Brinker International, Inc. Stock price
Compare with Peer Group
📊 Peer Group
📈 What is it?
The peer group consists of the companies with the most similar business model. They serve as a benchmark for putting a stock into context.
🧮 How is it selected?
Based on similarity of business model, meaning companies from the same industry with comparable products and a similar customer base. That's the only way to compare apples to apples.
🏛️ Why does it matter?
Whether a stock is cheap or expensive is best judged by comparison. A P/E of 18 or an EV/FCF of 20 can look cheap or expensive depending on the yardstick. The peer group gives you the most accurate one: companies with a similar business model that operate under the same conditions.
🎯 What does it mean for investors?
When a metric sits below the peer average, the stock is valued more cheaply relative to its competitors, and above the average more expensively. A discount to the peer group can be an opportunity, but it can also have a reason (for example lower growth). The comparison is a starting point, not a verdict.
Is Brinker International, Inc. a Top Scorer Stock based on the Dividend, High-Growth-Investing or Leverman Strategy?
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Key metrics
📘 Market Capitalization
📈 What is it?
Market capitalization shows how much a company is currently worth on the stock market.
🧮 How is it calculated?
🏛️ Why is it important?
It helps classify companies by size (Large, Mid, Small Cap) and indicates their market presence and relative stability.
🧮 Calculation
🎯 What does this mean for investors?
- Large-cap companies tend to be more stable, often pay dividends, but may grow more slowly.
- Smaller firms may offer higher growth potential but come with more volatility.
- Market capitalization is a useful indicator of company size — but not a measure of whether a stock is undervalued or overvalued.
📘 Enterprise Value (EV)
📈 What is it?
Enterprise Value represents the total cost to acquire a company — including its debt and excluding its cash reserves.
🧮 How is it calculated?
(= Market Cap + Net Debt)
🏛️ Why is it important?
EV gives a more complete picture of a company's value than market cap alone and is used in key valuation ratios like EV/FCF or EV/Sales.
🧮 Calculation
🎯 What does this mean for investors?
- Enterprise Value shows the true cost of buying a company, including all financial obligations.
- It is more accurate than just looking at market cap, especially when comparing companies with different levels of debt or cash.
- Professional investors prefer EV-based multiples because they better reflect the company’s full financial footprint.
📘 Net Debt
📈 What is it?
Net Debt shows how much debt remains after subtracting a company’s available cash reserves.
🧮 How is it calculated?
🏛️ Why is it important?
It indicates how dependent a company is on borrowed money and how easily it can service its debt in the short term.
🧮 Calculation
🎯 What does this mean for investors?
- Low or negative net debt signals financial strength and flexibility.
- Companies with strong cash positions are better positioned in crises.
- High net debt increases financial risk — especially in environments with rising interest rates or economic downturns.
📘 Cash
📈 What is it?
Cash represents all liquid assets a company can access immediately — including cash, bank deposits, and short-term investments.
🧮 How is it calculated?
🏛️ Why is it important?
It reflects a company’s financial flexibility and resilience — enabling investments, buybacks, or buffer in downturns.
🧮 Calculation
🎯 What does this mean for investors?
- A strong cash position means greater room for maneuver and crisis resistance.
- Cash-rich companies can invest, pay down debt, or repurchase shares.
- But excess idle cash might indicate a lack of growth opportunities.
📘 Shares Outstanding
📈 What is it?
Shares outstanding represent the total number of a company’s shares currently held by investors — excluding treasury stock.
🧮 How is it calculated?
🏛️ Why is it important?
It’s the basis for key metrics like Earnings Per Share (EPS), Market Capitalization, or the Price/Earnings ratio (P/E).
🧮 Calculation
🎯 What does this mean for investors?
- Fewer shares in circulation typically increase earnings per share — making each share more valuable.
- Share buybacks reduce the number of shares and boost per-share metrics.
- Issuing new shares does the opposite — diluting shareholder value and lowering per-share figures.
📘 Price-to-Earnings Ratio (P/E)
📈 What is it?
The P/E ratio shows how many times a company's earnings per share are reflected in its current share price — in other words, how "expensive" the stock appears relative to its profits.
🧮 How is it calculated?
🏛️ Why is it important?
The P/E ratio is one of the most widely used valuation metrics. It helps investors assess whether a stock appears cheap or expensive compared to its earnings power.
🧮 Calculation
📊 P/E (TTM) = Based on earnings from the last 12 months (Trailing Twelve Months):🎯 What does this mean for investors?
- A low P/E may indicate undervaluation — or signal underlying issues.
- A high P/E may reflect strong growth expectations — or an overvalued stock.
📘 Price-to-Sales Ratio (P/S)
📈 What is it?
The P/S ratio shows how much investors are paying for $1 of the company’s revenue – regardless of profitability.
🧮 How is it calculated?
🏛️ Why is it important?
P/S is especially useful for evaluating growth companies or businesses not yet profitable. It reflects how the market values the company’s sales.
🧮 Calculation
Market Cap = $8.33b | Revenue (TTM) = $5.81b
Market Cap = $8.33b | Estimated Revenue = $6.33b
🎯 What does this mean for investors?
- A low P/S may indicate undervaluation — or low profitability.
- A high P/S can reflect strong growth expectations — or excessive optimism.
- Especially helpful when evaluating companies where profits are low, volatile, or negative.
📘 Enterprise Value to Sales (EV/Sales)
📈 What is it?
EV/Sales shows how much investors are paying for $1 of revenue — considering not just equity, but also debt and cash. It’s the capital structure–adjusted version of the P/S ratio.
🧮 How is it calculated?
🏛️ Why is it important?
It’s ideal for comparing companies with different levels of debt. It reflects a company's true cost relative to its revenue.
🧮 Calculation
Enterprise Value = $8.67b | Revenue (TTM) = $5.81b
Enterprise Value = $8.67b | Forward Revenue = $6.33b
🎯 What does this mean for investors?
- EV/Sales allows for capital structure–neutral company comparisons.
- A lower ratio may indicate undervaluation; a higher one may signal strong growth expectations or overvaluation.
- Especially helpful when evaluating high-growth companies with low or negative earnings.
📘 Enterprise Value to Free Cash Flow (EV/FCF)
📈 What is it?
EV/FCF shows how many years it would take for a company to "pay back" its enterprise value using its free cash flow.
🧮 How is it calculated?
🏛️ Why is it important?
It focuses on real cash generation, ignoring accounting noise — ideal for assessing profitability and value based on liquidity, not earnings.
🧮 Calculation
🎯 What does this mean for investors?
- A low EV/FCF may signal undervaluation and strong cash generation.
- A high EV/FCF might reflect weak recent cash flow or aggressive growth expectations.
- Best suited for stable, mature businesses with predictable free cash flows.
📘 Price-to-Book Ratio (P/B)
📈 What is it?
The P/B ratio compares a company’s market value to its book value — showing how much investors are paying for each dollar of net assets.
🧮 How is it calculated?
🏛️ Why is it important?
P/B is commonly used for asset-heavy industries like banks or industrials. It helps assess whether a stock is trading above or below its net asset value.
🧮 Calculation
🎯 What does this mean for investors?
- A P/B below 1 may signal undervaluation — or weak profitability.
- A P/B above 1 implies the market expects future value creation (e.g., brand, IP, growth).
- Best used for companies with tangible assets and strong balance sheets.
📘 Dividend per Share (DPS)
📈 What is it?
Dividend per Share shows how much cash a company pays out to shareholders for each share they own – usually on an annual or quarterly basis.
🧮 How is it calculated?
🏛️ Why is it important?
DPS is the absolute value of the payout per share – crucial for income-focused investors and dividend strategies.
🧮 Calculation
🎯 What does this mean for investors?
- A stable or growing DPS often signals a strong, shareholder-friendly business.
- DPS alone doesn’t tell you how attractive the payout is – the stock price also matters (→ see Dividend Yield).
- Long-term dividend growth is often a hallmark of high-quality companies – like the dividend aristocrats.
📘 Dividend Yield
📈 What is it?
Dividend yield shows how large a company’s dividend is in relation to its current share price.
🧮 How is it calculated?
🏛️ Why is it important?
It allows investors to compare dividend payouts across stocks, regardless of price or payout size.
🧮 Calculation
🎯 What does this mean for investors?
- A stable yield can reflect reliable distributions.
- Comparing 1Y and 5Y yield shows whether dividend growth keeps pace with stock price appreciation.
- A low yield isn’t always negative – it can signal strong past performance or growth focus.
📘 Dividend Growth
📈 What is it?
Dividend growth shows how much a company has increased its dividend per share over time.
🧮 How is it calculated?
5Y: Compound Annual Growth Rate (CAGR)
🏛️ Why is it important?
Consistently rising dividends are often a sign of financial strength and shareholder orientation – especially relevant for long-term investors.
🎯 What does this mean for investors?
- Stable dividend growth is a sign of sustainable earning power.
- High dividend growth can significantly boost your total return:
- If a company pays $1 in dividends and increases it by 15% annually over 5 years, you’ll receive $2 per share in year 5 – twice as much as at the start!
📘 Payout Ratio
📈 What is it?
The payout ratio shows what percentage of a company’s earnings (per share) is distributed to shareholders as dividends.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess whether the dividend is sustainable – especially in relation to the company’s profitability.
🧮 Calculation
🎯 What does this mean for investors?
- A low payout ratio means the company retains more earnings for reinvestment – typical for growth companies.
- A moderate payout (e.g. 25–50%) indicates a healthy balance between returns and reinvestment.
- High payout ratios may seem attractive but can carry risk if earnings decline.
📘 Consecutive Dividend Increases
📈 What is it?
This metric shows how many consecutive years a company has raised its dividend per share – without any cuts or pauses.
🧮 How is it calculated?
(Special dividends are not considered.)
🏛️ Why is it important?
A long track record of increases reflects financial strength, consistency, and shareholder commitment.
🎯 What does this mean for investors?
- A long dividend increase streak builds confidence – especially in volatile markets.
- Such companies are seen as reliable and income-friendly investments.
- The longer the streak, the stronger the company’s dividend discipline.
📘 Revenue
📈 What is it?
Revenue shows how much a company earns in total from selling its products and services – the gross income before any costs are deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Revenue is one of the key figures to assess a company’s size, market position, and growth potential.
🧮 Calculation
🎯 What does this mean for investors?
- Growing revenue indicates rising demand and can be an early signal of future earnings growth.
- Comparing actual and expected revenue reveals trends in the market environment and analyst sentiment.
- Note: Strong revenue alone isn’t enough – margins and profitability matter just as much.
📘 EBITDA
📈 What is it?
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It reflects a company’s operating profit before the effects of financing, taxes, and accounting depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
EBITDA is widely used to evaluate a company’s operating performance – especially across capital-intensive sectors or international comparisons.
🧮 Calculation
🎯 What does this mean for investors?
- A high or growing EBITDA indicates strong operational profitability – independent of taxes, interest, or accounting methods.
- It’s especially useful for comparing companies across sectors or geographies.
- Important: EBITDA is not a net income figure – it excludes key costs like depreciation and interest.
📘 EBIT
📈 What is it?
EBIT stands for “Earnings Before Interest and Taxes.” It reflects a company’s operating profit after depreciation, but before interest and tax expenses.
🧮 How is it calculated?
🏛️ Why is it important?
EBIT is a core profitability metric that shows how well the company performs in its main business operations – independent of capital structure and tax environment.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT indicates strong profitability from the company’s core business – before financial and tax effects.
- It allows better comparison between companies with different debt levels or tax structures.
- Compared to EBITDA, EBIT already accounts for depreciation and reflects capital intensity more clearly.
📘 Net Income
📈 What is it?
Net income is the company’s total profit – the amount left after all expenses, taxes, interest, and depreciation have been deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Net income is the most comprehensive measure of a company’s profitability – showing how much actual profit remains after all business and financing costs.
🧮 Calculation
🎯 What does this mean for investors?
- Growing net income indicates that the company is managing all of its costs efficiently.
- It directly influences valuation metrics like P/E ratio and the company’s dividend capacity.
- Over time, net income trends reveal how resilient and profitable the business model really is.
📘 Free Cash Flow (FCF)
📈 What is it?
Free Cash Flow shows how much actual cash remains after a company covers its operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
FCF reflects a company’s real financial strength – regardless of accounting profits. It shows how much flexibility a company has for dividends, share buybacks, or debt reduction.
🧮 Calculation
🎯 What does this mean for investors?
- High free cash flow means the company generates real, usable cash – independent of reported net income.
- It’s often the most reliable base for sustainable dividends and buybacks.
- Declining FCF can be an early warning sign – even when profits appear stable.
📘 Revenue Growth
📈 What is it?
Revenue growth shows how much a company’s sales have changed compared to the previous year – both on a trailing basis (TTM) and based on forward projections.
🧮 How is it calculated?
Forward = (Expected revenue ÷ Revenue in prior year − 1) × 100
Forward growth is based on analyst estimates for the current fiscal year.
🏛️ Why is it important?
Rising revenue signals growing demand, business expansion, and market share gains – especially important for growth-oriented companies.
🧮 Calculation
🎯 What does this mean for investors?
- Growth is the engine of long-term value creation – especially in tech and growth sectors.
- What matters is not just current growth, but its sustainability.
- Forward projections reflect whether analysts expect continued momentum – or a slowdown.
📘 EBITDA Growth
📈 What is it?
EBITDA growth shows how much a company’s operating profit (before interest, taxes, depreciation, and amortization) has increased or decreased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBITDA ÷ EBITDA from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
Growing EBITDA indicates improving operational profitability – regardless of financing or accounting effects.
🧮 Calculation
🎯 What does this mean for investors?
- Strong EBITDA growth signals operational efficiency and scalability – especially during growth phases.
- EBITDA growth can be an early indicator of margin and earnings expansion – but should be assessed alongside revenue and EBIT.
📘 EBIT Growth
📈 What is it?
EBIT growth shows how much a company’s operating profit (after depreciation, but before interest and taxes) has increased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBIT ÷ EBIT from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
EBIT growth is a direct indicator of a company’s business performance – taking into account capital intensity through depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- Rising EBIT signals improving operating profitability – even after accounting for depreciation.
- It’s especially important for evaluating companies with significant capital expenditures.
- Combined with revenue and EBITDA growth, EBIT growth provides a well-rounded view of operational progress.
📘 Net Income Growth
📈 What is it?
Net income growth shows how much a company’s bottom-line profit has increased or decreased compared to the previous year – both on a trailing basis (TTM) and based on analyst projections.
🧮 How is it calculated?
Forward = (Expected net income ÷ Net income from prior year − 1) × 100
The forward estimate reflects analysts’ expectations for the current fiscal year.
🏛️ Why is it important?
Net income is the ultimate measure of profitability. Growing net income signals stronger efficiency, cost control, and sustainable earnings power.
🧮 Calculation
🎯 What does this mean for investors?
- Stronger net income boosts valuation, dividend potential, and investor confidence.
- If profits stall while revenue grows, it may signal margin pressure.
📘 Free Cash Flow Growth
📈 What is it?
Free cash flow (FCF) growth shows how a company’s available cash – after covering operating expenses and capital expenditures – has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
Free cash flow reflects real financial strength. Growing FCF indicates more flexibility for dividends, share buybacks, and reinvestment.
🧮 Calculation
🎯 What does this mean for investors?
- Declining FCF may point to rising investments, increasing costs, or weaker operating performance.
- Especially for dividend investors, FCF growth is critical – since dividends are paid from actual available cash.
- A negative trend isn't always bad, but it deserves closer attention.
📘 Gross Margin
📈 What is it?
Gross margin shows how much of a company’s revenue remains after deducting the direct costs of goods sold (like materials and production). It represents the company’s “raw profit” before fixed costs, taxes, and interest.
🧮 How is it calculated?
Or simply: Gross Margin = Gross Profit ÷ Revenue × 100
🏛️ Why is it important?
Gross margin indicates how efficiently a company can produce or procure what it sells. It is a key measure of product-level profitability and pricing power.
🧮 Calculation
🎯 What does this mean for investors?
- A high gross margin suggests strong pricing power and efficient production.
- Falling margins may signal rising input costs or competitive pressure.
- Compared to peers, gross margin offers insights into the quality of a business model.
📘 EBITDA Margin
📈 What is it?
The EBITDA margin shows how much of a company’s revenue remains as operating profit before interest, taxes, depreciation, and amortization.It reflects operating efficiency without being distorted by financing or accounting factors.
🧮 How is it calculated?
🏛️ Why is it important?
The EBITDA margin reveals how much operating income a company generates per dollar of revenue – independent of capital structure and tax effects.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBITDA margin reflects strong core profitability – before accounting distortions.
- It allows for effective comparisons across companies and sectors.
- A stable or growing margin signals efficient cost control and business scalability.
📘 EBIT Margin
📈 What is it?
The EBIT margin shows what percentage of revenue remains as operating profit after depreciation but before interest and taxes.
🧮 How is it calculated?
🏛️ Why is it important?
The EBIT margin reflects a company’s core profitability while accounting for capital intensity (e.g. machinery, infrastructure). It’s especially useful for comparing businesses with different levels of depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT margin shows that the company remains efficient even after factoring in depreciation.
- It’s especially relevant for capital-intensive industries.
- Stable or rising EBIT margins over time are a strong indicator of pricing power and business quality.
📘 Net margin
📈 What is it?
Net margin shows how much of a company’s revenue remains as bottom-line profit after deducting all costs, interest, taxes, and depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
Net margin reflects a company’s overall efficiency – across operations, financing, and taxation. It shows how much actual profit is generated from each dollar of revenue.
🧮 Calculation
🎯 What does this mean for investors?
- A high net margin means the company is not only strong operationally but also manages financing and taxes efficiently.
- Peer comparisons reveal business quality and competitiveness.
- Declining margins despite revenue growth can be a red flag for rising costs or inefficiencies.
📘 Free cash flow margin
📈 What is it?
The free cash flow (FCF) margin shows how much of a company’s revenue remains as actual free cash after covering all operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
This margin reflects the true liquidity generated by the business – independent of accounting rules or depreciation. It’s especially relevant for dividends, buybacks, and reinvestment decisions.
🧮 Calculation
🎯 What does this mean for investors?
- A high FCF margin means a company consistently generates strong cash flow.
- It’s a positive signal for financial stability and shareholder returns.
- The long-term trend is key – a declining margin may indicate rising investments or weakening operating efficiency.
📘 Equity Ratio
📈 What is it?
The equity ratio indicates what portion of a company’s total assets is financed by shareholders’ equity – in other words, how much it relies on its own capital.
🧮 How is it calculated?
🏛️ Why is it important?
A high equity ratio reflects financial strength and stability, especially during downturns. It’s a key indicator of a company’s solvency and long-term risk profile.
🧮 Calculation
🎯 What does this mean for investors?
- Companies with high equity ratios are generally more resilient and less dependent on external debt.
- Low equity ratios can signal higher risk or aggressive financial strategies.
- Important: Always assess the equity ratio in combination with the return on equity (ROE). This shows not just how stable the company is – but also how efficiently it uses shareholder capital.
📘 Return on Equity (ROE)
📈 What is it?
Return on equity (ROE) shows how efficiently a company uses its shareholders’ equity to generate profit. In other words: how much net income is earned per dollar of equity.
🧮 How is it calculated?
🏛️ Why is it important?
ROE is a core profitability metric. It helps investors understand whether a company delivers attractive returns on the capital provided by its shareholders.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROE indicates that the company is using its capital efficiently and profitably.
- It’s especially meaningful for capital-intensive businesses or firms with high equity bases.
- Important: A very high ROE can also result from high debt levels – always interpret it alongside the equity ratio to assess financial health.
📘 Return on Capital Employed (ROCE)
📈 What is it?
ROCE measures how efficiently a company generates profits from its total capital – including both equity and interest-bearing debt.
🧮 How is it calculated?
It evaluates the return on all capital employed, regardless of how it’s financed.
🏛️ Why is it important?
ROCE is ideal for comparing companies with different financing structures. It shows how well management uses capital to create value for both shareholders and creditors.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROCE means the company uses its capital efficiently – regardless of whether it's funded by debt or equity.
- The higher the ROCE compared to peers, the more value the company creates with its invested capital.
- Especially relevant for capital-intensive sectors like industrials, energy, or infrastructure.
📘 Return on Invested Capital (ROIC)
📈 What is it?
ROIC measures how efficiently a company generates returns from the capital invested in its core operations – regardless of whether the capital comes from equity or debt.
🧮 How is it calculated?
- NOPAT = Net Operating Profit After Taxes
- Invested Capital = Operating assets minus non-interest-bearing liabilities
🏛️ Why is it important?
ROIC is one of the most accurate indicators of capital efficiency. Unlike return on equity, it is not distorted by leverage and shows how much value is created for all capital providers.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROIC shows how effectively a company uses the capital that is truly invested in its core operations.
- Unlike ROCE, ROIC focuses only on the capital that is actively used to run the business – and that requires a return (i.e. interest-bearing).
- Especially useful when comparing companies with large amounts of excess cash or non-interest-bearing liabilities – giving a more realistic picture of capital efficiency.
📘 Leverage Ratio (Debt-to-Equity)
📈 What is it?
The leverage ratio indicates how much a company relies on interest-bearing debt (such as loans and bonds) relative to its shareholders’ equity.
🧮 How is it calculated?
🏛️ Why is it important?
This ratio helps assess a company’s financial structure and risk profile. High leverage can enhance returns – but also increases exposure to interest rate changes and financial stress.
🧮 Calculation
🎯 What does this mean for investors?
- A low leverage ratio signals financial strength and independence.
- A higher ratio can improve returns in good times but increases risk during downturns or rising interest rate periods.
- 👉 Always interpret in the context of industry, capital intensity, and interest rate environment.
📘 Earnings per share (EPS)
📈 What is it?
Earnings per Share (EPS) shows how much profit is attributable to a single share – and is one of the most important metrics for evaluating a company's performance.
🧮 How is it calculated?
The diluted share count reflects potential new shares that could be issued through options, convertible bonds, or other rights.
🏛️ Why is it important?
EPS is the basis for many key valuation metrics like P/E ratio, PEG ratio, or payout ratio. It enables comparisons of profitability across companies, regardless of their size.
🧮 Calculation
🎯 What does this mean for investors?
- EPS captures per-share profitability and is especially useful for comparisons over time or with analyst estimates.
- Rising EPS may signal consistent growth or share buybacks.
- Important: Always use diluted EPS for more realistic valuations – especially in companies with stock-based compensation.
📘 Free cash flow per share (FCF per share)
📈 What is it?
Free Cash Flow per Share shows how much free cash flow a company generates per outstanding share – after investments, but before dividends or debt repayments.
🧮 How is it calculated?
Free cash flow is calculated as operating cash flow minus capital expenditures (CapEx).
🏛️ Why is it important?
FCF per Share reveals how much real cash is available per share – useful for dividends, buybacks, or reducing debt. Unlike net income, free cash flow is harder to manipulate and often seen as a more reliable metric.
🧮 Calculation
🎯 What does this mean for investors?
- High FCF per share signals strong financial flexibility.
- It shows how much capital the company can effectively reinvest or return to shareholders.
- Particularly relevant for dividend payers and capital-efficient businesses.
📘 Short interest
📈 What is it?
Short interest indicates how many shares of a company are currently sold short – that is, borrowed and sold by investors who expect the price to decline.
🧮 How is it calculated?
It reflects the percentage of a company’s shares that are being shorted relative to the total shares available.
🏛️ Why is it important?
Short interest serves as a sentiment indicator: A high value may signal skepticism or bearish expectations – but also increases the potential for a short squeeze if prices rise unexpectedly.
🧮 Calculation
🎯 What does this mean for investors?
- Low short interest usually indicates market confidence in the company.
- High short interest can be a warning sign – or an opportunity if sentiment shifts.
- Especially relevant in volatile markets or ahead of key earnings releases.
📘 Employees
📈 What is it?
The employee count shows how many people a company employs worldwide – offering insights into its size, structure, and business model.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess operational scale, labor intensity, and cost structure. Combined with revenue and profit, it enables key metrics like revenue per employee or productivity.
🧮 Calculation
🎯 What does this mean for investors?
- A high headcount can signal operational complexity – but also significant growth capacity.
- Revenue per employee is a key indicator of efficiency.
- Especially useful for comparing tech, industrial, or service-heavy companies.
📘 Turnover per employee
📈 What is it?
Revenue per employee indicates how much revenue a company generates on average per employee – a key measure of efficiency and productivity.
🧮 How is it calculated?
The employee count is typically taken from the most recent annual report.
🏛️ Why is it important?
This metric helps compare business models – especially between labor-intensive and technology-driven companies. A high value suggests automation, operational efficiency, or strong value creation per head.
🧮 Calculation
🎯 What does this mean for investors?
- A high revenue per employee indicates a scalable and margin-strong business model.
- A low figure may reflect labor-intensive operations or lower value-add.
- Especially helpful when comparing tech companies to industrial or service sectors.
Brinker International, Inc. Stock Analysis
Analyst Opinions
27 Analysts have issued a Brinker International, Inc. forecast:
Analyst Opinions
27 Analysts have issued a Brinker International, Inc. forecast:
Brinker International, Inc. Events
Past Events
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SEP
17
Analyst/Investor Day - Brinker International, Inc.
one day ago
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AUG
12
Q4 2026 Earnings Call
about one month ago
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APR
29
Q3 2026 Earnings Call
5 months ago
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Brinker International, Inc. — Analyst/Investor Day - Brinker International, Inc.
1. Management Discussion
Hello. Good morning, everyone, and welcome to the 2026 Brinker International Investor Day meeting. My name is Kim Sanders, and I am the VP of Investor Relations. First of all, I want to thank everyone that traveled here to Dallas today to be here live at our restaurant support center. And then I'd also like to extend a warm welcome to everyone that is joining us online. So a couple of housekeeping items before we get started. First of all, we will have a couple of breaks today, but please feel free if you need to, to get up, have a bathroom break. The bathrooms are just right outside this room.
And then the next thing I want to do is tell you about the great day that we have planned today. It's going to be a wonderful day. First of all, we're going to have our senior leadership team walk you through our long-term corporate strategy initiatives and outlook. And then we'll have plenty of time for Q&A. And then those of you who are here in Dallas are going to give the opportunity to join us for lunch downstairs in the demo dining and the test kitchen, and we're going to try some delicious Chili's food that you're going to hear about in just a little bit. Before we head over to our Tarrant Parkway Chili's, where you're going to be able to see some of the reimage elements and throughput initiatives come to life.
