begin the launch of another virtual concept, Roberts said during the Wednesday call with financial analysts. Several other virtual possibilities are currently in test, though Roberts did not divulge details. An analyst participating in the call cited one called Platters and Pies, apparently an Italian concept.

A public company is usually upbeat during conference calls with analysts, but Brinker seemed particularly optimistic, noting signs that consumers are eager to return to restaurants. In California, which shut down indoor dining throughout virtually all of the state in December, “we put up tents in the parking lots and still saw lines,” Roberts remarked. It was an unmistakable sign that people are eager to dine out again, he explained.

“If you look at some of these regions where they’ve put in restrictions and then come off the restrictions, it’s amazing how quickly the bounceback has been,” said Joe Taylor, Brinker’s CFO.

Management noted that it intends to open six Chili’s units during the fiscal year ending in June.

Company-managed Chili’s units posted a same-store sales decline of 6.3% for the second quarter ended Dec. 23. Corporate branches of Brinker’s secondary brand, Maggiano’s Little Italy, generated a 47% decline, the result of dining rooms being reclosed across much of the country, management said. Executives said the Italian concept was particularly affected by a loss of catering and banquet business during what is usually the brand’s busiest quarter.

Overall, Brinker’s Q2 net profits amounted to $12 million, a 57% decrease from $27.9 million in the year-ago quarter, on revenues of $760.7 million, down 12.6%.

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