Brinker bets on new Tex-Mex menu

by Monica Watrous
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DALLAS — Brinker International Inc. hopes to heat up sales at Chili’s Grill & Bar with a new Tex-Mex menu.
Building off the chain’s Southwest heritage and unique flavor profiles, the Fresh Mex menu, introduced on Jan. 20, features quesadillas, fajitas, enchiladas, bowls, tostadas and crispy tacos.

“These new menu items deliver on key consumer benefits of great-tasting, cravable flavors that are freshly prepared and customizable all at a great value,” said Wyman Roberts, CEO and president, during a Jan. 22 call with financial analysts. “The product innovation is a benefit of our new kitchen equipment, and it also has a very favorable cost of sales.”

The breadth of the Fresh Mex menu allows Chili’s to offer pick-two or pick–three combinations at a compelling price point.

The customizable bowls include house-made corn and black bean salsa, rice, crispy tortilla strips and avocado with marinated grilled chicken, which may be swapped for grilled shrimp or steak. With such ingredients as Monterey Jack cheese, chopped cilantro and ancho-chile sauce, the new enchiladas are offered in green chile chicken, sour cream chicken, beef and cheese varieties.

“And really, the Mexican food category doesn’t come as a surprise to our guests,” Roberts said. “There is a lot of consumer acceptance with this category and Chili’s. This isn’t new territory for us; it’s one of our biggest categories and one of the differentiators of Chili’s.”

With the rollout comes a reformulated tortilla the company said rivals wraps offered by its competitors, including fast-casual players.

“And it’s not only a new product, but it’s a new process for us in how we prepare our tortillas for our guests,” Roberts said. “And so we are benchmarking our food against what we consider the best in the industry, and in some cases, that is fast-casual now.”

The company said the Fresh Mex menu will have a lower-check average but a positive cost-of-sales percentage.

“We know based on the preferences that we’ll see with these new items that there’s going to be big acceptance for it and that preference will drive some incremental traffic,” Roberts said. “And so we’ve known that Fresh Mex was a big idea.”

Newly installed kitchens at many Chili’s restaurants have opened the door to new menu items. The success of last year’s introductions of flatbread and pizza platforms underpins Brinker’s confidence in its latest innovation.

“We’ve obviously over the last five years been very aggressive at understanding how to evaluate innovation and how to take the research process, move it into test restaurants, and then project what it’s going to do when we roll it nationally,” Roberts said. “We think we’ve gotten better at it, and that’s why we have confidence in this latest rollout.”

Brinker, which also owns and operates Maggiano’s Little Italy, marked its 14th consecutive quarter of earnings growth in the second quarter of fiscal 2014. For the thirteen weeks ended Dec. 25, 2013, net income rose 7 percent to $39,744,000, equal to 59 cents per share on the common stock, from $37,177,000, or 51 cents per share, during the prior-year period.

Despite negative impacts from winter weather, Brinker said its sales results outperformed competition per Knapp-Track measurements. Total revenues increased 2.1 percent to $704,395,000 from $689,764,000 last year.

Comparable restaurant sales at Chili’s in the second quarter increased 0.7 percent, reflecting a 1.9 percentage point decline in traffic that offset a 1.5 point gain in pricing impact and a 1.1 point benefit from mix-shift.

Comparable restaurant sales at Maggiano’s advanced 0.9 percent behind a 1.5 point gain in pricing impact that offset a 0.1 point decline in traffic and a 0.5 point drop in mix-shift.
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