Next, I'd like to introduce you to our executive leadership team here at Brinker. Our presenters for the day are Kevin Hochman, President and Chief Executive Officer; George Felix, our Executive Vice President and Chief Marketing Officer; we have Aaron White, our Executive President and Chief Operating and People Officer; and Mike Ware, our Executive Vice President and Chief Financial Officer. Now I also want to introduce you to the rest of our executive leadership team. who you will get the opportunity to interact with today.
So first, we have James Butler, who's our Chief Supply Chain and Corporate Strategy Officer; Chris Caldwell, our Chief Information Officer; we've got Doug Cummings, Chief Operating Officer for Chili's, Dan Fuller, our Chief Legal Officer; Jeremy Linker, our SVP of Brand Finance and then also Laura White, our SVP of Peopleworks. So you guys know before we get started, it is my job also to remind you of our safe harbor statement.
Now Luckily, Dan is not going to make me read this entire thing on the screen you can take that for yourself. But I will remind you that during these presentations and in response to your questions, certain items may be discussed, which are not based entirely on historical facts. Any such items should considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 amended. So now that we've got that business out of the way, we're going to go ahead and get started.
I'd like to welcome to the stage, Kevin Hochman.
Thank you, Kim. I am so excited that you're all here and those online to hear about our next chapter of growth. Just a little bit about myself. So I've been with our company about 4.5 years. I started my career in 1995 with Procter & Gamble. It's a consumer products firm, where you learn a lot about brand building and you learn a lot about leadership. And then I had the fortune after 18 years there. I had the fortunate opportunity to join Yum! Brands, where I spent 8 years in a variety of marketing and President roles where you learn how to run a large multiunit restaurant concept, and you learn from some of the most amazing restaurant leaders in our industry.
And then fortunately for me, the Board chose me to run this company in June 2022 and I got to tell you, this has been the -- my career hallmark. This is an amazing comp with amazing culture, amazing people, world-class brands, and it's been a whole lot of fun getting back to winning again with Chili's. It feels like a lot of the old timers tell us it feels like when we were growing exponentially when we were a start-up brand, but it feels like that today.
We're now in year 5 of our invest-to-grow strategy, and we've had great results, but more importantly, we are a completely different company than we were the last time we were here at Investor Day 3.5 years ago. We have a clear track record of winning now. We have a strong differentiated foundation and capabilities built that I would argue is very difficult for our competitors to challenge. And we have clear growth drivers to sustain growth over time ahead.
Now I know there's a lot of questions in this room and online and in the investment community of how have they been able to have these remarkable results -- there's probably even more questions about how are they going to continue to sustain these remarkable results. And I hope that you leave here today with a clear understanding on both questions. How have we been able to deliver such remarkable results that people thought not possible? And what are the drivers of sustained growth? And what are the initiatives that we have put in place that will continue to sustain growth for many, many years to come.
And then lastly, I hope you leave with an understanding after Michael takes you through our long-term targets with the same confidence that our leadership team has of being able to meet or exceed those targets over time. So let's get speed. I missed the welcome slide. There you go. So -- this is a slide about basically telling you an overview of our company. There are 2 things that are important to know about this slide. Number one, Chili's is 93% of sales and it's 97% of profit, right?
And the second important thing is within Chili's, we make most of our sales and our money on equity-owned restaurants in the United States. So we're going to spend the bulk of our time today talking about equity restaurants in the United States, okay? We'll touch on some of the other things a little bit, but the majority of sales and profits come from those restaurants, and that's what we're going to focus on.
Now we've made incredible progress since our last Investor Day, which was in June of '23. There's 2 things I think are important on this slide to note. One is -- our success has been driven by driving same-store sales and driving Chili's AUVs. So in the last 3 years, in this snapshot, we went from a little over $3 million AUVs to $5 million, and that is driven both the top line and the bottom line, you can see the restaurant operating margin improving by 660 basis points. Part of that is simplification. A bigger part of that is driving AUVs.
So, we're able to drive the top line through traffic and getting guests to repeat, right? But the bottom line is also spinning a lot faster because it's AUV driven versus some other way driven, right? And that's why you can see EPS is almost triple over that time, okay? The other thing I think is important to note about when we look back at our results is every quarter and every year, what's the #1 question our management team gets. How are you possibly going to come up the comp, right? Oh, you did a plus , you did a plus 20, you did a plus 12. How are you going to comp the comp, right? And we're going to go deep on that today.
You're going to have a real understanding of how we're able to sustain traffic. The key thing on this slide that you're looking at is it's a pretty straight slope life up into the right, right? Our cumulative growth rates are pretty consistent. And I think when we give you a look under the hood, it's going to be really clear why we've been able to sustain traffic and that will be the foundation for our initiatives going forward to sustain growth. Now here's the thing I get excited about as an investor company, so I'm going to own a lot of stock. This is a very unique restaurant company to be investing in.
And there's -- because we have all of the strengths of a very successful legacy brand now, but we have a lot of the upside of the new brands that you cover that you're so excited about. So established brand strength. We are a legacy brand -- we have broad awareness. That's the #1 challenge in chain restaurants nationwide. Do you have a broad awareness. Everybody knows Chili's, right? We have a clear brand positioning. People know us for certain things. So we stand out, [indiscernible] -- right? And then lastly, we have incredibly strong 4-wall economics and AUVs now. That gives us a lot of opportunities to do some things differently.
But we also have new brand upside -- and there's 2 things to think about this. Number one, and you'll feel this in the building here today, you'll see this from our presenters. There is new energy in this business. We have fresh thinking. We have a growth mindset culture and that is something you typically see with upstart brands that you don't see with legacy brands. And second thing is we have a whole generation of guests that have not been introduced to Chili's, right? Everybody is like, how many more new guests can you bring in? The answer is a whole lot more new guests. And you're going to see that in the data when we provide. So this is a very unique investment proposition that you typically don't see in restaurants.
So let's get started with the agenda. We're going to start with what we've been able to accomplish in the last few years. You have an understanding of the foundation of this new -- the strategy has been built on. So I was on this stage about 3.5 years ago. This is a slide that we used. We talked about this was based on our turnaround strategy, right? And we talked about what are the things that we're going to do in order to transform this business, right? And I'm not going to touch on all of them, but I will give you a couple of examples, the ones that touch the 4 walls. So you've understanding a recap of what we've been able to do in the last 4 years. number one, menu, we talked about the need to simplify.
We simply had too many things for the amount of labor that we could afford. And we cut about 30% of SKUs now, right? why don't restaurant companies not cut SKUs you lose sales, right? That's all behind us now. And we've been able to grow sales while we cut SKUs, right? The second is operations. So in addition to additional simplification besides getting rid of menu items, right? So we got rid of a lot of process, a lot of administration, a lot of prep depths. We also added $180 million of incremental labor hours to the model, right? So what happens when you have more people with less things to do, a whole lot better execution.
And then on atmosphere, it was all about defense back then. We had restaurants with leaky roofs. We had plumbing issues. We had woodrock over $100 million, getting our restaurants back in shape, and I'm proud to say our restaurant estate has never been in better condition. And then lastly, we restored our advertising budgets, right? We added over $100 million of going advertising that is now in the going financials. So when you see all that ROM growth, it includes all these investments, right? -- all the things that you would worry about in a turnaround, those investments are behind us.
We'll still have an investor growth strategy, but the bulk of those investments that everybody gets nervous because they're risky, they're behind us, and they've worked. And we now have a very sustainable growth business. So what have those investments done to our brand attributes. So what you're looking at here is our key competitive set. This is carcinoCrest data. And the first column is the Chili's rank on these key branded treatments that are associated with long-term sales growth -- what we ranked out of 6 brands and then what has changed in the last 3 years.
And you can see on our last Investor Day, the results were very good, right? We were at the bottom or near the bottom of almost every brand attribute of why you would go to actual dining restaurant. I'm proud to say we've made incredible improvement on all these metrics, right? So that's a good thing. We're like #1 in value now. We're #2 in overall experience, right? But the good news is there's still a lot more upside to improve. Everybody ask me like how much more can you do to improve the experience. The answer is a whole lot more. And the consumer is telling us that, right, which is all just upside for comp in the business.
So, what is the improvement in those brand attributes done for our actual business. And you can see, as we've improved those brand attributes, versus our competitive set, we are capturing share in droves, right? So look at our 3-year traffic versus CDR, that growth. And then you look at year after year, quarter after quarter, we continue to expand our gap versus the industry and you guys know this in the restaurants that you cover. There's a few really well-positioned brands that operate really well and year after they steal share, right? That's exactly where we are now.
We're in a really good place based on the improvements that we've made in the business. and the way the consumer looks at our business, which gets to the money slide for today that you're going to see many, many times with all of the presenters, which is our flywheel for delivering sustainable profitable growth. It starts with great brand positioning and great marketing that drives traffic and demand creation. And George will come up and give you details on that. Once we get those guests in, the operations, our best-in-class operations, are bringing guests back. I'll take you through some data on that and so will George and Aaron.
When we have new guests coming in and they stay and they become sustainable growth, that drives more sustainable profitability and drive more cash flow with more cash flow, we're able to both invest in the business and return cash to shareholders. And when you invest in the business, what happens, traffic and the flywheel continues, right? So that is the key on how we're going to have enough cash to continue to invest in the business, grow comps, but add this new layer of growth that we'll talk about with new restaurant openings and reimages.
All right. So let's take a moment and talk about the drivers of our sustained growth, both now and going forward. So it starts with great marketing that we talked about. We want to have value across the menu, so no matter where you shop the menu, whether it's 3 for me or anyone on the menu, we want to make sure you have abundant terrific value. We need to continue to improve experience and throughput and productivity because that experience is how we sustain traffic over time.
And then lastly, we have a new layer of growth that we haven't talked about before, which is reimages and new units, which are going to be large investments to create a more sustainable additional growth layer in the business that we have not had before. So let's start with the marketing. So George is going to come up and talk to you all about this. This is all about having a relevant, easy, and distinctive brand with world-class marketing to drive sales overnight and brand over time, right? And the brand over time is really the important long term because think about how you go out to eat, you start with center of the plate for you and the group that you're going with, like what are we in the mood for, right?
As soon as you pick what you're in the mood for then you start thinking about what are a few brands that I would actually consider to go for that, whether it's margaritas or burgers or Chinese or whatever it is, right? If we are not in the consideration set, of those few concepts, what are the odds that they are ever going to come to Chili's 0, right? So the key thing is not just about being butts and chairs and traffic in the current quarter but it's also continuing to differentiate our brand over time so that we are in the consideration set more often, and that's exactly what's happening in our business.
So this is data -- the chart on the left that you're seeing shows this idea of top of mind awareness. So remember, we talked about you need to be top of mind where in order to be in the consideration set. You can see Chili's is going up into the right. Every quarter, we continue to see growth and top of mind awareness. In other words, when you think of any restaurant in, do I think about Chili's and the answer is yes. So the advertising and the marketing is working for top of mind awareness.
And then when they get to the restaurant, what does their experience look like -- and the good news is this kind of a you got is on the left are kind of crests on the right. We are continuing to improve the experience in the minds of the guest, and now we're exceeding CDR. And then this is the slide that I really want you guys to be across because I get questions all the time, how are you going to be able to comp the comp. This is the slide. So the gold bars -- this is based on our tokenized credit card data.
In other words, anybody that brings a credit card in, we have a token. So we can tell if you're new or you're an existing guests that we've seen before, those gold bars are new tokens that we see every month, right? They're anywhere from $3 million to $3.5 million, maybe a little higher, but it's pretty consistent. That represents about 60% of the tokens that we see are new. So there's a lot of new guests that are coming to the business. The chart below it is the average frequency of August.
So you would think in most concepts, when you see a large influx of new guests, whether it's for like a cartoon meal LTO or 1 of these short-term things, you typically see those people come once and then they leave and your frequency dilutes, right? What you're seeing in our business that frequency is staying that flat line, right? So every month, we bring new guests in -- and within 9 to 12 months, when we track their behaviors, they look a lot like existing guests.
So when folks are like, how are you able to comp that 20% or 30% -- this is the answer because we're not just bringing guests in for that current quarter that we all know those results, but we're setting ourselves up for repeat guests over time. The second driver of our growth is going to be delivering superior everyday value. And I get asked a lot about how much more menu can you actually renovate? And the answer is quite a bit. So we've got about 60% of our menu renovated. We have 40% left. George is going to take you through the innovation and the specific plan on how we're going to renovate the balance of it. But that is a key piece.
We want to make sure no matter where you shop the menu, you get abundant, delicious tasting food and we have some opportunities and we're going to show you -- and you're going to be able to take some of that for those that are in the room. The second piece of our value strategy is what we call everyday low price or EDLP you cover retail, probably know what this is. But there are 3 components to our EDLP strategy of why it's been so successful. Number 1 is everyday price certainty, which means I don't need a coupon. I don't need to come in for happy hour. I don't need to come in for early bird, right? I don't need an app with a special offer.
I can come in at any time to any Chili's anywhere in the country and I have price certainty on what -- if I only want to pay $10.99 for a meal or $6 for a modern Rita, I know I can get that. I know it's going to be high quality. And that shows up as $3 to $4 less on a per person average than our competitors in CDR, okay? So that's kind of number one. Number 2 is you get more for the money. So at a time when customers are thinking about, a, shrinkflation or they took service away from me, I now have to do this myself, right? Or the prices are too high and things are too small we're going the exact opposite.
We're trying to figure out how do we continue to deliver more for the guest, whether it's better ingredients, whether it's bigger portions right, whether it's better service, how do we give the guests more while we have a price value advantage. And then the last thing is I get asked a lot of how can you guys possibly make money with these price points. And the good news is casual dining is probably the only retail concept or a trade channel that actually has all walks of life coming to it across America.
You look at American demographics and you look at Chili's and CDR demographics, they look a lot of like, right? So the key for us is to make sure that we're meeting all those customers' needs. Not every customer wants a $6 margarita with good tequila. Some customers want the most premium tequila. Some customer wants stakes or rigs, right? So as long as we're meeting all our consumers' needs, we're able to make the margins work.
And you've seen that with our margin expansion as we've grown traffic. We are growing the business in the appropriate way by growing traffic over time with all demographics. What gets us to our next point, which is a next growth driver, which is we also are going to continue to expand margins as we grow this business. That's another 1 we get asked a lot is about the ceiling of your margins. How can you possibly get more growth than 660 basis points. Well, here's the neat thing. The majority of our margin expansion has not been through cost cutting.
There's obviously been some of that with the simplification that gets rid of food waste, that makes it easier to prep things, right? But the main driver of our margin expansion has been AUVs. So we have these north of 6 restaurants. We talked about this before. These are restaurants that do over $6 million or more, right? Our average now is $5 million. When we started talking about North of $6, we were only at $4 million, right? We study those restaurants to understand what can we do to speed up the operation, right?
These are not super Chili's, they're just regular Chili's that happen to do a whole lot more volume. And what we find is their margin -- their restaurant operating margin is 400 basis points better than the system, right? So as we continue to graduate lower volume and average volume restaurants to high volume, margins will continue to expand because only 20% of our state are north of $6, and every month, new restaurants enter that category, right? So we have tons of upside on margin based on AUV growth.
So then into becomes -- how are you going to speed up the box, right? And Aaron White, our COO, is going to come up and explain all the initiatives that we have to get throughput going, right? So this is a snapshot of what we're working on her team literally looked at every bottleneck in the restaurant and said, "Rick, what can we speed up? What is the friction in the restaurant? Where can we move faster? Where can we apply technology that's going to make it easier to serve more guests, right?
The other thing that we're doing is we're learning from the North as 6 restaurants and 1 of the things that they do that are not technology related, but are people related that we can apply to these restaurants. And so Aaron is going to take you through all the initiatives on that. The one thing I want to walk you through that those in the room that are coming to the restaurants will be able to see firsthand is we have a toll tech platform that is solely in support of speeding up the box, right?
And there's 2 things to know about this before you go see it in action in the restaurants. Number one, it's really important to have a strong foundation on tech, so strong WiFi, strong support system. We recently insured all of our restaurant tech support. So it's easier to get an answer faster in the heat of battle. We have redundant tech like edge computing that we're working on to keep things going. We have offline mode on our pay at the table to keep things going, right? So that's a really important thing.
A lot of people don't talk about is keeping the box moving even when tech doesn't necessarily work all the time, right? The second piece of this is additional layers to speed up the operation, right? So for example, for those of you that are going to be in the restaurant, we're rolling this out right now in restaurants today across the system. It's a mushroom rollout. I think it's in 40 or 50 now. We have a whole new team member handheld ordering system that makes the whole lot faster to get orders to the kitchen and reduces accuracy issues, right? That's an example of improving the tech.
Another one on this one is we are working on a longer term insti-year plan on a new AI-enabled back office system. So you think about a lot of the messy jobs that a manager has to do it that takes up their time, a lot of multivariant decision-making, it's inventory, it's ordering, it's labor scheduling. We are going to have a new back office system that's going to help them automate a lot of that, right? We've already do this with sales forecasting with AI incredibly successful, Imagine being able to do that with more of the tasks that the manager has to do, which frees up management to see with our guests and their teams.
And then the fourth growth driver is new units. Mike is going to go up and tell you all about the program that we've built the capability that we've built, the investments that we've made to get to a reliable, sustainable 2% to 3% in the next few years, right? That is a completely new lever that we've never had and I'm so confident in what we're doing in this, and I can't wait for her to share with you the details. We have so much white space opportunity.
And I don't want to spend dealer thunder, but I'll give you 1 example we were looking at the other day, in Ohio, giant state, lots of restaurants there, right? You look at our 2 competitors, which have much lower market share than us. You add up their boxes, they have 4x the number of restaurants that we do in Ohio. And of course, Chile translates in Ohio, right? That's 1 example. She's going to take you through all across America in addition to how we're going to go after those opportunities.
All right. So, next section I'm going to talk to you about is our plan for Maggiano's, I know that is a we just need to level set. It's about 3% of profitability. It's now smaller than Chili's International. But because it's so important to a lot of our investors thinking, we wanted to make sure that we touched on it and shared a plan with you. So there's really 3 things that we're working on. The North Star in Maggiano's is really clear. when they were at their best and growing, it is a brand that delivers a time American scratch favorites and they don't change and they're served in a bunch of portions, fund friendly atmosphere, the way none would treat you.
And so we need to get back to it on value. So we've recently added 20% more portions -- 20% more portions to all of our pasta dishes that's all baked into the current guidance that you have. We've also recently expanded family style to be back to all you can eat. So the guests can ask for more whenever they want more, and we've expanded the options on that. So we feel like that is we've done a really good job of making sure we got back to abundant portions that drive a lot of value.
The second is the one that's the biggest work in progress, so it's improving pace and service. So we need to see it faster. So host standing is a big bottleneck right now and turning tables as a big bottleneck, but they were also finding that some of the dishes are complex based on the way the kitchen is aligned. We don't have as quite efficient as Chili's. So there's a bunch of work we can do both on the back of the Heart House as well as bringing Chili's technology to the Maggiano's kitchens to speed up serve.
And the last one is upgrade the atmosphere, which I think is behind us now. We've got all the R&M out of the way, and most of the restaurants are reimaged. We feel very good about the image of the estate. It's really about improving that pace in service a now. So if you think about the year 1 of the Chili's turnaround, everybody is really nervous about the traffic now happening at Maggiano's. No, we're not CSL in the financials. -- in the traffic, but we are seeing it in some of the internals, which is a good sign in year 1 of this turnaround. So guest metrics are improving, intend to return, you can see there. Our value scores have been restored and our turnover is starting to decrease with the simplicity that we're putting in the restaurants. So obviously, not where we want to be, but certainly green shoots that give us confidence that this turnaround is going to continue.
Okay. The last thing I want to touch on is what's going to be different in the next chapter. I get asked this a lot, both from a lot of you guys as well as our Board. And a lot is going to be the same and with some new initiatives to continue to drive food service and atmosphere, but we've got a couple of things. We've got some external tailwinds that are going to be different. And then we've got some things that we're doing differently that is going to be different. So tailwinds. Number one, the third place is back, right? Think about the summer that movie theaters are having right now with traffic, right? Think about what's happening with mall.
Mall traffic is back, right? What's happening with CR in the last 2 years, outpacing QSR, right? People want a third place they want an affordable, easy way to get together, and that's going to be a continued tailwind for Chili's. Secondly, you guys cover this. The strong continue to get stronger in restaurants, great brand positioning, great operations, means we're going to continue to capture market share.
And then lastly, we have a value sweet sat in casual dining, right? Like right now, for the first time in a long time, people think casual dining as good a value as QSR. And then lastly, what will be different in the next chapter. We're going to continue to focus on throughput instead of just stabilizing the business. We're going to have this additional growth layer of new restaurants. We've got this another additional growth layer of reimaging. We're going to be spending over $60 million a year in capital and reimages that's going to deliver a return that Mike is going to talk about.
And then lastly, our capital allocation will shift from paying down debt and restoring the business to actually continue to invest in the business, building new restaurants, reimaging grounds and returning amples of cash to shareholders. So 3 takeaways for today that I want you to leave number one, it's a different business with a stronger Core -- number two, we have the drivers in place for sustained growth, and you're going to see that in detail from the leadership team members that come up and talk to you.
And then three, we have this new incremental growth layer that we haven't had before on new restaurants and reimages. So I hope that makes sense. And now I'm going to turn it over to George, and he is going to take you through brand positioning and marketing.
All right. Hi, everyone. Welcome to Chili's. I'm George Felix. I'm the Chief Marketing Officer at Brinker. I've been here for a little over 4 years. I've had a 17-year career in marketing that's been known for turning around legacy brands, brands like Old Spice, KFC, Pizza Hut and Chile's. Super excited to share everything going on in the world of Chili's marketing with you, today. So first up, we're going to be talking about what it means to be a red brand. So everything starts with the flywheel. Kevin already shared this with you one. But that starts with us, a well-positioned brand that is driving traffic into our restaurants. Once the traffic is there, we turn it up to our world-class operators, they deliver an amazing experience that keeps our guests coming back. But what does it really mean to be a red brand? To be a relevant brand, you want to be a relevant brand to your guests. You have to be a relevant brand within the categories that you play. And then you also have to be a relevant brand and culture.
For an easy brand, that's something that Aaron and Mike are going to talk more about, but it really boils down to being a brand that's easy to find and easy to transact with. And then finally, being a distinctive brand is critical for any brand in advertising, but particularly in the food industry, where so much marketing kind of blends together. So anything we do is to be unmistakably Chili's. So let's dive a little bit deeper into how we've made Chili's relevant again. It all starts with a very clear North Star in brand positioning.
Now Chili's brand purpose is something that just the marketing team focuses on. It's something that we use as an entire organization as a filter to make decisions. At Chili's, our purpose is to make everyone feel special through a fun atmosphere delicious food and drinks with Chile head hospitality. I hope you guys are feeling some Chile had hospitality today and throughout the rest of the day.
Next up, it's about cultural relevance. We need to put Chili's back in the cultural conversation. We do that through a steady cadence of what we call culture pops that are meant to drive buzz and keep Chili's top of mind. The last piece is our advertising campaign. The better than fast food campaign is in year 3, and there's no signs of long down, this was born on the insight that consumers were fed up and tired with the rising cost of fast food. Over the last few years, we've steadily increased our media investment, so we now have broad reach to consumers across the country.
So you put all that together and you have a marketing team that's firing on all cylinders. So why don't we take a look at how we've done that over the last 3 years.
[Presentation]
All right. So we've been pretty busy. We've been pretty busy over the last 3 years. But like the video said, we do feel like we are just getting started -- the strategy is working and no matter what metric you look at, whether it's value, awareness, sales and traffic, the strategy is definitely working. So let's dive a little bit deeper into value perception. So what you're looking at here is YouGov data, and this is value perception scores amongst a general population of adults 18 to 49 and you'll see this is Chili's along with other casual dine national advertisers as well as a few fast-growing fast casual competitors that we wanted to just also benchmark against.
And what you see here is that over the last 3 years, our value perception has increased by 50%, so we are now the leader amongst this competitive set with the general population. What's more interesting, though, is when you change this to look at value perception amongst consumers who have seen a brand advertising in the past 2 weeks, the trends are similar. We've seen a big increase in the last 3 years. And again, we are the leader in this competitive set.
But you can see that the increase in value perception is much bigger and the gap between us and competition is much wider. This tells me that the better than fast food campaign is really resonating. And when people see our campaign, it is making them think differently about the value that we offer Chili's. So what gives us confidence that we still have room to go. Well, when you think about ad awareness and the way to think about ad awareness is that is basically asking consumers, have you seen our brand advertising in the past 2 weeks? Our ad awareness has grown over the last 3 years by about 40%, which you would expect when you increase your media spend.
But we are still trailing the largest spenders in our category. And so that tells me there is still probably large pieces of the population that have not seen or been exposed to the better than fast food campaign. And if you look at the last chart, you know that once we do get people to see that, it does change the way that they think about Chili's. And so we think there's still a lot of runway to go on this campaign. So how do these metrics translate to sales? So what you're looking at here is our 5 Drive categories.
On the right side of the slide, is each of our 5 to drive. And we call 5 to drive, those are the categories we want to be known for. We have positioned ourselves. We want to be known for the triple dipper burgers, chicken crispers, fajitas, and margaritas. So you can see the sales growth in the last 3 years by each category individually on the right. On the left, we've taken all 5 and combine them. And you can see that the 5 to drive categories in the last 3 years have nearly doubled in sales with the standout, obviously, being the triple dipper, which is up almost 300%. So what we have is a proven marketing model.
And the next phase is about doubling down on it. We're going to give guests more reasons to visit. We're going to be more relevant in culture, and we're going to bring more guests into Chili's. So now let's talk about what those levers of future sales and traffic growth are. The first one is industry-leading traffic or industry-leading value. Now I get this question a lot. I know Kevin and Mike I get this question a lot. What will happen if you guys get undercut on the 3 for me at $10.99, what do people bring in lower price points? Well, will that slow your growth down? Will that change the way people think about your brand I have great news for you.
We already know the answer because literally, every single brand across fast food, fast casual, and casual dine have done this. You see $1, $3, $5, $9.99 and casual dine. It hasn't slowed Chili's down. And the reason is that at Chili's, we believe that true value is more than a price point. It's the holistic experience of what you get macro economy, there's the global economy. In times like this, consumers are looking for places they can trust and that they can rely on.
