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How Chili's sets itself apart from restaurant competitors

Brinker International, Inc. ( EAT ) — the parent company of restaurant Chili's and Maggiano's Little Italy — released fiscal third quarter earnings results on Wednesday.

Brinker CEO Kevin Hochman sits down with Yahoo Finance Executive Editor Brian Sozzi to talk about the chain operator's alcohol sales, regional pressures, and what sets Chili's apart from its competition.

00:00 Speaker A

Out of all the things that you talked about in your earnings call, I mean, the chicken sandwich is certainly top of mind for many investors. What something did stick out to me though, Kevin, it was perhaps some weakness in alcohol sales. And as you look at what consumers are under right now, $4 gas, I think I saw as a headline today, $6 gas in California. It's crazy. Is that a leading indicator? Are the consumers now starting to pull back and they're doing it at the bar?

00:21 Speaker B

Well, what we've seen in the last 30 days is we've seen our traffic accelerate versus the industry, but we have seen a little bit of pull back on check, which is what you're referring to. Um, you know, here's what I would tell you. Uh we are now the number one uh restaurant brand for alcohol sales in the United States. It's probably because we offer the $6 margarita every day. You don't need an app, you don't need a coupon, you don't need to come for happy hour. You know, the one we're running today, it literally just started today is our popping boba Margarita. We've never done this before. I don't think any national chain has done a boba Margarita before. It has Luna Azul uh tequila, it has deep Betty lemon vodka. So these are name brand uh alcohol. This is an incredible value and that's the reason why we're holding we're hanging in mostly on alcohol incidents. I think this is a recent 30 day thing that we shared, you know, based on what's happening with the macro uh and the geopolitical events. But, you know, here's what I would tell you, we've grown our alcohol sales for the past year about 20%. Um and now we're the number one alcohol restaurant brand in the United States.

01:07 Speaker A

You have a large presence in, in Texas. And of course, uh oil prices have gone up. I guess that market might be feeling pretty good, maybe a little extra cash in their pockets. What are you seeing in those Texas locations compared to the rest of the country?

01:17 Speaker B

Yeah, we know we see growth everywhere in the country. So this is not like, you know, for one particular area of the country. We feel very good. There's nothing really that's not growing in this business right now. We're firing on all cylinders. You know, this is our 20th consecutive quarter of same store sales growth. You know, we're now the number one, you know, traffic casual dining brand in the United States. And, you know, we're growing everywhere. We we continue we're going to continue to do that. That's the big, you know, story on Chili's is that, you know, we're now in year six of this turnaround and things are going really well.

01:40 Speaker A

I think Chili's is one of the outliers uh in the restaurant industry. I mean you guys have been putting up good results, you've done so for really over two years. But more broadly, I mean, I look at chains like once proud chains like Hooters, smokey bones this week closing all its restaurants. Like what's the state of play in the broader restaurant industry and why are chains like this that were once pretty solid, like why are they going away?

01:58 Speaker B

Well, you know, it should be simple. So, you know, why do you go out to eat bride? You go for a great food that you crave in an atmosphere that's really comfortable and inviting and you want to have great, you know, hospitality. And the challenge is it's hard to do all those things. And I think that's when those, some of those names that you talked about, when you fail in those things, you know, you can't blame the macro, you can't blame the consumer, you got to you got to look internally and say, how do I improve on those things? And that's what we did about four years ago. We said, how are we going to approve on food service and atmosphere? We're going to make hundreds of millions of dollars of investments to do that and we're going to get back onto the top of casual dining. And that's exactly what we've done and that's exactly how we'll continue to extend our lead.

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