And Chili's makes 3 promises to our guests every single day. The first is everyday price certainty. Kevin talked about EDLP. 63 days a year at Chili's, you can find our entry value price points, no strings attached. There's no app you have to dig through on the offer. You don't have to come on a certain day. You don't have to come between certain hours from open to close every day we're open. You can get a $6 Margarita or a 3 for me at 10. Our craveable food is also served an abundant portion -- if you look at the burgers that we serve on our 1099, they are nearly 0.5 pound burgers -- and if you are the what you're getting to drive through, it really puts fast-through to shame.
And there's no question on why Chili's value perception is so high when you see it. Finally, it's about a fun, consistent, reliable experience and a fun atmosphere. When we talk about Chile had hospitality, that's a smiling face greeting you at the front door, opening the door for you. That's our amazing servers taking care of you from the minute you sit down to the minute you leave, all done in a fun and vibrant atmosphere. That is Chile head of hospitality. You'll never see our team members point you to a kiosk. Have you put an order in on a screen or talk to an AI drive-through that doesn't understand what you're saying. We have true Chile ad hospitality, and that comes from our amazing team members.
So, now looking at how do we think about elevating all the different parts of our menu. We have a playbook that we've run now over and over again on about 60% of our menu when we want to elevate different parts of the menu. The first step is elevating the offering. So if we look at a category that we want to elevate, we look at all aspects of it to see how can we make that better so that we can give a better experience to our guests and better value to the guests. Once we figure that out, we then turn it over to the creative team to figure out how we're going to bring that to life.
Sometimes that takes the form of like burgers and chicken sandwiches, they take the form of a big TV advertising campaign on the 3 for me. Other times, it could be a culture pop where we talk about the margarine in the month. Or other times, it could be just in the restaurant with our menu and merchandising with things like ribs and fajitas. When we do those first 2 things well, we know we drive sales and traffic, and we create larger categories that are more profitable.
So now let's talk about how we do this both beverage and food. On the beverage side, you know at Chili's, it's all about margaritas, right? We are the #1 seller of margaritas in the United States. We sold 30 million margaritas in 2025. Now in order to do that, you got to meet the needs of all margarita drinkers, and we were doing that pretty well on the value side with our $6 margarita in the month -- and we're doing it really well on the high end for those guests looking for a premium tequila like our Don Julio margarita, which retails for about $12.
But our insights team uncovered a gap in the middle. They surveyed Chili's Margarita drinkers, and we found that over half of them actually prefer a frozen Margarita. And if you looked at our menus about it a little over a year ago, you would have found about 12 rock margarita's on the menu and on frozen margarita -- so the innovation team set out to make the best frozen margarita in the industry, and they did just that when we unleashed the Petron Frozen Margarita line up about a year ago. It's been a huge hit, and it starts at $10. You're not going to find a better frozen margarita and you're definitely not going to find a better frozen margarita at that kind of value.
And now a year after the launch, proud to say that about 1 in 4 of margarias that are sold at Chili's are frozen Margaret. I talked a little bit about the margarita of the month program, which is on fire, and we've codified how to keep this thing fresh because we bring new Margarita in every single month. We have a stable of proven winners that our guests look forward to when we bring them back, which helps with alcohol attachment. We also like to innovate on trending flavors. So while that also helps with attachment of alcohol, it also helps us be a relevant brand. So we've had great success with items like the lemon drop or the PT Dream margarita, which were some of our biggest sellers last year.
And then a few times of the year, we're going to take a bigger swing to try and insert ourselves into the cultural conversation through the Margarita the month program. A great example of that is last November when we launched witches margaritas. There's 1 green 1 and 1 pink 1 that played really well with a very popular move that a retention at that time. It went crazy on social media, and we saw not only the largest month of margarita the month sales in our history, we saw a noticeable increase in traffic to our restaurants that month.
So, we know that the alcohol category has had some challenges in the last few years with fewer people opting into alcohol. Amidst that backdrop, Chili's has been one of the few brands that's actually been able to grow share in the alcohol space, all the way to the point where we are now the #1 alcohol share brand in the entire industry. So now let's look at how we're doing this on the food side. We have a great pipeline of items we're launching in F 27, stuff we're testing this year for launching in F28 and beyond. One thing we've got coming up later this fall is we're going to bring some new news to the big Crispy Chicken sandwich platform that we just launched in April.
We're going to take a page out of our own playbook with the triple Dipper, where a few years ago, we launched the Nashville Hot Fried Mozzarella on social media first before we brought it to the full menu. We're going to do the same thing in the fall where we bring some fun to the big crispy lineup on social media first with the fund's social media-led campaign. And then that innovation will find its way to the menu a little bit later this year.
Another place that we're going to be innovating is salads. Now salads play an important role on our menu because it satisfies the veto vote. Now the veto vote is a group of view are looking to go out to eat and there's someone in the group that is a salad leader and they say, "You know what, Chili's doesn't have the right salads for me. All of a sudden, we are now out of the consideration set for that group. So we want to elevate our salad offerings. So we're going to look at all aspects of salads.
We're going to look at the bulls that they're served in, the lettuce blend that we use, the variety of cells that we offer. And we're also going to make sure that as we upgrade proteins across our menu, you can mix and match across every salad. As I mentioned, every single part of the menu plays a distinct role in our growth story, chicken sandwiches, for instance, a mass appeal item that we can offer at a great entry price point. That makes it a perfect candidate for the 3 for me advertising campaign, which the role of that is driving traffic.
Kids menus on the other hand, is something we probably never advertised, but it still plays a very important role because it makes us relevant with young families. So parents are excited when they could serve their kids something like our chicken grillers, Kids are excited about our new ice cream floats. We can get Coca-Cola and Dr. Pepper paired with our brand-new Blue Bell ice cream. And then we updated the creative. -- the actual kids menu creative hadn't been updated in like over 10 years. And so it now reflects the modern brand that we are, and it gives kids great activities to have fun for their entire duration that they're at Chili's. So now we've elevated the categories, how do we bring them to life.
As I mentioned, the better than fast food campaign is in year 3 and this is all born out of the insight. We saw all of our social media that consumers across the country were absolutely fed up with the rising cost of fast food. They make videos, holding up reseats, saying, how did I spend this much money in the drive-through. And when you start to look at it, you start to see that the prices of fast food were actually comparable to the prices that we were charging at Chili's, but we have higher quality food, more abundant portions and a great experience. So the better than fast food campaign was born when we launched the big smasher back in half '24.
Same flavor profile is the Big Mac, but twice the beef business took off and it hasn't looked back. In F '25, we followed it up when we introduced our big QP, which was the answer to the quarter pounder with cheese, 85% more beef than the quarter pounder with cheese. And then finally, this last April, we launched our first foray into the chicken sandwich world with the big crispy. That is us saying Chili's is now a player in the chicken sandwich market and that we were telling America that they deserve better than tiny overpriced fast food chicken sandwiches. And the big crispy absolutely dwarfs anything you'll find in the drive-through.
So right now, the momentum and the results of the better than fast food campaign have been solid, and we think there's a lot of runway ahead. When you think about the biggest categories in QSR, we've already innovated in the top 1 in terms of burger, and we've just launched into chicken sandwiches. So we think we've got more on way to go there. But you're probably thinking, where does the better than fast food campaign go from here? Well, if we can replicate the results that we've had in the first 2 categories, I think we've got a lot of great options.
Burgers, for instance, already a huge category for us was a $400 million category has grown 50% since we started this campaign and is now over a $600 million category for us. Chicken sandwiches. We had 1 chicken sandwich on the menu before. It was about a $96 million category. We have only a quarter's worth of data of the big crispy, but if you annualize what we've seen so far after that launch, we're projecting that a year after the launch, the big crispy, our chicken sandwich category with the big Crispy platform is going to be over $220 million category.
And we know that is a huge growing segment that we want to be known as a player in -- so where do we go next? Well, if you look at the chart of the biggest QSR segments, one was chicken CRISPRs, which we think we've got a great right to play there. We've improved our CRISPRs, -- we just never advertised them. And then the next place would be Mexican QSR. And -- why wouldn't Chili's who has a right to win in this category, take that category on next.
Now hang on, we're not doing this in the next few months. We're probably not even doing this in the next 12 months. This is probably 2 years out, but what I'm trying to explain here is that we have a huge pipeline ahead of us of things we can do. So in the Mexican space, we already play in Mexican categories like and fits. Our case of is, for instance, our Chicken Bacon Ranch cases are already a fan favorite.
But as we continue to upgrade our proteins across the menu like our Fajita stake, we're then going to look for other places we can use those proteins on the menu. We'll use that protein in salads, but we can also use that upgraded fajita stake in a delicious cheesy stake case a deal that would upgrade our Casebia offerings. And then when you think about the taco space, we already have like Chicken CRISPR is already a huge category for us and our guests love them. We can now deliver these in a familiar format like chicken crisper tacos, which is familiar from a taco standpoint, but it's Chile's spin on tacos using our chicken crispers, we can offer them in a base variety.
We can offer them in a spicy variety using the new spicy Mayo that we've already gotten rave reviews on our big crispy chicken sandwich. And we can also do sauce like our Culp favorite honey Chipotle. So when you think about where we can go with the better than fast food campaign, what I want you to hear is we have years of runway ahead of us. Chicken sandwiches, we are not even 6 months into the big Crispy Chicken sandwich launch, and we think we have 1 to 2 years of runway on chicken sandwiches to make sure that Chili's is known as a destination in that category.
We know we can keep innovating on the burger category, our Chicken CRISPR business has doubled in the last 3 years without any advertising, just through menu merchandising and upgrading the product. And then if you throw Mexican in, in a couple of years, I can easily see 5 years of a pipeline of where we can go to keep the better than fast food campaign going strong for the next 5 years. Next lever of growth for sales and traffic is cultural relevance.
Now I hear all the time that Chili's just got lucky a few years ago with the cheese pool. I take some personal offense to that. But Well, I'm here to tell you that we have developed a capability in marketing where we repeatedly can put Chili's into the cultural conversation. And that -- when we do that, we drive buzz, we drive consideration for our brand, and we drive purchase. So let's take a look at how this works. So what you're looking at here across the top of this chart is a selection of culture PoPs that we've done over the last few years. And our culture pops are all over the board. You've got the Chili's lifetime movie, you've got a triple dipper Halloween costume all the way through Lizzo, remaking our baby back ribs jingle.
In the middle, you have the YouGov stat of buzz generated amongst Gen Z. And then on the bottom, you have Chili's sales -- monthly sales on the red bars. Now what you see is that when Gen Z buzz spikes, it is highly correlated to when Chili's sales spike. And so what that tells us is that when we are driving buzz amongst Gen Z, it is putting Chili's in their consideration set. It is -- we are breaking through to that audience. They are considering Chili's, they're coming in, and then our operations team and team members are delivering an amazing experience that is turning them into regular guests. So if we go to the triple Dipper, a lot of food brands have viral moments. The difference between when most brands have a viral moment and what we've done at Chili's is that ours is sustained.
Most brands have a viral moment and sales spike for 1 to 3 weeks, then their business normalizes again and everything kind of goes back to normal. For us, when we saw the viral moment happening with the cheese pool and the triple Dipper, we mobilized our social media team and our innovation team to figure out how can we pour gas on the fire and sustain this. We did that through innovation. We quickly launched Nashville Hot and Honey Chipotle Fried Motzerella flavors. We launched them on social media, so we can move more quickly.
And then they came to the full menu later. We activated influencers to make more content, which encourages more organic content to be made by fans in our restaurants. And then we did some fun, silly things like we made a triple dip or bedding collection. We made a Halloween costume all of these things were in service of keeping triple dipper top of mind, and the results are outstanding. Triple dipper went from a $220 million item on our menu to now over $860 million in F '26 and that 1 item alone now makes up 16% of Chile's total sales.
I often hear is the triple dipper going to start fading. We have seen no signs of the triple dipper fading. In fact, it's quite the opposite and continues to grow, and we don't see that slowing down. It's just 1 example of the best-in-class social media capability we've built at Chili's. This is another way to look at it, earn TikTok views TikTok is the most influential social platform out there right now. And you can see that earn TikTok views as kind of a proxy for relevance on that platform. And Chili's is far surpassing any of our casual dining competition when you look at earned views on that platform.
Another way that we want to reach a younger generation and more and bring in a bigger audience is by reaching new communities. I would challenge you to find another brand that can reach the BRAVO reality TV audience in a really authentic way, while also being the lead sponsor of the hottest young driver in NASCAR, Carson House bar and then tap into the exploding world of YouTube Golf by partnering with Robak, for a merch collection and putting Chili's on a golf course. And this is only 3 of a ton of different things we've done over the last 3 years.
But what it shows is that Chili's is truly for everyone, and we are going to continue to find these audiences and these communities, and we're going to find unique authentic ways to reach them that aren't just logo slapping Chili's on different properties. I hope you guys all enjoy your row back merch. I'd love to see some pictures of you guys wearing it after Investor Day. All right. Third one is expanding the customer base. So I talked a little bit about this we have a really disciplined approach to how we go to market from a media standpoint.
We want to reach our core older audience through linear TV and streaming. That takes the form of weekends in the fall, you're going to see Chili's all over college football, NFL later in the year, March Madness, NBA playoffs, we want to be where the eyeballs are. But to reach that younger audience, we use our breakthrough social media capabilities and culture pops to rid break through with that audience because we need to be where their eyeballs are, and they're not watching linear TV. They're on social media platforms, and they're trying to see what's trending on TikTok. And so these 2 things need to work hand in hand.
So let's look at how we've grown our guest counts over the last couple of years. What you look at here is F '24 guest counts compared to F '26 guest counts. And you can see that we have added 40 million guests in that time frame. Now if you look at the right you can see where those guests are -- where we're growing across those different age cohorts. Now we love to see that we are bringing in younger guests into Chili's.
Gen Z is now making up about 25% of our total guest mix, which is awesome because younger guests are the lifeblood of any brand. But I often get the question, are we growing younger guests at the expense of our Core audience and I think this chart will show you that the answer is no. The great news is we are growing across all age cohorts. And so our strategy is working. We are not alienating the core audience. We are continuing to keep those big fans of Chile is engaged while we're introducing Chili's to an entirely new generation of guests.
And so we will continue to take this balanced approach as we grow our guests. Finally, let's talk about why we have confidence in sustaining growth going forward. So if you think about the casual dining market, it's about $116 billion market. That accounts for large chains, small chains and independent restaurants. Chile's only makes up about 5% share of that entire market. So when you think about what's going on with the strategies that we have in place, you think about the strong brands getting stronger and the weak brands getting weaker and more consolidation happening there is a huge headroom for growth for Chili's to continue to chair in this market.
So I want to share 5 numbers with you that show -- that demonstrate the strength that we have right now, but also give you reason to think that the strength is going to continue for years to -- our 5 to drive sales have doubled in the last 3 years, but I've also shown you a 5-year innovation pipeline of how we're going to continue that growth. Triple dipper sales have nearly quadrupled in that time frame, and there's no slowing -- there's no sign of that slowing down. And the relevance is just as we -- that product is just as relevant on social media as it was 3 years ago.
We have the best social media team in the industry, and we are going to continue to find ways to be the most relevant brand across social platforms. We have increased our guest count by $40 million and we've done that in a really balanced way where we're bringing in the core audience while also introducing Chili's to a younger audience, and that strategy isn't changing. And finally, there is 40% of the menu still left to be upgraded so that no matter where anyone shops on the Chili's menu, they have a great experience.
So in closing, I just want to leave you with a few thoughts. The Chili's marketing success is a result of disciplined execution of our strategy, not luck. We have a proven market model that is going to continue to drive new guests into our restaurants. We have multiple paths to grow. We have a robust innovation pipeline across food and beverage as well as plans to continue to keep Chile relevant brand and culture. And finally, we are winning with all age cohorts. We will continue to bring in younger guests while also activating our core audience.
Thank you very much. And now I'm going to invite Kevin Hochman back up on stage for some Q&A. We're going to do 15 minutes Q&A right now. We'd ask that you keep the questions to just the first 2 presentations that you saw this morning. We're going to have more Q&A this afternoon, where we'll all be back up here with more members of our ALT and there are going to be microphones. So please just raise your hand and we'll have mic runners and just wait for the microphones before you ask your questions.
2. Question Answer
Good morning, Jim Salera with Stephens. I would love to get your views on how much opportunity there is to continue to take share from QSR. You touched on this multiyear framework to continue to really target QSR and the value gap that you have -- but since you've seen so much success pulling people from QSR, do you find that guests are shopping or visiting your restaurant based on specific categories like burger and chicken and there's opportunity to pull from Mexican QSR? Or do you find that when they come in from QSR for 1 category that they're then moving across the menu. So we just kind of some help framing up that opportunity to perform in QSR?
Well, I can start and then feel free to chime in, George. So the way we think about it is we can source from everybody. So you saw the chart that said we're 5% of casual dining, which is probably surprising to a lot of you. And then I think share of stomach is still just a little above 1%. So we can source from anybody. The key thing when we launched the better than fast food campaign was to show relative value, right? Everybody says they have big burgers, they have great value, right? But like being able to see before your eyes demo of this burger versus this burger, this burger is twice the B, for this burger is 80% more beef like that -- and you can see the difference.
I mean that is very telling to the consumer. And so regardless of whether we're sourcing from QSR or casual dining, it tells them something about our relative value, vis-a-vis is everybody that's out there, right? So that's kind of .1 of like why we have that campaign. It's not necessarily the source from QSR or someone else. It's more about reforming relative value. I mean what we're finding when you look at the data and how much we've grown, we're sourcing from everybody, right? You've got -- obviously, we're growing sharing within casual dining, and I think you know kind of the shared donors versus the share gainers in that category, right?
But we're also finding when you look at some of some of these other reports, that people are starting to view casual dining to be as good a value of a better than QSR in some circumstances, right? And so I think over time, we're seeing a little bit of shift there too. So the answer is, yes, I think we can source from everybody.
I'm disappointed, George, I thought we'd see a mic drop. It's Chris call with Baird. As you brought new customers into Chili's, are you seeing the brand get used for occasions or need states where it historically hasn't or wasn't relevant. In other words, are there more situations today where consumers think Chili's than there were a few years ago.
Well, I don't know if I can give you like very specific, but I can give you more qualitatively, yes, we see that when we look at social media, we have a lot of guests that are creating content in our restaurants. And -- so you see more examples of Little League teams and sports teams going out to Chili's. There was an ESPN flag football championship that was televised, and like 1 of the teams from Florida said, Hey, if we win, you got to take us to Chili's coach. And like we hear stories like that all the time now from our operators, and we see it on social media. So I think like what I see is as we become a more relevant brand, we're becoming more relevant from our occasions like that.
I don't have like hard data to tell you exactly what those occasions are, but qualitatively, I do see it.
Thanks for the question. Jim Sanderson, Northcoast Research. I wanted to go back to the commentary on looking at the Mexican QSR category as a future target what pain points or concerns are you picking up from customers today in that category that gives you the confidence that you have a solution in mind that would really drive value for Chile going forward.
Yes. I think similar to what we've done in other categories, I think the quality and abundance is going to be like, first and foremost, and it's the most obvious, right? So when you think about -- when you look at our burgers, right, and you look at the burger compared the comparison or the chicken sandwich and that comparison, I think you'd find the same thing if you look at QSR, tacos or cases, you'd probably be searching like where is the meeting here and like looking for it differently versus what Chili's can do with our really abundant crispy chicken crispers or that upgraded stake agita stake that we would bring over to the case of DIA. So I think that would be the obvious first place, which would be very similar to what we've been able to do on burgers and chicken sandwiches.
Yes. When you think about the insights that we built the better and faster food campaign on, it starts with size and abundance, right, which the tacos that you saw on the screen, you're going to see downstairs next to the most comparable taco that you can get in QSR. The second thing is about the overall service and experience, and you look at the top QSR Mexican, they're all about kiosk and automation versus we're going in the opposite direction in terms of service.
And then if you look at Reddit and look at QSR Mexican and the way they talk about price, I think you're getting a lot of the same if you don't buy on the deal, the price is getting up there. So I think it's got all of the same ingredients for the recipe that we've had for the balance of the fast food came. And as you saw, it's a humongous segment that we can win from.
Just -- and that would be within the $10.99 price position relatively speaking.
Yes. We haven't finalized that, but that would be the intent, right? We know that's a hot price point that consumers come in for.
Zach Fadem, Wells Fargo. I want to ask the inverse of the first question and talk more about trade down versus up because I don't want to tell you how much I paid for a stake in Martini last night, but independent restaurants are very, very expensive. Could you talk a little bit about that opportunity in terms of bringing in higher income consumers and taking share from independents?
Yes. I just think that people want value everywhere. So I don't think -- right now, I think independents are winning and it's because people want to go back out to eat. So just like casual dining is outpacing QSR the last couple of years, I think you're seeing independence in because more independents are casual dining than they are. So I don't think we view it as an independent opportunity versus a chain opportunity. We just view it is as long as we improve food service and atmosphere, people want to have great value and great service and they're going to continue to come to us.
If you take it a crack at just sizing that independent market?
We have not. We don't look at it that way. We look at it as making sure that we continue to improve is ourselves.
Dan Geiger UBS. Kevin, I'm wondering if you could talk a little more about the north of 6 restaurants, points of differentiation for those above 6 versus under any kind of attributes you'd say, between the 2 categories? And then for those above 6, we've talked about this some historically. Just anything on the operations of those restaurants, capacity, that much more difficult in those restaurants from an ops standpoint. Anything you could share on the differentiation, please?
Yes. The #1 thing that we see -- no, there's a little bit of like equipment things that go on that we're supporting the other restaurants with now. The biggest thing that we see is the treatment of the labor card. So north of 6 restaurants tend to staff more appropriately for the volume that's coming in, whether it's staffing all the way to the labor card or making adjustments versus the labor card. And I mean that's the #1 thing that we see.
We have a huge initiative right now. We're retraining our directors and the general managers on how to write a proper labor card to staff for the sales that you want versus trying to make it on your bonus, right? So that is a huge initiative that's going on now. I think that has been -- if you said what's the #1 thing that's different between a North as Sig restaurant at a lower-volume restaurant. It's how they staff to a in a the GM -- we tend to have our best pilots or running our biggest restaurants, right?
And so Aaron and she'll talk to you a little bit about the ownership training that we're doing to elevate our game with our general managers, getting them trained up and setting higher expectations on higher bars. I mean, we're the #1 casual Daddy brand now. And so we should have all of the best general managers in the industry. We certainly pay top dollar, and so we have higher expectations. But we're spending a lot of investment in getting that ownership culture up, and I think you're going to see that in her presentation. So those are the 2 things, how you treat the labor card and the capability of the General Manager.
Margaret Binshtok from Wolfe Research. I just wanted to ask on the family occasion that you guys mentioned. Where is family mix now? Why do you guys see this as attractive? And how quickly do you think you guys can grow that occasion?
So we don't track it in terms of like share of segments, I don't have that data to answer directly. We think of is a big opportunity because everybody goes to Chile's and families that are a huge part of casual dining. For years, we really didn't do much on the kids menu. To create things that are just for kids. I think we're changing that is based on some of the menu updates that we made last quarter, the ones that are happening this quarter.
We certainly see in social media, kids talk a lot about Chili's. -- like I had a niece the other day say, "Hey, if our whole class gets 4s are better on their APs,rters at Chile, make sure, of course, right? You see that a lot, right? So as you think about winning in social media, younger people are there, and so we're creating a lot of demand for Chili's.
That's when I was talking about earlier, like we have this energy of an upstart brand. It's like we have this whole generation that just like we may sell have not have been a brand 5 years ago to Gen Z. And now we're a big brand, and we're relevant. And so as people get older, they're just going to gravitate into the brand. I think that's why we see this big opportunity.
Yes. And when you think about the family occasion family with younger kids, -- they want to go to a place where they feel comfortable being themselves. They don't -- they're not going to be embarrassed. They're worried about their kids behaving. -- we were talking about earlier exactly -- you're not going there, right? Like I think when we create the environment that we strive to create in our restaurants, the kids are having a great time and parents are probably having a great time, too, because if the kids are having a great time, they get to have a margarita, kind of hang out for an hour. And so we just think that's a big opportunity for us.
Great. Thank you. I really like that customer satisfaction or consumer rankings of your different attributes chart. I don't have it in front of me, but I remember just from the quick view that atmosphere and cleanliness were lower ranking or maybe more of an opportunity that remains. Also, I think -- I would have thought that, that would have been 1 of your biggest improvement areas because you've obviously focused on that maybe returning the bussers to and -- could you just talk about that? Is this going to come down to reimaging to get you the rest of the way there on that? Or what -- do you agree with that ranking?
I think reimaging will help. I mean, I think sometimes you get a clean comment because it looks a little older. So I think that's going to help. I think there's still tons of upside for us. We have been working on clean basically for 15 or 16 quarters now, like we pick something new every quarter to work out on clean, and we learn new things. Like as the restaurants get busier, there's more things to clean, and we have to clean more often. And -- do we have the right equipment.
The other day, I was in a center city market, and we realize they're not changing them up order often enough. And so that will create a floor that is not as clean as if you were changing the water more often, right? So there's just -- there's still a lot of opportunity. That's why I don't like -- I think a lot of people want us to declare victory and we're done. And the reality is we're still middle innings on improving this experience. The good news is we are better than most, and that's why we're winning market share, but there's no reason why we can't continue to do that but continuing to get better in food service and atmosphere.
And just quick click on the speed of service initiatives. Is there any examples you can share about what the benefit of 5 to 10 minutes faster service is in terms of what it means into same-store sales or AUVs or anything on that.
Yes. It's hard to give you an exact quantification of it. What -- I'll give you some examples so you can start wrapping your mind on why this is so important to us. So you've been a restaurant and like you need something comped off your bill and they got going to manager and you're like waiting around because you want to pay and get out a Dodge and the manager comes and they swipe their card, Well, our manager swipe their card over 60 times a day. okay? Now that's not all for checks.
But the #1 driver of why they're asked to swipe a card, which means they got to get access to the POS is to alter a check. So imagine a busy Friday or Saturday night, right? We got a 15, 20, 30, sometimes hour late, right? And we're waiting 10 minutes to get that table turn to get a manager to come swipe. And those managers are not just waiting for their cards. Some of are in the heart of house, some are in the front of house talking to gas like -- this is a lot of friction that prevents us from turning the table, right?
And so when we talk about initiatives like supermarket Simple where we to eliminate the need to do as many changes to the check because it's more frictionless to get your rewards, that's going to have a meaningful impact on our ability to turn tables. And there's 2 things that we know can drive traffic in this business is meaningful news, whether it's food news or social news and speeding up the operation. And if we do either 1 of those things, that leads to long-term growth, and that's why we're working on things like friction.
Andrew Charles from TD Cowen. I'm curious just on how you thread the needle with pricing. You guys obviously have in Titan every day, EDLP your ticket is 3 to 4 less than casualty peers. But how are you not boxed in to take pricing decisions? And how are you thinking about pricing over the next few years?
Yes. One of the things I think when you cover QSR and CDR, a lot of times you think of that, where it's like, well, we don't want to get size was it was like a $5 price point like some other QSR competitors had over the years. The difference is CDR is a much more varied menu, right? So there's -- like a lot of things in our -- they don't mix very much, right? So when we think about like 1099, how can you possibly make money on 1099, right? The reality is it's only like 9% of checks. -- right?
And it's like 6% of sales. So even if you meaningfully were to move that, it's not going to make a huge difference to the overall P&L. So I think that's an advantage that CDR has over QSRs that we have a more varied menu. And so everything tends to mix a lot less. And so even when you move the mix on those things, as long as you're doing the right things in terms of meeting all customers' needs, not just a low-income customer needs, you can make the P&L work. But I think that varied menu is a big difference in CDR versus QSR.
Okay. I think we're out of time for questions. Maybe 1 more One more. Okay. One more. And then we have a second Q&A coming up with the entire leadership team that you'll have more time .
John Ivankoe, JPMorgan. I'm happy that you mentioned your independents taking share versus change. That's not something a lot of chain CEOs say, but I concur with that. So the question is on the supply side, not just independent supply, which I think is very hard to measure, especially across an overall chain. But looking at some of the better chains 3 years ago we go around Dallas. And certainly, this is the case today. in and out, Shake Shack, Dave, chickens, Calvo Chipotle, there's just waves of supply that kind of come to a market, and it seems to come and we all at once.
This has been the case of the industry for as long as I've covered the industry certainly nothing new. Have there been any moments of competitive intrusion in various Chili's markets that you've seen that have been measurable or is the brand kind of defensible at this point that you're operating as a brand of 1 and kind of what's happening competitively around you might actually be noise.
Well, I'll give you 2 answers on that. One is when we do see a competitor open up near us, you will see like a very short term, people will -- regulators will leave and go and let's try the new thing. Inevitably, the business comes back very quickly. So it's very, very consistent. Now I don't know if that would have been the case 5 years ago, but we're a much stronger operation now. So people buy into what we're doing.
And I mean, I see it quite often, we'll go to market, concept opening up across the street, I'm like, don't worry about it, check with me 2 months from now. It's going to all snap back and it does. So I don't think that -- based on the quality of our service model, that doesn't really concern me at all. I do think the flip side is a big opportunity for us. I mean I think you're seeing the weaker concepts, the ones that are either closing doors or just going out of existence all together that create white space opportunity not only to collect their guests that got to go eat somewhere, but also real estate opportunities to do either conversions or scrape and rebuilds.
So to answer your question, I probably view that as more of an opportunity in the inflow and outflow of new restaurants, then anything that's taking share from us from a long period of time, we're just not seeing that.
Okay. I think we're going to now take a 15-minute break. There are going to be people outside. Bathrooms are straight back, and then there are people guiding you to other bathrooms that are just across the hall. So we'll meet back here 10:00. Thank you.
[Break]
Welcome back, and good morning. So my name is Aaron White, I'm the Chief Operating and People Officer for Brinker. I've been with the brand over 25 years. So, I started my career back in East Tennessee as a server with Chili's. And today, I'm going to build upon really what the foundation that Kevin and George have talked about, I'm going to ground you first with the Chili's flywheel and talk about how marketing brings our guests in, and our best-in-class operations team brings our guests back. With my experience starting in restaurants, it's been amazing because starting as a team member, I've been able to really understand from the foundation, from the ground up, what it means for operations.
Truly, it's about being in restaurants, listening to our team members. I spend about 40% of my time in restaurants, so does my team. And really, we're working side by side with directors of operations and also with our management teams and team members -- and the focus is to make their jobs easier, more fun and more rewarding. And as we do that, we're continuing to figure out the bottlenecks that we see. And today, I'm going to really talk about this in 2 parts.
I'm going to talk about the progress that we've made since our last Investor Day, and then I'm going to talk about the future and what it means really for improving the operating model for sustainable growth. So let me ground you in what look like for the last 3 years. It really is about focusing on the fundamentals, and that's what it's been about. It's about food, service and atmosphere. And the foundation of that truly is our team members. So I know George talked a little bit about the innovation on the food -- we've been focused on that. We've also eliminated a lot of SKUs to make it easier in our kitchens.
We've also made it easier to execute certain items in our kitchens, which helps with efficiencies and also throughput. For service, we've invested $180 million in service over these last 3.5 years. And what I will tell you is that has helped our throughput in the restaurant. This has been for cooks and also for servers and then for our service support. We brought bussers back, which is truly locked and unlocked a lot of throughput for the dining room. And what this means for atmosphere is it truly is about focusing on clean and well maintained restaurants.
We know we still have runway to grow, but we've made some positive impact here and it's getting restaurants back into the shape that not only we are proud of, but that our guests are proud of. So let me tell you what that means for results over the last 3 years. And I'll start with what it means to deliver a better guest experience. We have our clean scores that have increased from 64 to 74. We have our guests with a problem that we've been able to cut in half. And our Google scores have improved by 30 basis points and continue to rise. You're probably asking yourself, what does this mean for traffic? We have seen significant traffic growth since 2023.
We started at 3,400 guests per restaurant on average per week, and we're now have increased that by 800 over the last 3.5 years to 4,200 for this year. We've done that by focusing on the fundamentals and continuing to keep those top of mind with the staffing. What I'm most excited to tell you about is really about our historical peak. This happened back in the early 2000s, and it truly isn't the same buildings that we have today our largest guests per week was an average of 5,200. So you ask if there's runway, absolutely, there is. Because only today, there's only 50% of our restaurants, so 15% that are actually at that historical peak.
And we know with our continued focus on the fundamentals that there is tons of runway there. And then what that means for team members, we've been able to stabilize our timbers and our management teams -- and what that means is, as I talked about, making the jobs easier, more fun and more rewarding, we've done that, and we continue to focus on those things. Our manager turnover continues to lead the industry at 20%. And our hourly turnover due to all the simplification and the stabilization of our management teams have declined to 84%.
And this is the first time in a decade that we are actually at the industry average. So what does that mean about our next phase? And so as I talk about our next phase of operations, it truly is about removing bottlenecks. And let me tell you a little bit about our secret sauce. And what that is listening sessions. So we started these 3.5 years ago. It had a chance for Kevin, myself, Doug and the leadership team to get out into restaurants. We bring managers together usually in groups of 30 to 35 on and we act them 2 simple questions.
What do you love best about your job and what can make your job easier. And believe you may, they will tell you. So this last year, we started these same conversations with hourly team members. And so we are in front of these hourly team members any given day across the country asking those same questions. So they're able to tell us firsthand what are the bottlenecks in the restaurant, which takes me to the second half talking about what does our future look like? And when we think about our future for sustainable growth, it really is a rounding out in the slide that Kevin showed you earlier.
And this is truly looking at the restaurant -- from the start of the guest experience all the way through the entire flow. So my team does an amazing job getting out and understanding what those bottlenecks are, and I'm going to talk what it looks like for the future. So let me explain on the slides. I'm going to begin, when I talk about driving the guest experience and also cycle time improvements.
On these slides, I'm going to show you on the left what the initiatives are that we will be focused on. I'll also show you on the right about how we're going to measure success. And I'm going to begin by talking about the front door. So think about when you're walking in the restaurant, this is where the guests are greeted and we definitely have some pain points and some bottlenecks still today at the front door.
So we're going to focus on making sure that we're using technology to simplify the wait list. We've put a big stake in the ground that managers are going to be more involved at the front door. They're going to take ownership working with the host to make sure we have accurate quote times. I don't know if you're like me, but you walk into a restaurant, you see open tables or dirty tables and they've quoted you a wait time. It's a little frustrating. So we've got to build that trust back with the guest, and we know managers being upfront, being engaged with our teams is going to help with that. It's also going to help with large party service to be able to execute them through the restaurant.
And you're going to see that right now today, we're at 4,200 guests on average per week. Our goal is at 4,300. I'll remind you of that historical peak again at 5,200. But again, that 100 guest counts is goal and what's in the model. Number 2 is really about continuing to look at the service model. And so I want you to think about when you went to a restaurant. A lot of times, you'll see the server come to the table. They'll take a pen and paper, they're writing down your order -- they then have to walk to the point of sale. They have to input that order.
They have to then walk to the back to get your drink, that's a glass and that's ICE and that's a beverage, and then they bring that back out to your table. Well, Bree really helped ourselves over the last several years because we have team member handheld iPads. That takes all of that pain away for our teams. They're able to actually put the order in right at the table and I love it because I see it a lot in restaurants where you see that server is actually still engaging with the guests. They're still talking. They're talking about the menu, the guest hasn't ordered yet, and magically, a runner brings your drinks in your chips. And so we've cut down that throughput time, but we still have bottlenecks.
So Kevin mentioned we have a brand-new handheld iPad coming out at the back half of this year. And what we've been able to do with that iPad, my team has done a fantastic job of cutting those clicks in half. So we're cutting those clicks by 50%. So that's 5-0%. And what I would tell you about cutting those clicks -- it's going to give our servers more time to focus on the behaviors that drive a better guest experience. And that's refills, pre bus, that's connection. So I'm happy to say that what we're seeing right now in the test is that team members' knowledge and the menu itself, you may try later in the restaurant today. We may have you place an order. You don't have to have much knowledge to do it because it's so easy to execute. And we've seen better retention in those test restaurants.
Next, I'm going to take you to thinking about cycle time improvements. It's about the kitchen. It's about making sure we have faster ticket times and more capacity. There are several ways we're doing that. But today, I'm going to focus on our kitchen display system. So I mentioned that our servers are able to place that order. They're able to immediately send that item to the heart of the house. That's what we call our kitchens. And in the heart of the house, we have a larger iPad that we call the kitchen display system. This kitchen display system is interactive. They're able to touch screen. They can actually -- if I'm a new team member, I can touch screen, I can see what the item should look like, and I could see the ingredients of the item.
So if you think about being able to know the items and know how to make them very efficiently and quickly, that's helping us unlock that. The second thing that this kitchen display system is doing is it's allowing us to have better throughput. And let me give you an example. So Zone 1 is a kitchen station that we have. That's 1 of our most popular. It's where triple dippers come out of chicken CRISPRs come out of chicken sandwich comes out of. So it's pretty busy. So on any given shift, you can see 30 to 40 checks on that screen, different items. This smart technology has allowed us to be able to do an all-day counter.
So instead of being a team member and having to look down 40 checks to tell me how many Monserilla orders do I have? It will tell them at the very top of the screen that they have 7 orders of Monzarella. It will tell them exactly how many planes to drop. And so what this has allowed us to do is to have more capacity of team members over there for the throughput. So now we can have up to 4 to 5 working that 1 station. So this smart technology is making us more efficient, you're going to see future upgrades of us being able to do this in the bar, and we just implemented it at our beverage station, which is another big bottleneck for us.
You can see that, that will help also throughput with ticket times. Only 40% of our system today are actually at our goals of a 10-minute ticket time for lunch and a 12-minute ticket time dinner. So we know our goal is at 65%. And through equipment and technology, we are going to be able to continue to help drive efficiencies. Also I want to talk about to go and what we think about to go driving fewer problems, more repeat guests, we really want to go to be easy. We say it's going to be easy as fast food. And when we say easy is fast food, we mean that with the ordering and the pickup. So, to go is 25% of our business, 50% of that is actually delivery and 50% of that is carryout.
And when we think about that, we know that we need to lean into our app and web design to make that easier to execute. We need -- we have to have frictionless payment, which we'll be focused on for the future with to go. It will be easier ways for them to pick up the order, whether that be an order board or also an easier way with racks for them to be able to do that. Lastly, that takes me to the best team. I'll spend just a little bit of time here and really talk about what it means to ruthlessly simplify. So when I say ruthlessly simplify, this is challenging things that we've always done.
And it's not easy. So sometimes we have to think differently. Sometimes we have to challenge the status quo. And so an example of that is inventory. One of the things that my team is focused on is how do we make it easier for our operators to be in restaurant and spend more time with guests and team members. So today, I'll give you an example. When they're doing inventory, it's a 3-hour process once a month for 2 managers. So that's 6 hours of manager time away from team members and away from the guest. So during that time, they have to take kind of a clunky scale, put it on a cart and roll that into the walk-in -- they then have to take that product off the shelf, put it on that scale.
They have to subtract manually in their heads, what that pay and weighs -- they have to write it down with pen and paper and 3 hours later, go and put it into the computer, so we can calculate how much waste they've had. So think about this for the future. And test today, we're seeing some great things. We've cut that in half. So it's only taking our managers 1.5 hours, so imagine 3 hours every month back for those managers combined. They're able to actually go in and we know how much of pan ways, we know how much of full pan ways. So they now can count 1 pan, 2 pan, 3 pan.
And they can do that digitally straight into an iPad would be the future goal for that. So if you think about that's 36 hours a year that we're taking for those managers, that's a whole week, a whole extra week that they could be coaching and also spending time with our guests, which is important. Now Kevin mentioned the ownership journey. We started that 2 years ago, and it is a journey. It's nothing that's going to happen overnight. This is really about us thinking differently about our business and getting our operators to understand.
For example, that labor is not just an expense, labor is an investment, and we have to make sure that we're spending it at the right time to grow the business. We made some bold decisions this year. We went to sales and profits for our bonus structure, and I will say it's one of the best decisions I think we've made as a brand because our operators were really focused on numbers. They were waking up every morning to understand what's my score versus waking up to be focused on, what's the behaviors that are going to drive the guests back to the restaurants.
Now you're probably wondering, can they still see it as guest metrics still important? Absolutely, they are. We can still see clean. We can still see in our social scores, and we can still see our guests with a problem. We see that by shift. We can break it down lunch or dinner by daypart. That's given us visibility to be able to diagnose exactly where the pain points are. And so we're very confident with the switch that we've made. We have seen some positive results in our team members and our managers focusing on the behaviors to drive a better guest experience.
So in summary, I will say a stronger operating model is creating more runway for growth. We've rebuilt the operations foundation. It was really an operations reset, but we have room to grow with that. I'd like to say there's more simplification in front of us. than we have behind us. It really is about stronger execution. You saw that with our retention numbers, we're stabilizing our teams, which means our team numbers stay, they work together longer and it's a better guest experience.
And you saw that we Google score is at a 4.2% and continuing to rise. When we think about throughput and our focus on throughput in the future, this is going to help us with capacity in the restaurant. We definitely have the capacity. You saw that historical peak at 5,200 guests per week. Our goal right now is just to get 4,300 guests per week, and that's an additional 2% in same-store sales. So when I ask and think is the confidence and the runway there, we believe, absolutely, it is, and we will continue to execute and deliver to get the guests to come back in.
So with that, I'll turn it over to Michaela.
All right. Hello, everyone. I'm Mike aware. I am the CFO of Brinker. I'll tell you a little bit about myself. I've been here for 38 years. I know that's unbelievable, but I have I started in the restaurants. I had 6 years of operations experience there. I then transferred to the RSE, where I've had numerous accounting and finance roles. Probably most notably, I led the Chili's brand finance team for 7 years. And in that role, I really had the opportunity to learn the business from top to bottom, not just from a financial perspective, but also from an operating and marketing perspective. .
I've also held many roles in corporate finance. So I was the Head of Investor Relations. As many of you know, I had P&A, treasury and restaurant development. So a lot of different experiences. So now that brings me to here, I'm in my third year as a CFO, and I will tell you I'm enjoying every minute partnering with Kevin and his leadership team to grow this great brand.
So we're on the final presentation. I'm going to take us home for the presentation part of the day. And what I'm going to cover is we're going to talk about this stronger model that we built. We're going to review our capital allocation parties and they're going to finish it up with the new Brinker outlook. All right. So you've seen this a lot today. This is the engine behind the stronger financial model. So George talked about how his team is doing a great job of keeping Chili's relevant and driving in all those new guests. Aaron talked about how her team and their best-in-class execution is bringing those guests backs.
And what that is doing is creating a really, really strong top and bottom line for us, and it is generating a ton of cash. So we're converting that into cash. We're then using that cash to reinvest back into the business we are now going to start to expand the footprint, and we still are going to have cash to return to the shareholders. All right. So let's be clear. Brinker did not just deliver a turnaround we have exceeded every metric that we put out there, and we've built a really strong, sustainable financial model.
So let's look at some of the results. Kevin touched a little bit on this earlier, but we have materially outperformed every metric we set back in 2023. You can see our adjusted EBITDA growth is 35%. Our adjusted EPS growth, 56% and those Chile's AUVs are up over 50%. All right. Digging a little deeper, let's start with the top line. So for us, this has always been an investor strategy. You guys have heard me say that over and over. And why that is important is that we know the best way to grow the bottom line long term is to invest and grow the top line sustainably and we have done just that.
So you can see we have taken Brinker revenues from $4.1 billion to $5.8 billion. We've taken those AUVs from $3.3 million to $5 million. And something that's even more impressive is that at the same time that we've invested hundreds of millions of dollars back into this model. That is in labor, that is an R&M, that is in marketing. We have expanded or materially expanded our margins by 660 basis points. All right. In that strong top line, all those margins what that has done is allowed us to deliver record free cash flow.
So last year, we delivered $558 million. We used some of that cash flow to delever the balance sheet. So what you see on the right, this is lease adjusted leverage. So we took our lease-adjusted leverage from 3.7x to 1.4x. So before I move on, we have a really, really strong financial model. We have a sustainable top line. That top line allows us to grow our margins, we're generating a ton of cash flow that we can then use to reinvest and grow the business have a really strong balance sheet. So Brinker is in a really strong financial position.
All right. So let's talk about our capital priorities. We have the strong balance sheet. We have sustained same-store sales momentum. We are now going to add a new unit growth lever, and we will still have enough cash to return excess capital to shareholders. So here are our priorities, and they are balanced and they haven't changed much. So our first party will be to continue to invest for growth. Our second priority is to maintain a strong balance sheet and our third party will be return excess cash to shareholders. So let's look a little bit deeper at each one.
So priority #1, it's going to be invest in the business. We're going to continue to invest in the base business. And now we are going to start -- restart unit growth. So why now? First of all, we have strong demand. We have positive traffic coast-to-coast and we've identified plenty of white space opportunity to build new Chili's. The second reason is we have great unit economics. So you've heard us say, Chili's brand AUVs are now at 5 million and the Chili's operating margins are over 18%. And that allows us to generate a ton of capital.
So we have plenty of capital to ramp up new unit growth, okay? And then looking forward or talking about new Chili's, you've heard us say that everybody loves Chili's. Well, I'll tell you this, everybody really loves a new Chili's. So when we look back at the Chili's, we built the last 3 to 5 years, those Chili's continue to outperform all of these brand averages. So they open really, really strong and they've generated great returns.
Looking forward to what's going to happen as we move forward, we put a little bit of inflation in here, but these are the numbers for you guys to model. So right now, we think our investments for the new restaurants are going to be between $5 million and $6 million, and we still feel they're going to generate some great returns. So we're really excited as we ramp this up. And we have a great plan. So we have built a really strong restaurant development team. And their approach is grounded in analytics.
And so their job is to deliver the best sites. They're doing that with a great process, with great tools, and I'm confident they're going to continue to find all the best sites for us. In addition to our new process, we want to take a disciplined approach to the pace of how we build these restaurants. And so we know it's important that we're disciplined about this so we can continue to find the best sites and not feel pressured to approve any subpar sites. And more importantly, we want to be able to staff these restaurants with talented managers and team members. So we know we need a disciplined approach so we can continue to adapt and deliver on those financial expectations.
And we have multiple strategies to grow. So historically, we've really linked into this high potential strategy, which is building in major suburbs of major cities where we have a lot of development, and we've been really successful, and we're going to continue to do that. But we've also identified some other strategies that we can pursue. We have now a small town strategy. So the team has identified many smaller markets where we don't have a Chili's that we know can be successful. We've also done a deep dive on our existing markets and we've identified opportunities to infill those markets.
And also frequently those markets continue to grow and there's opportunities to build on those edges. And then finally, conversion. And so this has been popping up a little bit lately. It could be a lot conversion or it could be if it makes economic sense to find a small regional chain for the real estate and that's really helpful in those highly developed areas like the Northeast for us to find sites there. All right. And so we think that these strategies will allow us to ramp up to 30 units per year by F '29. So already, we have identified over 300 trade areas where we think we can build new Chili's. And the pace that we want to go is 2% to 3% new units per year. So just those 2 metrics give us a good line of sight for 10 years of growth.
Okay. So let's look at the map on where can we grow Chili's. And the good news is we can really grow Chili's everywhere. So let's start with the green states. Historically, California, Texas, Florida, those have been really strong markets for us, and that's where we have the most Chili's and Texas and Florida have the added benefit of above-average population growth. So just when we think we've already built as many Chili's as we can build in Texas and Florida. It's just not true. We have in the pipeline right now. So people keep going here, there's new development, and we keep growing. So that's great.
If we look to the upper left in the Pacific Northwest, let's just take the state of Washington. We have 1 street side Chili's in the entire state of Washington. We looked at 2 of our nearing competitors. They have 35 and 40 locations each. So plenty of opportunity to build up there. All right, let's go all way to the other coast in the yellow. So the Southeast. Those areas are really attractive for many of the same reasons that Texas and Florida are. So they have growing populations and plenty of development for us to be a part of.
And then finally, the middle, and I would say that pink could probably really encompass all of the white as well. But historically, the middle of the United States those have been more franchise areas. We bought a lot of those back. We do have the growth rights in all 50 states, but we're just underdeveloped in those areas. So we have a lot of opportunity there. I'll give you 1 more example in the -- we just bought back our franchise restaurants in Mississippi and Alabama, and we had 10 restaurants in Alabama.
We have already identified 5 additional restaurants for the State of Alabama and they're already in the pipeline. So we feel really good about our ability to build these Chili's in a disciplined way, coast to coast. And what is a great plan if you can't execute it. So this is also important. So -- we've had an investor growth strategy, and we have invested in our restaurants, but we've also invested in our teams. And so we built, like I said, a really great restaurant development team. Aaron and Doug are building great operations, -- we built great marketing, finance, IT, supply chain.
The great news is this is a cross-functional effort to ramp up new unit growth and all the teams are ready. Okay. So in summary, we have the demand. We have plenty of places to build. The returns look great and the teams are ready. And so I'd like to tell you, in fact, that we already have 15 units approved and ready to go for F '28. That's already in the pipeline already. We have an additional 15 restaurants approved and ready to go for F 29 and we have 46 more deals currently in the works. So I'm highly confident that we can achieve these goals, and we will achieve this plan.
All right. So let's turn to reimages. So first of all, why do we want to reimage. The reason is, is that 75% of our guests eat inside of our restaurants. And so we need them to be clean and well maintained, and we need them to be relevant. And reimages are a great way for us to do this. You can see on the left, we got 11 of them completed in F '26. I can tell you, as of today, we already have 70 in the works, ready to go for 2. And our plan is to ramp up to 10% of the system in F '28, and we are well on our way to doing that. And you guys have been asking, so here are the early results. We have 16 restaurants reimaged to date.
Right now, the average spend is $600,000 per unit. But what I would like to tell you about this is within that spend, there was $100,000 that we allocated to the bar reimage. And that is going to be only necessary for about 20% of fleet, it's some of our older prototypes. And so I guess the better news is that 80% of the fleet will not need that incremental spend, so it will be closer to $500,000 in spend. So we feel really good about that, and we'll continue to look at that spend as we scale up and make sure we continue to optimize.
Okay, right now in those early restaurants, we are getting a 3% to 5% sales lift, and that is on top of the fantastic momentum that we have in the brand that we've been talking about. So we are really happy about that. And those sales lifts do allow us to easily clear our cost of capital. So we feel really great about those returns. And finally, probably the most important thing is that as we are reimaging these restaurants, we are getting overwhelmingly positive feedback from our guests and team members and we know that, that is very important.
So they love the feel, they love the look, and I'm really excited for all of you guys to get to see it live today who are here in Dallas with us, but it's really, really good. Okay. So priority number two, maintain a strong balance sheet. So like I said, we've done a great job of paying down our debt. Our lease adjusted leverage is at 1.4x so moving forward, our target is to keep it at less than 2x. We're doing that just so we have a little flexibility for seasonality, for timing of share repurchase, but we think that's a great leverage target to maintain a strong balance sheet.
In addition, we just recently took out our $350 million bond. We did that to save on some interest cost. We put that bond on our $1 billion revolver, and we still have $700 million of liquidity. So overall, we in a great financial position. Okay. And priority number three, excess cash will be returned to shareholders. And we are going to do that in the form of a share repurchase program. And so our goal will be to reduce our shares by 3% to 5% annually -- we're going to do this at a consistent annual pace over time. It's going to be funded. It's going to be funded by our excess free cash flow.
And so we know, the most important thing is that we grow the base business organically. We're going to continue to do that. But we do think that a nice share repurchase program is a very good complement to the overall strategy to help us grow EPS. All right. So how does it all roll up? Okay. So the first thing is the next phase is still going to be powered by the top line. Our investor growth strategy is still in place. George has talked a lot today, and everyone has about how we still feel we have plenty of opportunity to grow those same-store sales by driving in those new guests, and we have plenty of capacity to welcome into our restaurants.
Now in addition, we have a new unit growth lever that we feel really confident in our ability to execute consistently over time. So those 2 things together will help us to drive sustainable earnings growth. All right. So here are the new 3-year targets. And so we believe these plans will allow us to deliver 4% to 6% annual revenue growth and delivered double-digit EPS growth. Underlying these assumptions are the 2% to 3% new unit growth, a 3% to 5% share repurchase plan and, of course, maintaining our strong balance sheet. And so we know if we deliver on these metrics that we will be able to deliver substantial shareholder value over time.
So to sum it all up before we get to the questions, first, we have built a really strong sustainable financial model that is generating a ton of cash flow. We have a disciplined capital allocation strategy. We continue to invest into the business and still maintain a strong balance sheet. We now have multiple growth engines not only do we have same-store sales, but now we have reimages and new units.
And finally, again, we have a clear financial outlook that we are highly confident in our ability to deliver upon, which, again, we know that can deliver substantial shareholder value over time. Okay, with that, I would love to invite some of the executive leadership team to join me on stage so we can have another Q&A session and take your questions.
Kevin? And if you could, again, same rules apply. Now you can ask any question on the whole presentation. But if you could wait for the microphone and state your name, and we will be happy to answer your questions.
Brian Vaccaro with Raymond James. I guess my question is for Aaron. I guess you were talking about throughput and table turns. But what is the average table or dine time at lunch and dinner? And I know it can be party dependent, but how long is too long for the average visit? And I'm curious what percentage of your visits would fall into that bucket.
Yes. I don't have the exact number of how many visits fall into it. I would say that the average in time from the guests the time they sit until the time that they actually pay their check, that's how we can see visibility there. And right now, that's around 50 minutes, 5-0. So we do know that keeping it smaller than that and under an hour is going to be important.
I think -- and you could also mention our ticket times, though, the time it takes when people order to get that ticket to the table is what is that on average at 11 minutes. And so we're really great greeting the guest getting them set and getting their food to the table. And that is super important. And then they, at their leisure, can enjoy their mill, and that is what equals kind of that 50 minutes.
Okay. Great. And if I could, just a quick follow-up for you, Mike. On the CapEx outlook, I know you're somewhere around $275 million this year. Where do you see that increasing to over the next few years as you ramp towards your unit growth and remodel targets?
That is a great question. And every year, I will give very specific guidance. But what I'll tell you is, for now, if we want some nice whole numbers this year the midpoint we guided is the $275 million. I would ramp that up to $350 million and then $400 million kind of moving forward. So those are some good ballpark numbers, reserve the right to tweak them as we move on, but that would be a good starting place. .
Sarah, Senator, Bank of America. I have 2 questions. One is -- I think for Chris and 1 is for maybe Mike. The first question is, I think Kevin mentioned labor scheduling being probably 1 of the bigger differences I think, between AUV, high EV stores and getting managers to be able to really staff ahead of the demand they want. Is there like a technology kind of solution for that? I'm just thinking about putting together the labor matrices.
And if so, are managers kind of receptive to that in my observation take time to convince anybody that the predictive analytics can actually tell them what to do. So any kind of technology solutions from that first -- and then my second question, Mike, just the idea of like returning cash to shareholders through repurchase versus dividend, just kind of the philosophy kind of versus reintroducing the dividend, the play there.
I can start with the first one. Yes, there's absolutely technology today to manage labor, but I think we do have a lot of opportunity to improve that. So we're actually in the process of reevaluating all of our office tech, which labor is a big piece of that. So I think when it comes to things like labor deployment, there's still a lot of manual activities that occur within our restaurants. So you'll notice that our very best restaurants with seasoned managers do a fantastic job, but that's still based on tribal knowledge. We think we could do a much better job with the technology to make that easier for even a new manager.
All right. And as far as dividend versus share repurchase, -- so right now, we just love the flexibility of the share repurchase program. We're just really ramping that back up after taking all that time to delever the balance sheet. The dividend will always be a consideration. So I'm not saying never. I'm just saying not right now. But as we continue to grow and continue to implement all of these strategies, the dividend conversation will definitely come back as we continue to get larger and larger.
Chris Carril, KeyBanc. Michaela, just a question on the new targets. I know the growth is still top line driven and focused. But can you talk about what's assumed from a restaurant margin expansion perspective in the new targets?
Absolutely. So what I will say is it always depends on how fast we grow those top lines. So the faster we grow the top line, the more margin opportunity we have, and we've demonstrated that those busiest restaurants have any of room to grow. On a more normalized run rate, I would say I'm still going to stick with my 20 to 40 basis points per year. I would say I would build that into the models over time because that allows us plenty of opportunity to continue to invest back in the brand to handle any inflation that comes our way and still really protect that value proposition, which we think is really important for the long-term ability to drive traffic. .
So first, I want to myself for the question. I'm going to apologize to some Chili's general managers that threw on the call. But my question is on inventory. You're currently doing it once a month. It was 3 hours per -- if I understood this is correct me. But 3 hours for 2 managers, 6 hours and you got out down to 3. And of course, I'm thinking, well, gosh, wouldn't it be great to do inventory. Here's the apology part. Once every 2 weeks or even once a week because I can't imagine it's their favorite part of the job, but really just in an education in terms of how it works inside of the Chili's would it make sense to do things like this.
So let's just take this as an example, things like this more on a real-time basis, closer to example, once a week to where if you really do have a problem somewhere and shrink or waste or whatever the case may be, that you can course correct a lot faster and kind of train the way that you need to of just showing your people in terms of what's optimal from a customer execution perspective. And of course, benefit margin as a result. So just a little bit more detail of the example that you gave, please?
Aaron, do you want me to start with just on the financial reasons, John. So right now, because of the process, we do want to keep it at once a month. And the great news is -- we feel really good about the tools we have. We have actual versus theoretical ports, so we can see where there's waste. And then we also have some opportunities if we think there is a problem that you can do in a weekly inventory, you can get a hot sheet or a hot inventory to look at that.
And so financially, and I say we feel really good about it. And then I think, Aaron, you can talk about just again, the tools you have or any other thoughts you have about that. But as technology evolves, we could do things probably faster, quicker, more frequently.
Yes. We used to do it more frequent, and I will be honest to see it even just doing it once a month, we're seeing better results. They're spending more time. They're more detailed with it. But we have tools that they can see on any given day to go back into their inventory to see what they've sold since then to pinpoint diagnose where they may have opportunities. So they're constantly looking at that.
I'd just add 1 thing is like we have -- there's all different ways we can improve waste, right? The #1 thing we can do is actually be honest about what country SKUs do we need and challenge ourselves of really are we going to lose sales. So like -- we've actually been counting, and Aaron said it a lot less than we did 4 years ago, but our waste has never been better because we're spending more time on both challenging the ingredients that we have in the pantry as well as making sure they have more time to do the right coaching and less time counting. So I don't anticipate that changing unless technology allows us, as Aaron said, to do it more frequently.
Andrew Charles from TD Cowen. Michaela, just on the margins, message heard about 20 to 40 basis points of margin expansion per year depending on the comp. But if we think about it in the framework of the North of 6 restaurants, that's 400 basis points gap. Philosophically, how much of that gap would you expect to realize versus reinvest over time?
That's going to be -- it's a journey that we've been on. So from 1 aspect, we've done a lot of work getting some very material investments already in the model behind us. Now every year, this team is really great about coming up with new investments that we needed to continue to put into the brand, and we do that. So with that being said, -- are we going to get all the way to 400, maybe not. But what I know is that we don't know what the ceiling is yet, and we know that we have plenty of room to expand margins and then yet still invest in the brand handle any inflation that comes our way and continue to expand those margins. So I just like having all that leeway.
Makes sense. And Kevin, my thought for you is just about the Brinker portfolio. You encouragingly talked about the operational metrics improving, Maggiano's, not quite yet on the financial side. But I guess what are you looking for in your open mind in this year to make this either a single Chili's brand or alternatively, within the 3-year framework, is there a cushion here for some M&A for a new brand, if you like?
Right now, we're focused on the 4 walls of Chili's and starting to build new Chili's as well as stabilizing the Maggiano's business. So we're going to stay laser-focused on that. That said, we're obviously in a much stronger position today, as Mike talked about, than we were 4 years ago. My guess is in the next 2, 3 years will be even a stronger financial position. So a part of the Maggiano's turnaround is understanding how to do shared services and how to manage a portfolio of brands.
But if we're able to continue to grow Chili's and build new Chili's and continue to improve our financial performance, it just opens up a lot of opportunities to look at different ways to grow. So right now, we're having Investor Day, and we're talking about our main new growth lever is going to be reimages and new Chili's, but obviously, that could change 2 to 3 years from now.
I just had a question about how you framed the remodels, right? I think you said sort of like expected 3% to 5% left. Is that what you're seeing now out of some of these early ones? Or is that like when we think about the range that we'll do, maybe it's more impactful upfront and then that kind of changes over time. Like how did you think about those targets for that is?
So what I'll say right now is that 3% to 5% is what we're actually getting in those initial 16 restaurants. So as we continue to expand this program, and it's early on going to be coast-to-coast in different DMAs, we have great software, we can do test and learn and really understand what's driving I would expect that to help us to prioritize where we go next and kind of prioritize those DMAs so that we continue to get the biggest bang for our buck. But again, that's the lift we're getting again above and beyond what this brand is already doing and we feel really good about the ability to continue that throughout the fleet.
I had a question back on marketing, too. It's interesting, right? Like it seems like some brands kind of just deciding that like influencers work. Is that what sort of like move the needle most with younger customers like we weren't really on those channels before? Or I guess, like is it the value message that's resonated with them? Like what's kind of worked best for that young customer cohort?
The good news, I think it's a combination of all those things. So influencers has been a big part of us being becoming more relevant on social media. Now I think everybody is probably doing some a bit of work with influencers. So I don't think it's just like a magic like turn the switch on and influencers and everything is going to be great. I think our team does a really nice job of partnering with influencers on the top -- on the messages we want to get across.
And value is 1 of them, right? So people -- the content that is being made in our restaurants when people are showing the value of a 3 for me and -- and sometimes it's in their cars, showing the value compared to fast food. It resonates with that younger audience. But also, in addition to that, it's also the culture pop things that we do and all of that kind of working together. So I don't think it's just 1 thing, but it's certainly a big part of it.
And the thing I would also just add is like, I mean, influencers is just another form of marketing. At the end of the day, if the product is not better. If like our experience and our food is not better, that could be a double-edged sword, right? So the reality is people are seeing these things online. They come to the restaurant. They're having a very similar experience, and then we're getting a lot of organic shares. So I think these guys have done a wonderful job. I think they're probably the best marketing team in the industry.
But I would also say the operations that Aaron has been leading is a big part of why we get disproportionate returns on this because what you see in the social feed is what you get in the restaurant and it just continues. I mean if it was the opposite, you'd have the opposite thing happening with social, right? So -- that's just something I think people forget, it's like, yes, it's a great tool. But if you don't have a great experience, it's not going to matter.
I totally agree. Like the best driver of marketing ROI is the work that Aaron and her teams are doing to deliver a great experience. And you'll hear in our heart of house in our kitchens, the term make sure the food social media ready, like the idea that as soon as that food hits the table, it could be seen by millions of people basically 2 minutes later, right? And our teams have really embraced that and they take a lot of pride in that.
I wanted to ask you about reimaging pace versus new units. I mean, obviously, reimaging is the tenth of the price of a new unit. The returns by math looks pretty similar between the 2 20%-ish -- so you would be the same there, but one could argue there's network effect to the positive for a brand when you reimage a big part of the brand, all of a sudden, maybe even those club scores go up. So maybe it would make sense to go pedal to the metal on reimaging first and then get the muscles ready for units later. What are your thoughts on that? And how did you decide on this cadence for each of those?
So right now, starting with the reimages to get it to $110 per year. We do have some restraints where we need to be in the south in the winter in the north in the summer so that we can get these done with some of the weather. But just ramping up to 100 in our history, $125 is the most we've been able to get done in a year. So that kind of is -- we're ramping it up to as fast as we've done historically. Now with that being said, once we get to that 10%, if we see we have the capacity to continue to ramp up even faster, and we're getting those great returns, we'll definitely look into that.
But right now, -- it's the same team, but it's 2 different, I guess, growth tracks for the teams that are going to execute the reimages versus the general contractors and other teams that are building those new restaurants. So we like the balanced approach of growing both in [indiscernible].
The other thing I would just add is like everything we're doing in this business is just try to create sustainable models like we're not like someone was asking me a few months ago about the World Cup and I'm like, we're just not interested in the World Cup because it's a onetime thing and then we got to roll it over. I'd much rather those resources work on the operation or technology or culinary for long-term growth. And images and newbuilds are no different.
And the way I think about them is we want to build a spat that can reimage and build, but we don't have to lay them off 3 years from now because we did all our reimages in 3 years and then we have 7 years. We don't need reimage. -- right? I think that was the old Brinker. The new breaker is all about slow, steady growth. Now we tend to exceed the slow steady growth
We design so that is all sustainable. Even if that means slowing down some growth that we could have immediately in front of us. And I think that's a difference. This is an incredibly disciplined leadership team -- and we always think about the long term of this thing versus can I go get that dollars tomorrow? .
Jim Salera with Stephens. Thanks for the time and all the detail in the presentation today. Just doing some quick math, if we take the 4% to 6% target back out the unit growth that applies kind of 2 to 3 on SRS. Can you just give us some color on how we should think about that composition? And you talked a lot about the opportunity for incremental traffic but maybe how we should think about ticket first traffic in that SRS going forward?
So what I'll tell you is when we design these historical long-term targets, -- the first thing we want to do is make sure that we are highly confident in us being able to achieve those, and we are highly confident in that. And so underneath that, we think that 4% to 6% total revenue growth that does have some pretty strong same-store sales and unit growth below it. With that being said, specifically, you asked about the pieces of same-store sales kind of early in this turnaround, it's going to continue to be more same-store sales than it is new units because those are going to ramp up. .
But long term, there's going to be a little bit of price, and we're going to drive positive traffic. And so that is what this whole plan is designed to do is to drive positive traffic over time in those same-store sales. and we think we can do that. Mix, on the other hand, we're going to continue to try to drive that mix, but we've done such a fantastic job with it. I kind of consider that icing on the cake. So I would consider that to flat to slightly positive moving forward. But again, a little bit of price, but it's all about driving that traffic.
It's Chris Carril again. I had a question, first, Michael, for you. Just a clarification. The fiscal '27 revenue growth guidance -- or guidance implies revenue growth, I think, of 6% to 8%, which would imply '28 and '29 could be lower if the revenue growth guidance, the 4- to 3-year target. Is that it's kind of surprising given unit growth is ramping during that same period. So is that just conservatism or am I missing something?
I think it's really just thinking about if we've been delivering double-digit same-store sales, high single-digit same-store sales, we're still altogether trying to figure out what does that new normalized run rate look like for same-store sales. So again, when we think about these long-term targets, we said, okay, 2% to 3% same-store sales that seems highly achievable for us. So let's just count that as the base case that we can do.
But with that being said, with the momentum that we've experienced in the brand, that gives us a great opportunity to outperform those targets. So I guess I'll leave you with that as we're just trying to outdoes this thing ever settle on to be steady case scenario, but we always have our foot on the gas and want to hit or exceed those targets.
Okay. That's helpful. And then, Aaron, could you maybe elaborate on how the company is shifting to an ownership culture and maybe what that could look like longer term, especially for the ops team.
Yes. I think a lot of that is what I talked about with behaviors, right, focusing on behaviors versus chasing numbers I think long term with ownership, we are looking and evaluating a stock comp program. So in addition to the comp program we have today. I'm confident that you'll see that in the next 12 to 24 months, but it is something that we feel like will drive ownership. -- for the future also.
Mike Halen, Bloomberg Intelligence. Kevin, when we spoke in the past, the tokenized customer data was very expensive and almost -- it was almost prohibitive to help run your business on a regular basis. So versus maybe a year or 2 years ago, is it deeper? Are you more willing to spend since you're so much more profitable or was this -- we need to create a 3-year plan, and we want to give us some data point.
I don't think it -- I still don't think it's super easy. I mean, I think every time we want to pull stuff, it's -- we have experts in their field and data analytics that have to grind the numbers and get these answers. So I think we're using it more because we're getting better at what we're doing. But is it like a systemic as I think we all would hope No. I mean the thing I really I'm trying to push for is can we get the ability for our everyday managers to be able to pull this data and query it like a lot of other databases. We're not there yet, but I mean that would be the gold standard. But yes, it's still not super easy to call like we can pull sales data and regional data and things like that. It's just tough. It's a lot of data.
But I will tell you, in the beginning, we had to outsource it and it was expensive. It is now in-house. We have our own in-house experts. We now had to wait to start gathering all the data to start reading it because we needed 12 months. And so that's why now we have the data available every month, Kevin and I review it or every quarter at least with the teams, they're gathering it, they're tracking it and giving us insight on that. But long term, we'd like to make it a lot easier to access it.
I give you a great example that they pulled the other day. I was like I blew my mind. So we're learning on this, right? So they came and done an analysis on basically how quickly it takes for a server to ramp up. And I'm like how could you possibly figure this out. And they're like, well, we've got all this GWAP data from the tabletop device. -- and they can track for new servers that come in, when does the GAP settle to a run rate, and that's basically the time that they're up to speed, right? It was 90 days, right? So what does that tell you about our trading system.
One, Things are pretty complex servers and two, we got to figure out how to going to train faster, right? So things like the new team member hamheld, which is -- and those of you that are going to be in restaurants are going to be able to do it yourself, we'll have you do an order. -- like that's going to take that 90 days and shrink it, right? You can probably do some things from a training standpoint, how do we get people up and running faster than doing so much computer time, right? So we're learning every day from this data analytics team. They certainly are getting stronger, and we are doing more of it in hail.
Margaret-May Binshtok from Wolfe Research. I wanted to ask -- and Mike, I think you mentioned staffing being an important component of kind of the pace of unit development going forward. Where are these general managers, which is an important part of opening these new restaurants. Where are they coming from? What are you guys doing now to ensure that you have that pipeline ready? And are they coming from existing restaurants?
Yes. So you know what, Aaron, I may let you answer that since you were the expert on that one. .
Yes. So we have a lot of leadership development programs that we've put in place over the last several years to help us build that pipeline. So we have a program called RISE, it's for new newer managers that are actually interested in being a general manager. And so once they get to that peak and then we are always looking geography and planning ahead. So we do throughput planning of what does it look like for staffing.
Alabama is a good example. We have the 10 restaurants that we just bought back, but we're continuing to build the pipeline within internally doesn't mean we won't look externally, but our development programs, we have another program called Lead. That's for general managers ready to be directors of operations. These internal programs are getting them ready to take that next level.
So most do come internally, but the great news is when you have results like ours, that does allow us to attract a lot more external talent that we may not have been able to attract before -- and so that just gives us another avenue to get that talent in the pipeline, get them trained to these programs and get them ready for the restaurants. .
Jim Sanderson, Northcoast Research. I just wanted to go back to the new unit growth strategy. what's baked into the square footage assumptions? Are you going to move into markets that are more densely populated, more expensive with smaller square foot stores to still generate the cement those results.
Yes. So right now, we have a new prototype that is coming. It's a little bit bigger. It has more tables than the most recent 1 we've been building. So that's great news because we have these growing -- but to really specifically answer your question, there are no plans to make the restaurants smaller because our plan is to continue to grow the AUVs and get more guests in there, and that's where we make all our money. So we think we have a really optimal size now it can handle these restaurants can handle a ton of volume, and that's what we want to do as we continue to move forward. So no small -- no plans for a smaller ones.
Just a quick follow-up question, following up on margin. What's your G&A outlook? Is that going to grow slightly lagging revenue and what type of opportunities there to drive some leverage on SG&A long term.
Yes. No, that's a great question. So the last 3 years, like we said, we -- as we had to invest back into the restaurants, we really -- we really had a bare bones team truthfully up here at RSC as well. And so we've had to invest back in these teams. Restaurant development is a great example. We have really grown that team to be able to ramp up, execute the reimages get all of the new restaurants going.
George's team has grown with all the marketing and the social media. So we've put a lot of investments there. With that being said, Typically, you guys see us stay around that 4% of revenues. As revenues continue to expand, now that we have some of the big investments behind us, that could start to leverage a little bit, but I don't have any specific guidance to say, hey, it's going to go from 4% to 3.5%, but it is an opportunity on the model to leverage in the future, absolutely.
All right. Looks like everyone's asked answered all the questions in the presentation.
That sounds good. So first of all, just thank you for your time and attention today for our Investor Day. -- especially for those that are on the webcast, they're not going to be able to be with us here at the test kitchen. Your feedback is really important to us. So we'd love for you to scan that QR code and give us feedback on how we can be better and any feedback is appreciated. And then I'll just quickly wrap it up. So just to just recall what we talked about earlier in the day.
I hope you leave understanding this is a completely different business. In terms of the investments that we've made, the stronger financial foundation, the teams that we've built, the capabilities that we have, what we're focused on. This is a fundamentally different business. The turnaround is behind us. It's in the rearview mirror, and now it's all about playing offense. And that gets to the second point, which is have clear drivers of sustained same-store sales growth, but we also have this new incremental growth layer called newbuilds and reimages that are going to continue to be able to comp the comp the comp and create sustainable, profitable returns for everybody.
And the 1 thing that we haven't talked about today, which I think is really important is our exceptional leadership team. And many of you in the room here will get to interact with them, both here at the tasting and then we go out to the restaurant. I would say I think we have at least 1 of the best, if not the best leadership team in the industry. It starts with -- they have incredible functional expertise. So I'd encourage you of those that are going to be spending time with them ask them whatever you want to ask about their functions. They know everything about this business. They're in the restaurants, they're with our people.
They really understand what we need to do to continue to drive those growth levers we keep talking about. The second thing I would tell you is they work really well together. So if you ask them what the priority is on the business are, you're not going to get 5 different answers from 5 different leadership team members. They're all working on the same thing. -- because anything we're doing in these businesses, we talk about these things like improving service like ticking candy from a bag. It's hard to do these things. everybody you guys cover are talking about these things, but how many actually really deliver this consistently -- and it's because these require cross-functional leadership to make them come to life.
And I would say those are the 2 reasons. And then the third thing I would tell you is -- this team is incredibly disciplined. And when I say discipline is they don't get distracted by shiny balls. And maybe there's some good ideas that come up and say, okay, what's going to come off the plate so we can focus and do that -- but we don't just keep adding to the flower stack until the flower overwhelms, right? And that's why we're able to execute because they're disciplined and they work well together, and they're incredible experts with their teams.
So I'd encourage you whether the people up here, and we have some of our leadership members over there. please interact with them, ask them questions. The they're the ones that are bleeding this thing, and they're having incredible success because they're such a good leadership team.
And with that, I want to say thank you to everybody. And then I think we have -- is it a 15-minute break?
Thank you, Kevin. Thanks again. We actually have a little bit of extra time. So we are going to take a little bit of a longer break, maybe like 20 minutes, give you guys time to pack up your things because we're not going to be staying in here. We're actually going to be moving downstairs to lunch. You'll have time to use the restrooms, and we have people outside that will help direct you downstairs to lunch.
So what time should they be at lunch, Kim?
So let's be at lunch at, let's say, 11:25. So that can be a little bit more than 20 minutes. All right.
Thank you so much. Thank you, and thank you to everyone online. Thank you for joining us. Thank you.
Brinker International, Inc. — Analyst/Investor Day - Brinker International, Inc.
Brinker International, Inc. — Q4 2026 Earnings Call
1. Management Discussion
Good day, and welcome to the Brinker Q4 F '26 Earnings Call. [Operator Instructions]
It is now my pleasure to turn the floor over to your host, Kim Sanders, Vice President of Investor Relations. Ma'am, the floor is yours.
Thank you, Holly, and good morning, everyone, and thank you for joining us on today's call. Here with me today are Kevin Hochman, Chief Executive Officer and President of Brinker International and President of Chili's; and Mika Ware, Chief Financial Officer.
Results for our fourth quarter were released earlier this morning and are available on our website at brinker.com. As usual, Kevin and Mika will first make prepared comments related to our strategic initiatives and operating performance. Then we will open the call for your questions.
Before beginning our comments, I would like to remind everyone of our safe harbor regarding forward-looking statements. During our call, management may discuss certain items, which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
All such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such risks and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC. And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations.
And with that said, I will turn the call over to Kevin.
Thank you, Kim, and good morning, everyone. Thank you for joining us as we discuss our financial and operating performance for the fourth quarter, as well as provide guidance for fiscal '27.
Q4 Chili's same-store sales of plus 6% marked our 21st consecutive quarter of same-store sales growth and again significantly outpaced the industry. This strong result was rolling a plus 24% from last year and a plus 15% from 2 years ago for a 3-year cumulative comp of 50%.
There are lots of different ways to look at our results, but the key conclusion is that Chili's turnaround is real. Fiscal '26 saw this brand increase its lead as the #1 casual dining traffic brand, and the results are sustaining year-after-year. It's important to note in this difficult operating environment that instead of using precious resource and investments on initiatives to drive short-term sales, we at Chili's focus our resource for long-term sustainable growth, improving food service and atmosphere and the team member experience, as well as positioning our brand to be more relevant, easy and distinctive.
These experience improvements, coupled with our everyday value leadership represented by a per person average spend that is $3 to $4 below competition, are supporting a powerful flywheel of traffic, sales growth, margin expansion and then reinvestment into our business. And this steady approach is why the business will continue to win. The American consumer demands experience and great value, and they are showing up for those brands who consistently deliver that.
Third-party syndicated data confirms Chili's continues to be ranked in the top tier across key measures, like value, quality, service and overall experience. We still have room to improve, but our progress gives us confidence that we will sustain traffic gains and repeat business. We are very appreciative and proud that Chili's is one of the small handful of brands the American consumer trusts, and we're willing to increase their visits to. And we will work hard for our guests to maintain both our value leadership and improving our guest experience year-after-year.
Now I'll give some updates on the Chili's business. We're now 4 months post-Big Crispy launch, and we can share some more detail on how it's performing. The launch has been a success, overdelivering on our lofty estimates going in. We were selling 20 chicken sandwiches per restaurant per day pre-Big Crispy launch. By the end of Q4, we were selling 55 sandwiches per restaurant per day, an increase of 175%, and that number continues to build in the current quarter.
For perspective, the Big Crispy is bigger than the '24 Big Smasher launch and the '25 Big QP launch. And as you all know, those were 2 very successful launches. The customer reviews and social media comments have been excellent, declaring Chili's victorious for size, price, value and taste versus fast food. The Big Crispy is now a signature sandwich and another important chapter in our Better Than Fast Food story that will continue to position Chili's uniquely as a restaurant destination.
In addition to culinary upgrades, our team continues to deliver world-class marketing to drive traffic. Q4 highlights include the successful Big Crispy launch, the remake of our famous 1985 Baby Back Ribs Jingle commercial featuring Popstar Lizzo, and a continued success with our Margarita of the Month program.
As a reminder, our marketing strategy is driving sales overnight and brand overtime. It's clear the marketing is driving sales, but they are also doing an amazing job of strengthening the brand's positioning over time. We are 2.5 years removed from the initial viral cheese pull in early '24, and YouGov's third-party data reported that Q4 was Chili's highest level of buzz across all cohorts ever recorded. Chili's is everywhere. It continues to be America's hottest restaurant brand and the sustained relevance of the brand proves this repositioning has legs beyond one social event.
Now let's talk about operations. We continue to focus our efforts on both removing friction as well as improving restaurant throughput as this is a key piece of our sustainable growth flywheel. In addition to listening to our managers' ideas on how to make operations easier, we now have the North of 6 team, our highest volume restaurant leaders to formally source ideas from 2. I think the important thing to note is North of 6 leaders typically have the additional perspective of increasing throughput because of their incredibly high volumes. We recently made some very significant changes to free up managers' time to coach teams to be with guests on the floor.
The first is the ruthless simplification of our shift line checks, a set of tasks the manager is mandated to perform to know their team is ready to take on guests. We have taken that by daily process down from 8 pages to 1 page and freed up 30 minutes of manager time per day. Think about that as 22 years of manager time freed up annually across our system, and that's time much better spent side-by-side coaching their teams and in the dining room with our guests.
A second important change we made is upgrading hot schedules. Our tool managers used to schedule labor to make it easier to schedule the right number of team members per shift. We know the #1 thing that can set up a shift for success is properly written labor schedules and anything that makes the task easier to do correctly is a big win for our managers and improves our ability to take on more and more traffic.
And lastly, the VPs of operations have chosen their obsession metric for fiscal year '27. This year, they have chosen traffic for a third year in a row, but have added a second metric, profit improvement. They chose a second to begin developing a stronger ownership culture on restaurant expense with things like R&M. We recently made profits a bigger percentage of their bonus structure, so it is even more important to field leadership to nail the flow-through of all the incremental sales.
Before I close out Chili's commentary, I do want to touch on one more important thing. Last quarter, I talked about a new initiative we have started with the objective of speeding up restaurant cycle time, meaning looking at everything that goes into the total time of kitchen prep and the dining experience and finding ways to remove time to serve as another traffic building block.
Most cycle time improvements may seem small, but will continue to compound to make meaningful impacts as well as improve the guest and team member experience. Remember, this is about attacking anything that gets in the way of a smooth dining experience, which should also improve overall guest satisfaction.
The first of these initiatives have now been successfully rolled out. Supermarket simple for loyalty reward redemption. In the newly rolled out system, the guest simply puts the rewards telephone number into the Ziosk. And at the end of the meal, the discount that is available like free chips and salad is automatically removed from the check.
Then the Ziosk tells the guests how much they save by being a rewards member, kind of like what happens when you put your loyalty number into the supermarket. The Ziosk software upgrade will reduce the manager time needed to resolve check issues, deliver faster table turns and more importantly, improve the guest dining experience.
To summarize, Chili's long-term growth year-after-year is a result of deliberate set of choices we make to deploy resource and capital to improve the guest and team member experience while driving same-store sales now and over time. The traffic growth reinvestment flywheel continues to spin and create sustainable profitable growth.
Now I'll give a short update on Maggiano's. A reminder that given the success we've had focusing on Chili's, Maggiano's now only represents 8% of sales. For perspective, Chili's outside of the U.S., which is a licensed model is expected to deliver 4% of Brinker profits this fiscal, and that will actually surpass Maggiano's profit contribution.
While we are seeing some green shoots with financial results improvement and guest value scores, the turnaround at Maggiano's has been mixed. We've made progress on operational and culinary improvements, but some of that progress has been offset by losses with our core guests from our prior strategy.
So while we're headed in the right direction, the turnaround is happening slower than we had planned. We think we're on the right strategy, but we need to be more focused on delivering a few important changes that can make the biggest impact. These updates are all contemplated in the fiscal '27 Brinker guidance we have provided today.
Before I close, I want to share 2 weeks ago, we had our Annual General Managers Conference in Arlington, Texas. To summarize the event, the restaurant leaders are proud of their results, excited about the plans for fiscal '27 and ready to lead their teams for another year of growth significantly ahead of the industry. Because of their leadership and their success, almost 80% of GMs now earn more than $100,000 this past fiscal, and that number keeps growing annually. Our stated goal to those GMs 4 years ago was to make their jobs more fun, easier and more rewarding, and you could sure feel that in the room that we have collectively delivered on that commitment.
Manager turnover has been well ahead of the industry for years now, and now hourly turnover recently moved ahead of the industry, too. We also recognized our GM of the Year, P.J. Tremblay, leader of the East Fort Myers Chili's and our Above Restaurant Leader of the Year, Dale Bullotta, the VP who leads our California region.
I also want to recognize Dale's colleague, the legendary Vice President in the Northeast region, Todd Pierce, who was inducted into our Chili's Hall of Fame along with 35-year Director of Operations in South Florida, Tony Viola. Congratulations to all 4 of these amazing leaders, and thank you for your years of making guests feel special and leading our restaurant teams.
To close, Chili's delivered another strong quarter, rolling very big numbers from the prior 2 years. The macro headwinds the industry is experiencing are still there, but Chili's is positioned to continue winning in this environment with improvements in food service and atmosphere, coupled with our industry-leading value.
That formula has proven quarter-after-quarter to be resilient in driving traffic and outperforming the industry. And with all of the initiatives we have planned for fiscal '27 to continue improving the fundamentals, we are poised to have another year of profitable growth that significantly outpaces the industry.
Now I'll hand the call over to Mika to walk you through fiscal '26 fourth quarter numbers. Go ahead, Mika.
Thank you, Kevin, and good morning. As we close fiscal 2026, today's results highlight major milestones in Chili's growth journey. The completion of 5 consecutive years of same-store sales growth, positively lapping all 4 quarters of double-digit same-store sales growth this past fiscal year, including 2 quarters that were above 30%, 2 consecutive years of traffic gains and average annual unit volumes increasing from just over $4.5 million at the end of last fiscal year to $5 million this year.
Together, these results demonstrate the continued momentum and sustainability of our focus on the fundamental strategy. For the year, we reported total revenue growth of 7.9%, restaurant operating margin improvement of 30 basis points and adjusted EPS growth of 20.6%.
Turning to the fourth quarter. We continue to see strong year-over-year top line growth, traffic well above industry averages and restaurant margin expansion at Chili's. Brinker reported total revenues of $1.536 billion with consolidated comp sales of positive 5%. Our adjusted diluted EPS for the quarter was $3.07, up from $2.49 last year, a 23% increase. Chili's comps were positive 5.6% in the quarter, driven by price of 4.3% and positive traffic of 1.5%, partially offset by negative mix of 0.2%.
Chili's continues to gain momentum through its strong everyday value platform, led by the success of the Big Smasher, the Big QP, and now the Big Crispy Chicken Sandwich. July sales and traffic have significantly accelerated versus the fourth quarter, further widening our lead over the casual dining industry. For Maggiano's, the brand reported comp sales for the quarter of negative 2.5% with negative 5.3% traffic, negative 0.1% of mix, partially offset by price of 2.9%.
At the Brinker level, restaurant operating margins were 18%, a 20 basis points improvement year-over-year, primarily driven by sales leverage, partially offset by unfavorable food and beverage costs as well as higher advertising and insurance costs.
Food and beverage costs for the quarter increased by 80 basis points, driven by 4.4% commodity inflation, primarily from higher beef cost, and a temporary spike in tomato prices following a late freeze in Florida. Tomato costs remained elevated longer than expected, but have since normalized and will not impact Q1 cost.
Labor for the quarter was favorable 90 basis points year-over-year. Top line sales growth offset wage rate inflation of approximately 3.1%, additional investments in labor and higher health insurance costs.
Restaurant expenses for the quarter were favorable 10 basis points year-over-year with sales leverage and lower repairs and maintenance costs, partially offset by higher advertising costs and general inflation impacting expenses such as utilities, rent, to-go supplies and delivery fees.
Advertising expenses for the fourth quarter were 3% of sales and increased 20 basis points year-over-year to help support the rollout of the Big Crispy Chicken Sandwich campaign. G&A for the quarter came in at 3.9% of total revenues, 10 basis points favorable to prior year due to sales leverage and lower performance bonus accruals, partially offset by an increase in restaurant center support resources.
Depreciation and amortization for the quarter came in at 3.6% of total revenues and decreased 40 basis points year-over-year due to sales leverage and the lapping of accelerated depreciation from the prior year due to the retirement of the CTX and Impinger ovens.
Fourth quarter adjusted EBITDA was approximately $228 million, a 7.1% increase from prior year. Our adjusted tax rate declined year-over-year to 17.6% from 19.5%, primarily due to a benefit from our state income tax filing adjustments and a higher benefit from the FICA tip credit. Capital expenditures for the quarter were approximately $58.3 million, driven by capital maintenance spend.
In our new Chili's reimage program, we completed a total of 11 reimages in fiscal 2026. Based on the learnings from these restaurants, we plan to complete another 60 to 80 during fiscal '27. In fiscal '28, we will start a planned cadence of 10% of the fleet annually.
Regarding new unit growth plans, our growth will be modest in fiscal '27, but we already have sites in the pipeline to ramp up significantly in fiscal '28, with expectations for our new run rate to be in place for fiscal '29. We expect to share more details on our strategy and plans at our September 17 Investor Day.
Our strong free cash flow provides sufficient liquidity to maintain our disciplined capital allocation strategy, allowing us to invest in our restaurants, keep debt levels low and return excess cash to shareholders. We continue to support this approach by repurchasing $100 million of common stock under our share repurchase program in the fourth quarter, bringing our total for the year to almost $400 million.
In support of our capital allocation strategy, our Brinker Board of Directors authorized additional amounts under our current share repurchase program in August, bringing the total amount available to $750 million.
Subsequent to year-end, we redeemed our outstanding $350 million, 8.25% bonds using the liquidity on our $1 billion revolver, which will provide interest expense savings in fiscal 2027 and the flexibility to continue to reduce leverage, if we choose.
In this morning's press release, we shared that fiscal '27 guidance includes a 53rd operating week in the fourth quarter. We estimate the impact of the additional operating week to be an increase of approximately 2% in total revenues and $0.70 in incremental earnings per share.
Regarding the guidance, we expect F '27 annual revenues in the range of $6.15 billion to $6.27 billion, adjusted diluted EPS in the range of $12.60 to $13.40, weighted average shares in the range of 42 million to 43 million, and capital expenditures in the range of $265 million to $285 million.
Assumptions underlying this guidance include planned commodity and wage inflation in the low-single digits, with commodity inflation higher in the first quarter before moderating as the year progresses, a tax rate of approximately 19% and 3 net new company-owned restaurant openings.
Guidance also contemplates the planned acquisition of 12 Chili's franchise restaurants located in Alabama and Mississippi, including the real estate of 6 of the locations. The transaction is expected to close at the end of August.
As previously mentioned, fiscal '27 is off to a strong start in July and August, and we are confident our plans will enable us to continue to significantly outperform the industry in both sales and traffic while delivering another consecutive year of same-store sales growth.
Before I wrap up, I'll just say this. The results we delivered this year give us a lot of confidence in where Chili's is headed. The strategy is working, and we believe there's still plenty of runway ahead. We'll keep building on the momentum by bringing in new guests, giving them more reasons to come back and staying focused on the things that matter most, strong execution in our restaurants, great value and world-class marketing and innovation. I look forward to providing further details at our upcoming Investor Day scheduled in Dallas for Thursday, September 17.
With our comments now complete, I'll turn the call back to Holly to moderate questions. Holly?
[Operator Instructions] Your first question for today is from Dennis Geiger with UBS.
2. Question Answer
Congrats on another great quarter and year, guys. I wanted to ask a bit more on fiscal '27 guidance. I know we can back into select items, but anything more to share on specific assumptions for Chili's same-store sales for the year? And then just shifting over to margins and earnings flow-through, helpful with the inflation, but anything more on some of the key pieces there as far as reinvestment opportunities go maybe versus prior years?
Sure. So what we've done and what's implied in this guidance is we built in a little bit of upside for July. But basically, for the remainder of the year, we have assumed mid-single digit same-store sales and positive traffic for Chili's. So we feel really confident that we can continue to deliver those results. If this momentum continues that we started in the beginning of this fiscal year, there's absolutely opportunity to exceed those expectations, but that is what we have built into the guidance.
As far as the margins go and the flow-through, we are very protective of our value proposition. We've been very mindful of that. We are very aware of driving positive traffic over time. So we have built in inflation. I talked about the inflation for commodities and for labor. There's also some inflation in some other pieces of the P&L. For example, we have some inflation in rent. We have some inflation in advertising, inflation in our insurance costs. So we've been just really mindful of baking in all those expenses and making sure that we're not putting too much pressure on the guest and the pricing strategy on the top line.
So we feel really good about the numbers that we've built in. I think we've been very, very conservative about the inflation that we put in. So we feel good about delivering the results in the double-digit EPS that we promised.
Your next question is from David Palmer with Evercore ISI.
Congrats on the accelerating sales. I had a question about that. I wonder what reasons you would give for this pretty big acceleration you're seeing in July and August. I've heard a lot of theories, but would love your analysis. And what part or parts do you think are more clearly not sustainable in your mind?
Yes. So we've seen lifts like this in the past during this turnaround, David. And like what we've seen to be is we bring people in and then it just kind of becomes their habit, and we just don't look back. So to answer your question more specifically about what we think is driving it right now, number one is chicken sandwich. So the chicken sandwich continues to build. It's doing everything that we thought it would do. It was part of our plan to continue the better than fast food campaign, continue to drive our value leadership in the industry, but most importantly, continue to give the guest unbelievable abundant value that tastes great, and that's exactly what it's doing.
We've had a couple of other things that happened from a social standpoint. So we had some pretty good success with our Bombshell Marg, which was the Margarita of The Month in July that we saw some younger guests come in for. And then we also seized upon a social media thing that we did not do. So guests started asking for Molten's on top of skillet cookies. The marketing team wanted to get after it immediately and we said, hey, let's make sure we're operationally ready to do that before we turn that on. So we were hard at work making sure we had the proper supplies on cookies and Molten's and ice cream.
And then we recently put that into the business, allowing the service have keys to ring it up properly as well as train the teams on how to make it consistently versus just looking at social media and how to make it. And that's also been very successful. It's actually reversed our incidence decline on desserts between that and then also upgrading a couple of our other desserts. So we feel like it's just a collection and then obviously, the continued operational initiatives on removing friction and improving throughput.
They're very hard things to pinpoint because like I said in my prepared comments, the throughput stuff is a collection of small things that add up. But like, for example, when you make the reduction of our loyalty rewards supermarket simple and it reduces the number of times the manager has to come and change checks, that turns tables faster. And we know, especially on the weekend, turning tables is traffic in the till. So it's a collection of all the things that we're doing. And we've been relatively consistent continuing to deliver comps on top of comps on top of comps and it's because our strategy is built to just continue to plow through all of this.
Your next question for today is from Jeff Farmer with Gordon Haskett.
Mika, what is your expectation for the restaurant level margin in '27? And how should we be thinking about the benefit from the 53rd week?
That's a great question. So what I would say on a 52-week basis, I'm going to expect 20 to 40 basis points of margin improvement. Depending on where it falls in that range, the 53rd week could get you up to 50 basis points of margin improvement year-over-year. So that's where we are now, Jeff.
Okay. And then just one more quick one. As it relates to the -- it sounds like you guys have made the change in the compensation structure for the restaurant level manager. How are you guys thinking about the impact that would have on the business?
Yes. So a couple of things to answer that question, Gordon. So -- I'm sorry, Jeff. So number one, we're trying to simplify the amount of reports and the measurements that the managers use so that they can focus more on the behaviors, which is in terms of coaching the team members as well as being in the dining room with the guests. So they're still going to have access to the GWOP metric, and they'll be able to see it like on a weekly basis, and they'll be able to get verbatims from guest comments.
And we're going to use AI to help cultivate that for them so they don't have to go through all of the verbatims. But we're not going to give them GWOP per shift on a daily basis because we found that they were kind of overly consumed with the daily metric. They were using that more often with their teams, posting them up and the team members didn't feel great about it.
And so even though we've been making incredible progress on GWOP, the guests with the problem, we felt like it was taking them away from the things that we wanted to do. So we're not going to have them look at it on a daily basis. We removed that from the bonus. The bonus is totally focused now on sales and profits. We did codesign this with them. We started with our Vice President of Operations, and we trickled it down.
And overall, the feedback has been incredibly positive. It's like, hey, we can focus on the behaviors that we need to focus on and we don't necessarily have to look at this thing and be consumed with reporting. We also dramatically simplify the reports that they get on a daily basis. We've got kind of this laundry list of reports down to 2 main reports that help them with throughput, labor scheduling and some other key things like guest metrics that they need to be able to see.
So I feel like that, that change is going to make them focus, number one, most importantly, on the behaviors to deliver a great guest experience. And then number two, because profits are a higher percentage of their total bonus, we think that's going to help us with that middle of the P&L to be able to flow through more of the dollars that we get with incremental sales. And it doesn't mean we're not going to continue to invest in the business.
So Mika talked about that in the prepared comments, but we feel like this is just a continuation of dramatic simplification in order to allow the restaurant teams to do their job, which is making guests feel special.
Your next question is from Andrew Strelzik with BMO.
And maybe following up on that last answer. If you feel like you're going to be able to get more flow-through because of the change in the compensation structure, why is 20 to 40 basis points still the right starting point for margin expansion?
So Andrew, I'll start with that. So like I said, 20 to 40 basis points is what we have built in the model. And again, we've been very mindful of how much price we're taking. So our pricing strategy had been 3% to 5%. We're on the lower end of that. And we actually have just a lot of inflationary pressure. So I talked about the commodities even though they're in the low-single digits, that's going to start at the beginning of the year.
Probably I'm going to give you some nice round numbers where commodities will probably be 4% in Q1, 3% inflation in Q2, 2% inflation in Q3 and 1% in Q4. That's what we're modeling now. So we do have a little bit of earlier pressure on that. Also we've had some inflation in some other areas such as insurance, such as delivery fees, things like that, we've built in that we're not necessarily passing all the way through to the guest. So we've been very mindful of driving long-term traffic over time.
When I take a step back and just look at the whole model, we know if we deliver mid-single digit same-store sales over time, we delivered 20 to 40 basis points of margin improvement and we deliver double-digit EPS growth that we're going to deliver significant earnings and growth to the shareholders and if we can deliver those consistently over time. So we're not as concerned. We don't want to overpressure the guest in the short term. You've heard a lot of our competitors have that same mindset where you don't want to overprice the guest right now.
We have a lot of inflation that we're facing. So we're being more conservative in those assumptions. Now as the year progresses out, if our sales exceed our expectations or some of those inflation assumptions are a little bit less, I think we have the opportunity to outperform those metrics. But that's what we have guided in and worked in the model for now to start the year.
Got it. Okay. That makes sense. And maybe if I zoom out on the margins, obviously, you transformed the restaurant level margins of the business. Is there a level at which you think about kind of shifting how much flows through versus how much you reinvest kind of like a ceiling on restaurant margins for this business over time as you kind of continue to make these continuous improvements, how you think about that?
Andrew, that is also an excellent point that I should have made, too. So as you called out, we had, since this turnaround started, over 600 basis points of margin improvement over time. So we've significantly improved the margin profile of this business. Now that is a reason why because we have an investor growth strategy that as we move forward, you're going to see the margin growth moderate a little bit. And really, what that means is, we're not trying to flow through every dollar. We're trying to make sure that we're mindful to invest back in food service and atmosphere.
What that means is, we are investing back in the guest experience, the team member experience, and we don't want to overprice the guest, and we want to make sure we continue to make that value proposition as strong as it can be because we know that is the secret to driving positive traffic over time. There's not a cap. I said all that, and you did say is there a cap. We do think if we continue to grow the top line in the AUVs, we still think we can expand it.
It's just not going to be as material as it has been during this turnaround. So there will be a point as the AUVs grow. But right now, we still have plenty of capacity. Our restaurants are only at 80% capacity of our historical guest count. So we have plenty of capacity to continue to grow traffic and grow some margin.
And just one thing I would add is like when we first started this turnaround, what I told the leadership team was, boy, we were like at $3 million AUVs, like we just get the $4 million AUVs, like we'll have enough labor to service the guests. We'll have better restaurant margins, like we'll have enough money to pull back into the business and that happened. And now we're getting to -- we're at $5 million now. And you just get more of that. And at the end of the day, when we study these North of 6 restaurants, they have dramatically higher margins than the balance of the system.
So as long as we continue to invest in the business and grow those AUVs and delight the guests, good things will happen with margin. And every year, we start out the year with a pretty reasonable guidance on our margin growth, but then we've blown through it. We've blown through it because we keep delivering on the top line because we're winning with the guests. So I don't know why we would change that approach. And I would expect that, if we deliver on the upside on sales based on the acceleration that we've seen in the first part of the year, then I would expect to see that also expand on restaurant margin.
Your next question for today is from John Ivankoe with JPMorgan.
The first, I think, housekeeping and the second may be a little bit more important. In terms of the remodels at 60 to 80 units, I know you've looked at a number of different packages in terms of what you would spend per unit. Where are we kind of landing in '27 on a per remodel basis? And is that the right number to assume going forward as well with normal type of inflation?
So John, that's a number that we're still finalizing right now. But what I will tell you is we have taken our capital guidance up. The majority of that increase year-over-year is due to the reimages, and we said we're going to do between $60 million and $80 million. So you'll get an estimate there. We're continuing to refine that number. We're going to talk about it on Investor Day and give some more details around it then. But I'm pretty happy with the number. The first 250 are probably a little bit elevated because we've talked about those being some of the 911 restaurants that probably need a little bit of extra love.
They also have -- a lot of those are older prototypes. And some of the early reimages, if they have the lower ceilings in the bar, we do an extra step where we open up the bar and actually remove a wall. So that also has an incremental cost. So over time, I think this number is going to continue to evolve and come down as we get more scale and then we kind of work through the balance of the system. But again, more details on Investor Day, but the bulk of that increase in the year-over-year CapEx is for the reimage.
Well, we're definitely looking forward to the 17th. Okay. So let me ask another question on the menu. We've talked in the past about maybe opportunity, maybe today wouldn't be the time, but we talked about the opportunity to kind of relaunch salads, bowls, maybe improving steak to kind of take another modern re-hit at the Guiltless Grill for how people are eating today. So can you kind of talk about any major menu categories that could be addressed in the near term and could lead to future sales growth beyond '27?
Yes. We have shuffled a little bit of our priorities in '27 based on just what's happening in the zeitgeist. So let me just tell you what food innovation will be for '27, and then I'll share with you what we're planning for '28. So number one, we're going to continue to ride the chicken sandwich all year. So that was certainly up in the air as we were launching.
The plan was if it does well, we're going to continue to drive it. And so that's the plan from an out-of-store marketing standpoint. And then, we're going to continue each quarter to remind the teams on how to make the best sandwiches. It's not an easy thing to make a hand breaded sandwich. So we're going to stay focused on that operationally.
Secondly, we're in process of revamping the kids menu. So we've launched the new kids menu, and this is about how do we just continue to get young families into Chili's. We know that kids are talking about Chili's. We see -- there's a very common thing we see in social media where if a kids team wins X, they want to all go to Chili's. So we think this is the time is right to go after the kids menu. So we have a new kids menu. We brought back Grilled Chicken Tenders, which is a parent and kid favorite.
And then next quarter, we're going to be adding mini Moltens back to that lineup as well as cheese quesadillas. And then we've recently launched new floats with our new Blue Bell ice cream. So we've upgraded our ice cream to a much more premium ice cream. And then we've also added a mocktail for kids, a Shirley Temple that's made with Sprite. So -- the new kids menu, a part of that has happened now and the rest of it will be finished next quarter.
We finished renovating our pasta platform. So we've added sausage as a protein. We are hearing our chicken and sausage in our Q2 menu. And then we retrained teams on what we call pasta perfection. We did that last quarter. So the pasta is now going to be featured in Q2 in a bigger way. And then we also have a new cooking process to make it a little bit hotter.
And then on a dessert standpoint, we've got a couple of things coming, which we haven't done in a while. We just recently upgraded our skill of cookies. So if you go in the restaurant now, you'll probably see it being advertised on our little table tent. It's been to upgrade with more premium ingredients, chocolate, brown sugar and butter to make them oozier and gooier. We've obviously upgraded the ice cream, which I talked about earlier to Blue Bell Ice cream.
And then lastly, we added this social media phenomenon, the Molten on top of the cookie, and that is now something that we're selling in the restaurants. And then next quarter, we're actually going to bring back Cheesecake as a non-chocolate option for folks that want dessert. The other thing I would tell you about desserts that we're learning operationally is a lot of times in casual dining, servers don't sell dessert because they want to turn the tables on a busy Friday or Saturday. And we think we have an unlock on that one.
The feedback that we've been getting from the servers is like, hey, when I get the dessert, it goes to the bottom of the kitchen display system on Zone 3, that's where we make desserts. And so it might take 15 minutes to make a dessert. So I really don't want to sell dessert, it's going to take 15 minutes. And so what we're doing is we're going to start -- we're going to test it first, bump the desserts to the top of the screen so the desserts get priority, so we actually can get that sale. So there's a lot of good things happening on the menu.
In '28, that's when we're going to launch in the front half, we're going to launch salads. So we push that out a little bit based on what's happening. And then we'll have steaks and Guiltless Grill, hopefully, in the back half of '28 also.
Your next question is from Brian Harbour with Morgan Stanley.
Mika, just a quick clarification. So is it correct that you expect to run like roughly 3% price through this year? And then do you have any kind of directional color on like mix impact that you're expecting?
Yes. So what I would say as far as price goes, like I said, for the full year, it's going to be on the lower end, maybe just over 3%. If you're thinking about the cadence by quarter, it's going to be a little elevated in Q1. So I would model, again, nice round numbers, 4, 3, 3, if you wanted, just some general numbers on how the pricing will go at Chili's.
As far as mix goes, like we said, it was slightly negative in Q4. We had the 0.2 that was driven by alcohol and appetizers. For the full year, the assumption, I would say it's basically flattish. So we see -- Kevin talked, we've had a little momentum in the dessert category. But really, our strategy this year is to focus on driving traffic. We've talked about that a little bit with the flow-through, but it's really about the chicken sandwich.
The chicken sandwich is designed to drive traffic. We've built up all these other businesses over the years, and those are all built into the run rate, and now we're really leaning into this one to drive traffic, and that's exactly what it's doing. So flattish mix for the year. You got the price just over 3% and the balance of your sales will be from traffic.
Okay. Got it. Maybe talk about this next month, but I guess, any of the like North of 6 initiatives that you'd expect to see visibly this fiscal year? I guess, like any of those that you're kind of giving yourself credit for sooner at this point?
Well, let me tell you one thing we've done. So really, we look at North of 6 to really study their throughput. And so, as traffic continues to increase, we want to capture all that traffic. We just talked about, we're really excited about the start of the fiscal year. And when we think about the labor model, that's the main place that we're learning from them. So for example, in Q4, we just talked about that flow-through was a little bit challenged. I talked about tomatoes. We saw that food and beverage is up a little bit and also beef.
But in our labor model, I will say, hey, we thought that labor would be a little bit more efficient. We have been telling our operators to staff for the sales they want. So we did have a little bit of -- let's say, they weren't as efficient as we wanted in labor, but thank goodness we did that because traffic ramped up so quickly in July and August that they were all ready for it and they're capturing it. So we have actually built in a lot of that where they exceeded the labor model last year.
We built that into the model this year. Now a lot of it was built in the year-over-year already because they overspent, but we learned all that again from where are they leaning into this labor model. We're working on getting the base labor model exactly how we have it. I mean, it's a great problem to have that every year, we're growing the business so quickly that we're adjusting that labor model to make sure that we can capture all the guests and have the throughput improve. But that's kind of where we're focused on.
Yes. The -- and like, I said in my prepared comments, there's a lot of little initiatives that help with throughput. The major one, I think, that we're mostly focused on in the front half is going to be host stand. So this is this idea that like when we're on a weight, the average weight of our guest is 15 to 20 minutes. And even if we can't reduce that, we're going to try to reduce that, even if we couldn't reduce that, even just managing the host stand better makes a huge difference for that guest. Like, there's very different ways you can experience 15 to 20 minutes.
And one way it can be a delighter and another way, it can be just the opposite. So we're going to focus on how they use the software to seat guests and manage the seating of the restaurant, retraining the host on how to better work with the guest on waits. We're obviously going to work on how do we get tables seated faster, how do we get tables bused faster. So there's a whole host of initiative coming in Q2.
And then there's going to be just things throughout the year. So for example, one of the pieces of feedback we've been getting from North of 6 restaurants is some have tried to put in a second soda machine, but the reality is we just have a bottleneck on refills because we give a lot of free refills to our guests. And so, during a busy Friday, Saturday night, that can get -- that station can get clogged with both servers and food runners trying to get drinks. And so, we've got some initiatives that will help us with the KDS to unclog that.
So there's a lot of little things like that, that are going to improve throughput. But it's very clear that those North of 6 restaurants that take on so much more traffic than our rest of our restaurants, they have the similar sized boxes, but they do things differently, and we're going to continue to roll those things out, plus take new ideas from those North of 6 restaurants and what we need to work on from a system standpoint.
Your next question is from Brian Vaccaro with Raymond James.
Just on the quarter-to-date, just to kind of make sure we're all on the same page and setting reasonable first quarter expectations. Would you be willing to share what the quarter-to-date comp is at Chili's or provide a guardrail there? And in the fourth quarter, could you also share what the 3 For Me mix was and the split between the $10.99 and higher tiers?
Yes, sure. So Brian, what I'll say and what I said in my prepared comments is that we did significantly accelerate in July and August. And so if Chili's was 6% in Q4, that means it's higher than that in Q1. So I'm happy to talk about all of that when the quarter ends, won't go over all of the results in quarter 1, but we're just really, really pleased with the strong start to the year and the traffic drivers.
And so again, like Kevin said, the chicken sandwich is outperforming. The Margarita of The Month has been fantastic. It continues to help us drive traffic. And the Triple Dipper, I wanted to mention that, that the Triple Dipper is something that has grown our business year-after-year-after-year and continues to grow today and is up even in Q1 year-over-year. So we're happy with that. That's also built into our everyday value. proposition. So that is the first thing.
The second thing you just asked is on the 3 For Me mix, and I'm very pleased to say that, it's very stable. So in Q3, it was just under 21%. And in Q4, it's just over 21% of our guests are opting in on the total platform for 3 For Me. And of that 21%, about 40% of the people are opting into the $10.99 tier, which is very stable, that's what we reported every quarter. So what I -- the takeaway would be 3 For Me continues to be very stable. We are very pleased that the chicken sandwich and before that, the QP and the smash, they drive in new guests. But the guests -- some guests opt into the $10.99 that want it, but the majority of the guests then eat all over the menu and enjoy anything else they upgrade to whatever they want on the premium option. So that strategy continues to play out, and we're very, very pleased with it.
And I guess as a follow-up, if I could, just on the topic of accelerating unit growth, which you've obviously talked about in recent quarters and this morning. I guess, can you just give us a sneak peek on just the opportunity you see there in the U.S.? It would seem that there are some pretty large states in the Midwest, the Pacific Northwest, and I saw you are acquiring Alabama this morning as well. There's a lot -- there's several states out there where the stores per pop might be 1.5 to 2 instead of 3.5 plus like the system average. So any early thoughts on the TAM in the U.S. that you could be thinking about?
Yes. What I'll tell you about is we do think there's an opportunity to build -- to definitely build more Chili's. We talked about kind of the new unit growth as a percent of revenues ramping up. So we're going to share all those details. Again, we got to say something for Investor Day. But what I will tell you, Brian, is that what I really love about it is we still have opportunity to expand in our 3 biggest states, California, Texas and Florida. We have a lot of opportunity in the Southeast to expand, like you said. I mean, we really have opportunity all over the United States.
And so, there's a lot of markets where we can continue to build out Chili's in just kind of those gray areas that we haven't built yet. There's a little bit of white space still in the Pacific Northwest, where we know we have opportunity there. So we have a great opportunity. I think we're going to be able to grow units over many, many years at Chili's and have a nice growth rate to build into our growth algorithm and a nice lever to pull for years to come. So we are excited about the total opportunity for Chili's.
Your next question for today is from Andrew Charles with TD Cowen.
Mika, I had 2 different questions about the guidance. So just first, what contributes to the $0.70 53rd week impact? It's a pretty large impact relative to the revenue guidance. Is the interest savings piece of it from the new debt structure, a piece of it. Just curious more about how the $0.70 came to be.
Yes. So what I would tell you is at a very high level, this is how we did it, and we'll continue to refine that as the year goes on. But it's just an incremental week of sales. So you'll look at what our sales volumes are at the end of the year. And it's just a flow-through assumption. It's going to be probably at restaurant level margins, it's probably going to be in that 30% to 35% range. And at a net income, it will probably be in the 20% to 25% range. So it's just a flow-through assumption on that final week of sales.
Okay. And then the other piece is the impact of the 12-store franchise acquisition, how does that impact EPS guidance? And if you could also provide the purchase price you guys are paying for that as well, it would be helpful.
So let me tell you how it impacted the guidance. And so I'm glad you asked that so I could clarify. So we did get the 12 restaurants back. They are a little bit lower performing than the brand average. And also, remember, we have to net out the royalties we were already getting. So the incremental revenues from those restaurants is probably around $30 million year-over-year.
And then it's going to have a flat impact to EPS basically because it's a very small acquisition. And with the opportunity of share purchase versus buying those back, it's probably a flat EPS impact. I don't know, if I'm going to share all the price on that. I think we'll give some more details as it comes, but we didn't put it in now, but we've got a really great price on those restaurants, and we're really happy to welcome them back.
Your next question is from Sara Senatore with Bank of America.
Maybe just a quick follow-up on that and then a question about Maggiano's. I noticed you're acquiring real estate. Is that a signal about how you're thinking about growth ahead in terms of approaching unit growth? I know there have been periods of real estate acquisition, but also sale leaseback. So just as I contemplate how you think about kind of the outlook as you're accelerating unit growth. So that was one quick question. And then I do have a follow-up.
Okay. So really, our approach to growing Chili's in the future is going to be that we're open. Now I will tell you the majority of the opportunities are going to be to continue to lease our locations and have operating leases, which is what we're going to continue to do. But I guess what I would signal is if there's an opportunity that we could purchase the land, if it makes sense, we're not against that if it helps us to continue to grow Chili's and it makes sense in certain areas.
When we did the deal with Valente, they own that real estate, and we were happy to take it back. We'll continue to hold it. We'll look at it to see what we think the long term is. I don't know that we have a lot of sale leasebacks in our future. We prefer probably just to hold the real estate. Some of these are older units. We don't want to burden them with some really high and long rents on there. So that's not going to be a big strategy moving forward. But what I would say is primarily, we're going to leave. If the opportunity comes to buy, we're not against it, but we're not overhauling our strategy to be an all-buy strategy by any means.
Got it. And then I guess maybe just 2 quick modeling questions. One is the negative mix, is that sort of a continuation of the check management you saw in April? And then can you give any color on Maggiano's, as you mentioned, it was being contemplated in the 2027 guidance. I know to Kevin's point, it's less than 4% of operating profit, but just curious about that.
Yes. So as we move forward on mix, I think because the chicken sandwich is just going so great, we're just really -- again, we're just modeling, I would say, flattish for the next year. The negative 0.2% was just a continuation of, like we said, a little bit of check management with alcohol and appetizers. Like also Kevin talked about desserts, those are hanging in there a little bit better. So we feel good about mix.
And again, I'd like to remind everyone that we've spent so many years building the mix up when we built up the Crisper business, we built up the Triple Dipper business, the fajita, the rib, and all those are maintaining, which is wonderful. And so that's why we're back to this flattish. But there is a little bit of check management, but it's very, very small.
As far as Maggiano's goes, I'll give you some high-level assumptions. And what we've done is we've basically assumed in this guidance that Maggiano's is going to have flat revenues and flat profits year-over-year, that just gives us a little bit of room so that we've seen some green shoots like Kevin said, so that we just have room to have Maggiano's to be able to kind of have the pressure off of them where they can just really focus on improving their food service and atmosphere and they can get that traffic rolling again. But those are the assumptions at a high level built in for Maggiano's.
Your next question is from Chris Carril with KeyBanc Capital Markets.
Just on the chicken sandwich platform, can you maybe expand a little bit more in terms of what you saw around guest demand around the different tiers and price levels you offer maybe relative to your expectations? And Kevin, you gave us some detail around the number of chicken sandwiches sold per day and how that's continuing to build. So can you talk maybe about how like advertising and awareness drove that growth versus maybe other factors and how the trajectory of chicken sandwich compares to what you saw with Big Smasher and Big QP?
I'll start with the 3 For Me question on the chicken sandwich. So we're very mindful about maintaining our $10.99 level of the 3 For Me. So when something new comes in, the other one moves out. And so, in this case, the Big Smasher moved up to $12.99 and the Big Crispy moved in $10.99 and Big QP. Like I said, those levels have stayed very similar. So as far as the 3 For Me goes, we're selling about a similar amount as we did before the Big QP and the Big Smasher.
The rest of the chicken sandwiches and the increases that Kevin talked about are really on the base menu because we have all the sauce versions, we have the premium, the deluxe. And so that's where we're selling the bulk of our incremental chicken sandwiches are on, I would say, the base menu.
And then as far as like the driving trial and awareness, the curve -- when you look at the curve, it looks almost exactly like the QP and the Smasher curve just higher. So like it started off at a certain level and then it kind of a few months in, it starts to accelerate, which is what we saw on the others, too. So the mix is still good. That's like it's kind of behaving like the other 2. So that's why we just continue to drive advertising on it.
Like I mean, a lot of folks have seen it quite a few times like in the investment community or in our walls, our 4 walls. But like the reality is the vast majority of our guests haven't seen a Chili's ad, hate to tell the marketing team. So as they continue to drive and build the awareness of it with a very similar campaign, that awareness will compound over time. So that's why we stay on these things. We don't do it for 4 weeks and then move on to something else, hat's had incredible success for us, since we've started the 3 For Me campaign. So we don't plan to change that.
As long as the item is -- the customer is responding well to the item, which is what it appears to be on the Big Crispy, we're going to continue to drive that. And then we'll reassess whether in year 2 of Big Crispy, do we continue to advertise that or we bring news to Big Crispy or do we move to another item on $10.99. But we do that -- we've done the same thing every year for the last almost 4 years now, and we've had success. So we don't plan on changing that formula. We think that is creating value certainty for the guest and really repositioning us in the market.
Your next question is from Jon Tower with Citi.
Kevin, you earlier talked about the cycle time efforts and what you've got lined up for 2027 in terms of what you're tackling. I'm just curious like how you're thinking beyond that. Are there larger chunks or areas that you can go after in '28 and beyond? I'm just trying to get an idea of how long this runway is for you to kind of continue to improve the cycle times.
Yes. I think there's 2 areas, I think, that we'll continue to work on that we're going to learn about, which is like the actual dining experience. And so -- and that one, I think there's a ton of upside just because it's a big part of the business, and we continue to uncover basically places where things bottleneck. And so we're just going to continue to walk through those things. So for example, host is a big one. That is a major initiative for us. But like we also know that the order time is a little bit of a blockage.
And so when we're finally finishing rolling out the new UX for the order tablets, that's going to speed up ordering. And what we're learning at the soft drink station, the fact that, that's -- it's harder to get refills as fast, and that's going to speed up time. And then this idea of dessert bottlenecks. And so when people do order dessert, it ends up being a long time. That's going to improve cycle time, but it's also going to improve the server being more willing to sell desserts, right? So I think we're just going to continue to uncover things from a dining room standpoint. And I think we've got at least 3 years of runway on that one.
The other one, which we haven't even scratched the surface on is to-go. It's 25% of our business, and we have a huge opportunity to figure out how to get friction out of that to make it seamless. When you look at the players in QSR that win on digital, meaning they create habits of their guests that they can rely on to get a quick take-home meal, it's all about a fast app, a seamless pickup experience and accurate pack-outs. And we think those 3 things, we can go nail over the next couple of years. And we think that we're uniquely positioned in casual dining to go after those transactions because if you look at the things that we're winning with, it's all around the Better Than Fast Food campaign.
So these are things that people think about when they think about take-home meals. So burgers and chicken sandwiches and chicken tenders and some of our Tex-Mex offerings, like these are all things that we think are positioning ourselves well, but we've got to figure out that operation. I think that's a huge task. We're going to talk a little bit more about it when you guys come in for Investor Day, but that's the next big frontier I'm excited about because there's so many more transactions in QSR that we could go after with the off-premise occasion.
I guess one more follow-up. I guess I've asked this question before in previous calls. I'm curious if you have any data behind it now in terms of the guest behavior. A lot of those guests that have been lapsed and now have come back to Chili's over the years, how they're using the brand perhaps differently than maybe you thought or maybe they're using the brand or the menu as you had expected. I'm curious if you've got kind of that customer journey, how they've been coming back in.
Yes. We don't really have that detail. I mean the level that we have with the token data is basically that we're bringing a lot of new guests in. So a little bit more than half of the tokens that we see each month are new. And then when we track them, now we do it within 9 months, we can understand what their repeat behavior is, and it looks a lot like existing guests. So that's basically what we know. We have some broad things on younger guests that tend to order more triple dippers -- older guests tend to order more of the 3 For Me.
So we have some of that, but like we don't really -- it's -- I don't know how to answer your -- I don't have the data to answer your specific question of like how our lapsed users will they come back to the brand using the brand differently. We don't have it to that level.
Jon, but what we do know is we continue to draw on new guests every quarter, and then we talk about how 3 For Me is pretty stable. So we're not seeing like an over-index to value. And all of the categories are -- they've grown over time, but then they're all pretty stable. And so we're not seeing any huge mix shift in the menu with new guests. It's kind of like we said, we're attracting new guests in and they quickly fall and look like existing guests over time and then just keep coming back, but they're utilizing the menu basically the same. We're not seeing any big changes in the run rates of all the different particular categories or like a run-up in 3 For Me.
Your next question is from Margaret-May Binshtok with Wolfe Research.
This is a 2-parter. I wanted to ask, I know you guys have talked about the success of the Big Crispy platform, but anything to call out in terms of the incremental traffic? Is that a younger guest? Anything between the different income cohorts, the type of guest that that's bringing in? And then the second part, I just want to ask, since you guys launched the Margarita of the Month Club earlier this year, have you seen any sort of sequential improvement in alcohol incidents?
So you know what the great thing is about Chili's and about burgers and chicken sandwiches, everybody loves them. So our traffic has been up, and we're growing. We're growing all income levels, low, medium, high. We're growing all of our different demographics. And so historically, we had a little pop in our younger guests with the initial success of the Triple Dipper. We've maintained that. And we continue to grow and attract all the different demographics and cohorts.
So we're really pleased that chicken sandwich again, has behaved just like the burgers. It's a huge segment, and it's broadly appealing to everyone. And so we're not seeing one particular group drive the traffic. It's all the groups, which we love because it's not very specific to one group. It's very broadly appealing.
And as far as the Margarita of the Month Club goes, it's been a huge success for us just in general as an everyday value platform for us. So I know our guests really appreciate that $6 margarita. It's fun, it's colorful. They enjoy seeing what's next. It's culturally relevant. The one we had in July, Kevin mentioned it, it was really successful. So I would say, overall, the Margarita of The Months have been very successful. They're driving margarita incidents. They're driving traffic.
Now if you take a bigger step back and look at the whole alcohol category, we're feeling a little pressure like everybody else as the whole category -- for the category as a whole, we continue to sell market share. We're top in market share, but we're feeling a little bit of that macro pressure like everyone else is. But Margarita of the Month specifically, great value and helping us drive traffic.
And one other thing I would add is I think maybe 5 years ago, the prior team viewed Margarita of The Month as just like how do we get more drink attachment. And it does play a great role to do that, still does. So we tested it years ago when I first got here, which put take it off the table and it was a mistake. So we know that it drives drink attachment even if the broader macro trends are against alcohol attachment and what's going on with gas prices.
So -- but the second thing I think that is important to note is the new marketing team has done a phenomenal job of figuring out what are different margaritas a month we can use to drive traffic. We saw that with -- last November with our witch-themed Margs. We saw it with the most recent Bombshell Margs in July. And so I think they're doing a better job. Not every month is going to be this big traffic-creating margarita. These guys are very planful about which ones they're going to do and how they're going to surround it with advertising and social.
But they've done an exceptional job of creating a second growth lever on Margarita of the Month. So it's not just about attachment and entry price point, but it's also now about traffic driving for certain Margs and I think that's going to continue. When I look at the innovations they have planned, I think it's not going to be every month, but often, they're going to be looking at things that are actually going to drive the total box traffic, not just alcohol attachment.
We have reached the end of the question-and-answer session. I will now turn the call over to Kim Sanders for closing remarks.
Thank you, Holly. That concludes our call for today. We appreciate everyone joining us and look forward to presenting an update on our long-term growth plans at our upcoming Investor Day in September and updating you on our first quarter fiscal year 2027 results in October. Have a wonderful day.
Thank you. This concludes today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
Brinker International, Inc. — Q4 2026 Earnings Call
Brinker International, Inc. — Q3 2026 Earnings Call
1. Management Discussion
Good day, and welcome to the Brinker International's Q3 F '26 Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Kim Sanders, Vice President of Investor Relations. Ma'am, the floor is yours.
Thank you, Holly, and good morning, everyone, and thank you for joining us on today's call. Here with me today are Kevin Hochman, Chief Executive Officer and President of Brinker International and President of Chili's; and Mika Ware, Chief Financial Officer. Results for our third quarter were released earlier this morning and are available on our website at brinker.com. As usual, Kevin and Mika will first make prepared comments related to our strategic initiatives and operating performance. Then we will open the call for your questions.
Before beginning our comments, I would like to remind everyone of our safe harbor regarding forward-looking statements. During our call, management may discuss certain items, which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such risks and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC. And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations.
And with that said, I will turn the call over to Kevin.
Thank you, Kim, and good morning, everyone. Thank you for joining us as we discuss our financial and operating performance for the third quarter as well as our outlook on the remainder of fiscal '26. Q3 Chili's same-store sales of plus 4% marked our 20th consecutive quarter of same-store sales growth and outpaced the casual dining industry by 420 basis points. This strong result was rolling a plus 31% from last year for a 2-year cumulative comp of 37%. A list of the top 500 largest restaurant chains for all of 2025 just came out, and I'm proud to say Chili's is now the #2 casual dining brand for sales in addition to maintaining our status as the #1 casual dining traffic brand.
To put our sustained growth into perspective, if Chili's nearly $1 billion of sales growth in calendar '25 was its own business, it would be larger than most of the restaurant chains on the list. After delivering a plus 15% in calendar '24, we often were getting asked what's going to be the next Chili's? With the 21% we posted in calendar '25, the answer was resoundingly Chili's. And in 2026, our sales growth has consistently outpaced the industry with our outperformance continuing to accelerate from 320 basis points better in February to 550 points in March and now 560 points month-to-date through April.
Chili's momentum is sustaining, driven by quarterly improvements in food service and atmosphere as well as continuing to make Chili's more fun, more easy, and more rewarding for our team members. These experience improvements, coupled with our everyday value leadership, represented by a per person average guest check that is $3 to $4 below competition, are supporting a powerful flywheel of traffic, sales, growth margin expansion, and reinvestment into our business.
Now I'll give some updates on the Chili's business. We spent Q3 continuing to work on the fundamentals, preparing for our new chicken sandwich platform launch and bringing in new guests with relevant marketing to experience Chili's. In Q3, our restaurant teams remain squarely focused on the fundamentals of the guest experience. From a food standpoint, our primary focus was chicken breading and cooking perfection, which involved retraining the teams on perfect execution of hand-breading our chicken crispper and chicken sandwich lineup, which will ensure those items are freshly cooked, hot and crispy.
A key differentiator of our chicken sandwich is that we hand bread the chicken in restaurant. We believe a freshly breaded filet tastes better than chicken that has been breaded and fried by machines in a factory, frozen, shipped hundreds of miles and then refried in a restaurant. And in anticipation of our Q4 chicken sandwich launch, our teams were busy ensuring restaurants were ready for the guests that will come in, including reinforcing daily procedures for sparkling clean restaurants and emphasizing key areas to double down on Chilihead Hospitality, our differentiated customer service that drives memorable experiences to grow sales and traffic over time.
While our competitors ramp up limited time offers, we spent the quarter investing time in operations, training and culinary resources into everyday capability that more closely correlates with long-term sustainable traffic growth. We believe doing fewer things bigger and better is a more sustainable way to build traffic and grow our business over time. The result is continued momentum on the business, attracting new guests in and retaining the ones we have converted. Dine and GWAP or Guests With A Problem continued its 3-year decline, finishing the quarter at 1.9%. Food grade finished at 75% and intent to return was also an all-time best at 79%. Our operational improvements continue to deliver better experiences for our guests, and our tokenized cohort tracking yielded similar results from previous quarters. New guests are coming into the restaurants and following the pattern of existing guests on frequency, which gives us confidence growth will continue to sustain.
Our chicken sandwich platform launched on April 14, with our new menu drop. The lineup features 2 sandwiches at our $10.99 3 for Me opening price point, the Big Crispy and the Spicy Big Crispy, which includes fries, a bottomless Coca-Cola drink and bottomless chips and salsa. Given a wide range of guest preferences, we also offer 3 flavored chicken sandwiches, Nashville Hot, Signature Honey Chipotle, and Buffalo with 2 sides as well as well as the Big Crispy Deluxe with lettuce, tomato and bacon. All sandwiches are served with our Chili's Signature house-made ranch for dipping and dunking that our guests absolutely love and pour on everything. This adds an additional point of differentiation you can only get at Chili's.
The sandwich platform was launched behind our Better Than Fast Food Campaign, this time tapping into an insight we have seen among consumers frustrated with what they call shrinkflation, where portion size is reduced to offset rising input costs. For example, a post went viral a few months ago when someone posted a photo where a famous fast food chain's burger pickle was actually thicker than the burger patty itself. We believe Chili's over-the-top generous portions are a great way to resolve the biggest challenge facing our customers today. In a world of rising inflation, how do I get the best value for my money? Our TV ads both show and tell our chicken sandwich is way bigger than the leading fast-food restaurants most premium chicken sandwich. And at $10.99, this addition to the 3 for Me platform is the perfect antidote for corporate shrinkflation.
The launch campaign geared a before your eyes demo of a balancing scale holding our Chili's Big Crispy in one pan with its lighter fast food foil in the other. The scale is not in balance with the new Big Crispy demonstrating it is the exact opposite of shrinkflation, weighing down the scale heavily. In fact, our test conducted in the Dallas-Fort Worth area, weighing a large sample size of sandwiches, the new Big Crispy filet was over 80% bigger than the leading fast food restaurants premium chicken sandwich filet.
I know many of you are interested in specifics on how the launch is performing. And while it's only been 2 weeks in market with only 1 week on TV, initial response to the new sandwich platform has been encouraging. So far, the overall platform is selling 161% more sandwiches than prelaunch and is significantly outpacing the numbers we saw in the 200 test locations. From a total business standpoint, we have been comping in mid-single-digit sales in April with positive traffic, which is rolling a plus 29% in April, driven by the Big QP launch in the prior year. As I said earlier, we have accelerated our sales outperformance versus the industry to 560 basis points in April, which only includes 2 weeks of chicken sandwiches. So while it's still early, the initial results on both the platform and the total business are both encouraging.
I also want to give an update on our north of 6 initiative and how it will be a key to continued sustainable comp growth. A question we get asked a lot is with all the traffic growth you've had in the past few years, do you still have capacity for more? So let me start with the numbers. Our average traffic is now back to 2013 traffic levels, but that's still about 20% less weekly guests from our peak in 2000 to 2005. And our north of 6 restaurants serve anywhere from 20% to 80% more guests than our current average restaurant traffic. So the first point is we know we have a lot more capacity in the buildings.
The second question is, what are we learning from the north of 6 restaurants? And first of all, the dramatic business simplification has been a huge enabler for our restaurants and the direction we are getting from the managers of north of 6 restaurants is we need more simplification. So our teams are going to challenge every requirement that slows down our restaurant teams. We'll continue to remove items and processes that don't help the guests or team members. And the new initiative I'm most bullish about is speeding up cycle time, meaning looking at everything that goes into the total time of kitchen prep and the dining experience and finding ways to simply remove time. For example, if one of our restaurants are on a wait on the weekend, the average wait time is about 15 to 20 minutes. That number is pretty good. But remember, that's just an average, which means there are about half our restaurants with longer waits.
If we have enterprise project teams studying every bit of that wait to understand what are the bottlenecks we need to remove to reduce that cycle time, whether it be at the host stand, taking orders, kitchen ticket times, checking out with the Ziosk payment system and ultimately resetting tables for the next wave of guests. Chief Operating Officer, Aaron White, and our cross-functional teams are hard at work to reduce cycle times across the entire dining experience. I look forward to sharing new additional initiatives, which should be a continual tailwind for traffic on future earnings calls.
On the Maggiano's business, we are continuing to make progress in its turnaround. When you adjust for Christmas Day falling in Q3 of this fiscal and the January weather, we did see sequential improvement in traffic and comp sales. Customers are noticing more abundant portions, more generous family style and the return of classic Maggiano's dishes like eggplant parm and Gigi's butter cake. Value scores are improving. We still have a lot more opportunity ahead of us with service and removing non-value-added process to improve Maggiano's dine-in times. But the important thing to know is we are making sequential progress. This turnaround, like the Chili's turnaround, will take time. But as long as we focus on important areas of food service and atmosphere and make progress every quarter, I'm confident we'll return this business to growth. As a reminder, Maggiano's is only 8% of our company sales and low single-digit percentage of our profit contribution, but it can be a source of growth in the future given the white space opportunities.
To close out, I want to do some recognition of our integrated marketing team and our supplier partners on industry recognition. The industry-leading publication Ad Age named Chili's the brand of the year for the second straight year, an award that has never ever been awarded to the same brand 2 years in a row. This is an award recognizing the best work in all industries, not just restaurants. In addition to Chief Marketing Officer, George Felix and our Marketing Vice Presidents, Jesse Johnson and Steve Kelly, we have developed a deep bench of directors, managers and a collection of world-class agencies in various disciplines who have delivered the results over the past 3 years to earn this industry recognition.
And the last bit of recognition I want to do is to congratulate our driver, Carson Hocevar, and the entire Spire race team for their first ever NASCAR Cup series win in Talladega last Sunday, driving the #77 Chili's car. Carson is a servant leader to his team and his fans and always makes those around him feel special. He's a perfect representative of what we like to call Chilihead hospitality that our guests experience in our restaurants. And hats off to our Mooresville, North Carolina, Chili's restaurant team and Area Director, Rachel Austin, who stayed open late Sunday night for Carson and the Spire team to celebrate their victory with a lot of triple dippers and a few Presidentes.
To close, Chili's delivered another strong quarter, rolling big numbers from prior year. The quarter got stronger as we moved out of January, and we accelerated our market share growth as the quarter closed and now into April, driven by the chicken sandwich launch. Yes, there are macro headwinds the industry is experiencing, but Chili's is well-positioned to continue winning in this environment given the improvements in food service and atmosphere and our industry-leading everyday value. That formula has proven quarter after quarter to be resilient in driving traffic and outperforming the industry.
Now I'll hand the call over to Mika to walk you through fiscal '26 third quarter numbers. Go ahead, Mika.
This quarter marks our 20th consecutive quarter of same-store sales growth and our second year of traffic gains, evidence of the durability of our results and the sustainability of our strategy. With the end of fiscal '26 in sight, we expect average annual unit volumes for the year to approach $5 million. These higher sales levels and strong unit economics continue to support our Invest to Grow strategy. We maintained strong business momentum this quarter, achieving positive same-store sales despite last year's positive 31% comparison, including 4% growth at Chili's. While winter storm burn affected Chili's January sales, growth returned to mid-single digits after weather conditions improved. In both February and March, Chili's comparable restaurant sales increased 5.9% with positive traffic, reflecting the underlying strength and momentum in our business, which we expect to continue throughout the rest of fiscal '26.
Turning to our financial results. In the third quarter, Brinker reported total revenues of $1.47 billion, an increase of 3.2% over the prior year, with consolidated comp sales of positive 3.3%. Our adjusted diluted EPS for the quarter was $2.90, up from $2.66 last year. Chili's top line sales growth was driven by price of 4.6% and positive mix of 0.6%, offset by negative traffic of 1.2%. Weather and a holiday shift negatively impacted sales and traffic at Chili's by approximately 2.1% during the quarter. For Maggiano's, the brand reported comp sales for the quarter of negative 4.6% with negative 10.4% traffic, partially offset by positive mix of 0.6% and price of 5.2%. Weather and a holiday shift negatively impacted sales and traffic at Maggiano's by approximately 2.1% during the quarter.
At the Brinker level, restaurant operating margins were 18.4% for the quarter compared to 18.9% in the prior year due to higher food and beverage costs and higher restaurant expenses, partially offset by sales leverage. At Chili's, we continue to make investments in food by upgrading the quality of ingredients and making recipe improvements for items such as ribs, frozen margaritas, queso, nachos and our bacon cheeseburger to improve the guest experience and ensure value across our entire menu. In addition, we prioritize actively repairing and maintaining our facilities to provide a comfortable and fun atmosphere.
At Maggiano's, we continue to execute the Back to Maggiano's strategy, which is designed to improve our value proposition, optimize our service model and ensure our atmosphere is clean and well-maintained by making the investments needed to improve the business. Food and beverage costs for the quarter were unfavorable by 60 basis points year-over-year due to unfavorable menu mix with 4.6% commodity inflation, mainly due to beef offset by price. Labor for the quarter was favorable 60 basis points year-over-year. Top line sales growth offset wage rate inflation of approximately 3.4%, additional investments in labor and higher health insurance costs. Restaurant expense for the quarter were unfavorable 50 basis points year-over-year due to higher repair and maintenance costs and general inflation impacting expenses such as utilities, rent, to-go supplies and delivery fees offset -- partially offset by sales leverage.
Advertising expenses for the quarter were lower than expected and flat to the prior year at 2.9% of sales due to a portion of spend that shifted from the third quarter to the fourth quarter of this fiscal year. G&A for the quarter came in at 4.0% of total revenues, 10 basis points favorable to prior year due to sales leverage and lower performance bonus accruals, partially offset by an increase in restaurant center support resources to support our growth. Depreciation and amortization for the quarter came in at 3.7% of total revenues and decreased 10 basis points year-over-year due to sales leverage and lapping accelerated depreciation from the prior year due to the retirement of the CTX and Impinger ovens. This was partially offset by an increase in our asset base from new equipment purchases.
Third quarter adjusted EBITDA was $223.7 million, a 1.4% increase from the prior year. Our adjusted tax rate declined year-over-year to 18.7% compared to 19.3% in the prior year, largely due to the impact of a prior year tax catch-up associated with stronger-than-expected performance. Capital expenditures for the quarter were $51.2 million, driven by capital maintenance spend. At the end of the second quarter, we completed our first 4 reimages at Chili's, and the learnings were used to inform our long-term reimage and new unit growth strategy. As we shared last quarter, we plan to complete another 8 to 10 reimages during the remainder of this fiscal year and another 60 to 80 during fiscal 2027 before getting to a planned cadence of 10% of the fleet every year starting in 2028. Regarding new unit growth plans, our goal is to continue to ramp up to a new run rate by fiscal 2029, and we expect to share more details on our strategy and plans at our Investor Day later this year.
At Maggiano's, our main focus areas will continue to be guest-facing repairs and maintenance, supplemented by a smaller reimage program. Our strong free cash flow provides sufficient liquidity to maintain our disciplined capital allocation strategy, allowing us to invest in restaurants, keep debt levels low and return excess cash to shareholders. We continue to support this approach by repurchasing $108 million of common stock under our share repurchase program in the third quarter. In addition, we are planning to call our $350 million 8.25% bonds early in fiscal 2027 using the liquidity of our $1 billion revolver, which would provide interest expense savings in fiscal 2027 and the flexibility to continue reducing leverage if we choose.
In terms of our expectations for the balance of the year, as noted in this morning's press release, we're updating our guidance for fiscal 2026 to include the following: annual revenues in the range of $5.78 billion to $5.82 billion, adjusted diluted EPS in the range of $10.60 to $10.85. Capital expenditures in the range of $240 million to $250 million; weighted average shares in the range of $44.7 million to 45 million. Our guidance assumes wage and commodity inflation in the low single digits and a tax rate of approximately 19%. April started the quarter on a strong note with continued mid-single-digit sales growth and positive traffic. In addition, our outperformance versus the industry is accelerating, and we remain confident we will lap the fourth quarter with mid-single-digit sales and positive traffic at Chili's.
Looking ahead, our results show that our strategy is sustainable and that we're positioned for continued growth. At Chili's, we will build on our momentum by continuing to bring in new guests and drive loyalty through relevant and innovative marketing, menu innovation and strong operations and our industry-leading everyday value. We're confident these strategies will support our ability to drive growth, invest strategically in the business and deliver value to shareholders. I look forward to providing further details at our upcoming Investor Day scheduled in Dallas for Thursday, September 17.
With our comments now complete, I will turn the call back to Holly to moderate questions.
[Operator Instructions] Your first question for today is from David Palmer with Evercore ISI.
2. Question Answer
Two questions, if I could. Just I know you said some stats on the chicken sandwich, but if you wouldn't mind, so forgive me if I'm making you repeat yourself, but any stats on that would be helpful, the mix of the product, the perceived lift to same-store sales when you exclude any of the noise that might be out there, new guest repeat, customer sat scores associated with it? And then is your experience that the lift from that -- a product like that will rise over time with the TV campaign, consumer trial for a product like that?
And then just a big picture question. As Chili's approaches $5 million in AUV, and I'm not asking you to front run your Analyst Day out in September, but how are you thinking about the big levers from here and how they'll be different to get the next $1 million or $2 million? How should we be thinking about your big hairy goals here from here and how you get there?
Okay. So 2 big pack questions. So I'm going to start with the chicken sandwich first, and then I'll address the second one about sustainable growth in the second. So from a chicken sandwich standpoint, we don't have really much more to share because it's only been 2 weeks of launch. We've had 1 week of merchandising only and then 1 week of TV. And we're seeing 161% more chicken sandwiches today than we did pre the launch, which is significantly higher than what we saw in the merchandising-only test market. So -- and in fact, the first week where we were merchandising only, we did see higher lifts than we saw in the test market. So that's all good.
As far as like what's the feedback been, anecdotally, we've heard mostly very, very positive, both in the reviews that we see online as well as in talking to our team members. The first thing that people tend to say when they see it is, "Oh my goodness, this is a really big sandwich," which is exactly what we're going for. Inflation is how we position the sandwich and the price point and the size, especially when we compare to our fast-food foil. So that's all working. Over time, we're going to see whether it continues to maintain. So we'll be able to answer your questions about repeat rates and we have all that tokenized data, but that's going to take a few quarters to really understand that. But right now, we feel very, very bullish about it.
Typically, when things mix a lot, they tend to be generally overall more incremental from a magnitude standpoint. So the fact that we're beating the test market is very encouraging. And then we obviously saw some acceleration in traffic driven by the sandwich over the past 2 weeks, which feels good, too. So it's too early to declare this thing is successful. But so far, we're really encouraged by the data that we're seeing.
Now on the second question, David, on what are the next drivers of sales over the next 3 years, we're kind of a repeat record on this. There will be new initiatives behind this, but it's still going to be focused on food service and atmosphere. So from a food standpoint, we talk about the other menu categories that still need renovation, plus we'll have some innovation on the core categories that we've already renovated. So that will continue.
From a service standpoint, I think the big unlock of north of 6 that we're understanding over the past 3 months is this idea of cycle time. So the idea of how do we take the throughput that we're seeing in the north of 6 restaurants and expand that throughout the system. They do a lot of things differently to get higher throughput. So like the example I gave in the prepared script, was at the host stand, right? So typically, in a north of 6 restaurant, they either have more staffing at the host stand than what the labor card says and/or they have more senior level of staffing, either paying a more senior host or sometimes having a manager be in the door during busy peak times, right?
In addition to that, there's software behind that when we use the seating system that we need to make sure the teams are trained on, they're using consistently so that when we quote wait times, they're more accurate because we need to use that all the time. So there's a bunch of work that we need to do for the host rollout that we're learning from the north of 6 restaurant. That will go in Q2 of next fiscal, but that's like one example of reducing cycle time, which I think is going to improve throughput, not just for north of 6 restaurants, but more importantly, the entire system.
And then on atmosphere, the big thing is the reimage. And you're going to be able to see that when you're here for the Investor Day. We're going to take you out to the restaurants, so you can see them for yourselves of what we're doing. The next 8 to 10 that we're doing in these 3 months is really going to be finalizing what are the things that we want to invest and what are the things that we don't want to invest in so that when we start with 60% to 80% next fiscal and obviously get to the 10% run rate in fiscal '28, we're off and running with the best possible package with the best possible payback. So we're very bullish about the growth levers in front of us. And obviously, I even talked about our world-class marketing, which continues to get stronger and stronger and bring new guests in. So we're very, very bullish about the continued sustained growth of this business.
Your next question is from Chris O'Cull with Stifel.
Kevin, just given the recent volatility in consumer sentiment, have you observed any canary in the coal mine type behaviors such as check management or softness in lower income spending?
The answer is we're seeing a little bit of check management. So as we've seen traffic accelerate behind Chicken Sando launch, we've seen a little bit of check management in desserts and in alcohol. Our alcohol sales are still way up with the growth that we've had with the business, but we are seeing some incidents start to slow. And here's what I would tell the team is let's control what we can control. So we can continue to win market share with the best food service and atmosphere in the industry with industry-leading value, and we need to stay focused on that.
Whatever happens to gas prices in the macro, that's out of our control. But what we can control is staffing our restaurants for peak. We can control serving great food and with wonderful service in a clean and inviting environment. And if we continue to do that, we'll continue to grow market share, we'll be able to hang on to our business. And then obviously, if the macro gets any better, we'll be able to grow even faster behind that. So I'm kind of like a broken record on it. It doesn't matter what happens with the macro. It doesn't matter what happens with external factors. Our indicated action for this team is improved food service and atmosphere and good things will happen, and we're just going to stay focused on that.
Makes sense. And then, Mika, I know margin flow-through was impacted, I think, by R&M expense this quarter. Can you help us walk us through how to think about flow-through in the fourth quarter? And were there any significant headwinds on any line items that we should be aware of? And then maybe whether the new sandwiches to the platform are margin accretive or margin neutral? Any color would be helpful.
Okay. Great. Yes. So I know the flow-through, we continue to invest back in the business with this invest to grow strategy. So that's part of it is that we don't flow it all through when we put it back in. We saw that food and beverage was up a little bit year-over-year. We continue to invest in labor. And then our restaurant expense, like I said, the R&M, we caught up with a lot of the deferred maintenance. Now we're shifting to preventative maintenance, which takes a little bit of time for that to start really coming through that you can see some opportunities or some reduction in future expenses. But we are seeing a lot of give and take in there. If you look at our R&M just over the first 3 quarters, you can really see that we've kind of established a run rate. So it's pretty steady. I think some of the volatility is really lapping the prior year. And we'll continue to look at that and get more efficient in our spend, but that's kind of one of the drivers there.
Looking forward on margins, I think in the fourth quarter, you're going to see probably similar margins. Maybe food and beverage are going to creep up a little bit. We have a beef contract that came due, a state contract that's going to be a little bit more. I think we'll continue to leverage the labor that will probably offset any of that increase. And then you'll see very similar, I think, to restaurant expense this quarter as a percent of company sales. I think you'll see something there. So I expect margins to be similar from Q3 to Q4, and I expect margin growth to happen, return to margin growth in Q4. And I'm very confident in what I stated at the beginning of the year is that, taking a step back, we're going to grow our margins year-over-year at 30 to 40 basis points. I'm very confident about that moving forward.
Your next question for today is from Dennis Geiger with UBS.
With all the focus on the chicken sandwich, all 6 varieties of which are delicious, as you know, you put up great results in April, even with just a couple of weeks of the sandwich seemingly, even as you talked about that acceleration in traffic with the sandwich. But I'm curious if you could talk a little more about sort of ex the sandwich, some of the key drivers of that momentum that you've been seeing, especially as we kind of go into 2027? Or said differently, even if, let's say, the sandwich incrementality is not a significant step change in trend, do you think that sort of the mid-single-digit type of comp trajectory is still within view?
Well, the answer to your last part of the question is yes. I still think that mid-single comp is still within purview. The recipe for success for us is just to continue to improve the fundamentals, so foodservice and atmosphere. That's why every earnings call, I talk about the improvement on Guest With A Problem and GWAP and food grade and intent to return because what I tell my team is if it's not better than the previous year, what belief do we have that we're going to continue to grow. So we have to continue to improve those things because we're not going to like LTO our way to growth that we see others do. So we want to use those resources on the things that drive long-term traffic and sustainable growth.
And if we believe in that, those metrics have to continue to improve. And that's why when we budget the year, we have some food news that has to do with upgrading the permanent menu, but most of our initiatives have to do with improving food service and atmosphere on the kind of the core thing, like the thing like Q2 hosting, what we're going to launch for next fiscal. That's all about throughput and driving traffic. That's not a new piece of food that's necessarily going to drive traffic. It's going to drive traffic through taking the demand that we're already having come to the restaurants and making sure they don't leave, right? So the recipe for success right now is to continue to improve food service and atmosphere, continue to improve the fundamental metrics, right, and then let the world-class marketing team create excitement so that people come into the restaurant and try it for the first time. And that's why we also share the token data because the idea is, hey, we are bringing -- we are putting new guests into the funnel every quarter.
And then when we look back over the next 6 to 12 months, they start looking like existing guests. And that's the key. If the fundamentals continue to improve, then the new guests that come in will start looking like existing guests, and we've just got to keep that flywheel going. That traffic growth obviously drives sales growth. Sales growth drives revenue growth -- drives profit growth. We're able to reinvest some of that back into the business to continue the flywheel and drive traffic growth, right? That's the recipe that's worked the last couple of years, and that's the plan for the next 3 years.
Your next question is from Jeff Farmer with Gordon Haskett.
Mika, I think you just said that there's an expectation that you can grow margins by 30 to 40 basis points sort of on a go-forward basis or at least in '27. But beyond continued same-store sales momentum, what dynamics do you see contributing to that level of margin expansion? And hopefully, I got that 30% to 40% -- or 30 to 40 basis point number correct in the question.
Yes. Well, the 30 to 40 basis points was referencing this fiscal year, what we guided, very confident in that. But I do think that we will be able to grow margins over time. And it will primarily be from sales leverage because that's our strategy is to grow the top line. But we do think there can be opportunities now that we have gotten through the turnaround, we've stabilized the teams. We've attracted better talent. This does give you an opportunity to just be more efficient in your spend, and I think we'll look for ways as we move forward to do that as well. But even with the sales growth, I do think that we can continue to leverage margins.
Okay. And then just one quick follow-up. As it relates to menu pricing moving into FY '27. I think you guys have been back-to-back mid-4% in '25 and '26. How are you thinking about menu pricing as you move into FY '27?
Yes. So the very first thing, most important thing for us is to protect our value proposition. We're going to protect that $10.99 industry-leading value, have it there for those that need it. And then we also want to make sure we have value across the entire menu for everyone. And with that being said, moving forward, I do think that we'll continue to invest in food service and atmosphere, but we will probably be on the lower end of our stated pricing range. So moving forward, we'll have to -- we're always going to make sure that we can price for inflation, but we're going to make sure we balance that with making sure value is there for our guests.
Your next question for today is from Andrew Strelzik with BMO.
I know there's a lot of focus on the food initiatives and the menu initiatives that you guys have planned. But I was hoping you could talk a little bit more about the operational and service improvements and those kind of legs of the stool there. How much more room for improvement is there? What are kind of some of the bigger opportunities that you see kind of going forward to drive that?
Yes. It's frustrating, but it's also really exciting how much more opportunity we have. So look, we didn't even touch on the technology initiatives that are happening from an operational standpoint. We continue to improve our KDS system. We have a -- we're just kicking off now an entire back office redo, basically taking all these antiquated systems and getting to -- it's not an ERP system, but the idea that all the back-office systems could be connected. So it's going to be way more usable for the team members, hopefully, help for throughput as well as retention. That's the big one.
We still are working on -- we're rolling out right now our team member handheld initiative, which is a complete upgrade to the interface. That's gone a little slower as we rolled it out just as we've seen some glitches. We paused it to get it fixed and it's rolling back out now, which should be done by next quarter, which is a huge one. So that's all the technology initiatives and there's a lot more than that. We have what we call Supermarket Simple that's going to be rolling out in the next quarter, which is all about removing the friction that happens at the end payment with the Ziosk where either a discount didn't come off that the guest expected or they accidentally left a different type of tip and we need to get that reversed.
These are all things that hold the tables. I'll give one example. This one simple example that happens about 7 times a day where we've got to reverse something out on the Ziosk. We added it up. It was like over 20 years where the tables tied up for the guests waiting for that to get reversed by a manager. And that's an example where we can fix that very quickly with an update from Ziosk. So there's a huge amount of technology initiatives.
And then from an operational standpoint, really the big push now has been the north of 6. So we're moving from kind of defense of just removing a bunch of stuff and making it much easier for our team members to operate. We're now moving to offense on accelerating cycle time. So whether that's the host stand, whether that's ticket times, a great example we'll see in very busy restaurants is their ticket times will be a little bit inflated. We'll go to the labor card to understand are they scheduling enough cooks. The answer is no. And it's like that's a clear indicated action that we can continue to take on more traffic and get those ticket times down.
So ticket times, even the checkout time that we talked about earlier. So there's a ton of initiatives that are coming. We'll be giving a lot more detail at Investor Day on the new things that we haven't talked about before. But I remain very, very bullish about our ability to improve the operations, continue to get GWAP and intend to return scores better and better as well as the most important thing right now is to get throughput going.
Great. Okay. And then I wanted to ask also on the remodels, and I know it's very early days, but can you just remind us kind of spend levels? How should we think about the types of lifts that we might be able to expect there as that continues to build? Or maybe kind of are there different levels that you're testing? How should we think about that?
Andrew, yes, so it's really early with only 4 restaurants that we've done so far. But we are optimizing the spend. The good news is we did 4 different levels of spend and the lowest level of spend is getting the same sales lift. So we are getting a sales lift in these restaurants. We're optimizing the spend. But we'll have more of that to share once we have a bigger test group with the 8 to 10 and then the 60 to 80. So more of that, again, will come in September when we just have a little bit more time to read the test, but very encouraged with the spend and the sales lift that we're getting in the early 4.
Your next question is from Jeffrey Bernstein with Barclays.
The first question is just on the new unit opportunity. Clearly, new unit growth is more of a stable driver of top line than comps. But can you talk maybe a little bit about the changes in the new units you anticipate versus existing, maybe the cost to build and return requirements. I know the Investor Day will offer more color, but just how you think about the U.S. total addressable market for a brand that most people view as fairly mature. And then I had one follow-up.
Okay. Thank you, Jeff. Yes. No, we're really excited about our new unit growth strategy. So our first step was to really build up the team. We have a great leader with Richard Ingram. We have a lot more insights, a lot more analytics. Just the whole team is phenomenal. So we've really started gearing that up. Primarily in the past, we've really stuck to some of the states, our biggest states that we always have done a great job in California, Texas, Florida. We continue to build there. We've been very successful, and we'll still build there. But there's a lot more opportunity across the United States for us to build in different markets. So it seems like Chili's is everywhere, but Chili's is not everywhere.
So again, we'll kind of spell that out and give more detail on how and why we think we have a much larger addressable market, but we are going to be able to ramp up our unit growth. And so next year, you won't see it next year just because there's usually about an 18- to 24-month cycle, but we can already see the teams are ramping up for F '28, and we expect to get to our new growth run rate in F '29. As far as the units go, we're making sure we're using a lot of the fun elements from the reimage. And then we're working with the operators and all the insights we have, again, with the north of 6 restaurants just to make sure that we have these restaurants exactly how we want them, especially with the new unit volumes that we're experiencing to make sure that they are designed for optimal throughput. So a lot of exciting things to come. We have a very strong team. We're ramping up the growth, and that's going to be a great lever for us as we move forward.
Understood. And the follow-up, just Kevin, I think you noted that Maggiano's was -- I think it was high single-digit percentage of sales, low single-digit percentage of operating profits. I know the turnaround is on track, but seemingly take time. Just wondering whether there's any incremental interest in adding a second brand of greater scale, maybe something more meaningful in terms of sales and profit contribution. Clearly, you have the credibility, you have the playbook to strengthen maybe more of a national brand now that Chili's is seemingly in a much more stable and consistent growth position. Just wondering whether there's any incremental interest or what it would take to maybe get you to think about a potential brand of more scale to add to the portfolio.
Jeff, we get asked that question a lot. What I tell my team is we need to be able to turn around a smaller brand first before we take on more risk of a bigger brand. So it's -- just because we have the playbook on Chili's doesn't necessarily mean that the same leadership team can do the same thing on other brands. And I'd rather prove it on a pretty risk-free opportunity like Maggiano's versus take the big swing for the first time on something a lot bigger that could put more -- put undue risk on the business that we don't really need to do right now. We're very bullish in continuing to be able to grow Chili's and do that profitably. And so we can prove out our beliefs about our ability to turn around other brands with Maggiano's.
Right now, part of the Maggiano's turnaround is also just unifying the system so that we could be ready for a third brand should we be able to turn around Maggiano's. So for example, one of the big issues in Maggiano's is its kitchen throughput. It has a very antiquated kitchen display system. We're now in process of putting them on the Chili's kitchen display system. If we're able to do that successfully, which we should be, it's pretty easy, then as we do updates as we learn more about the Maggiano's business, it's much easier because they can use the same team. It's much easier than having them to have to learn a completely different system, right?
So part of the Maggiano's turnaround is not just the financial improvements of Maggiano's, which is we all want, right? It's also proving to ourselves that we could have a model like some of our biggest competitor in casual dining does an exceptional job being structured to be able to plug in new brands. And so that's a big part of the Maggiano's turnaround, not just the financials, but actually structuring the company to be able to do that. But I will tell you, until we are able to do that, I would caution us from trying to get a third brand. We have no business doing that until we can prove that we can handle our second brand.
Your next question is from Jon Tower with Citi.
On the north of 6 initiative that you're going after, I'm just curious, it sounds like there's a need to invest in some labor. So I'm curious if you could speak to where you see and think labor needs to go over time across the system? And then I've got a follow-up.
Yes. So right now, when we look at the north of 6 restaurants, they don't all invest labor in the same places. I mean generally a trend for the extremely high-volume restaurants, they do invest more labor than what the model tells them. The typical positions are either in buster or server assistant. Sometimes it's servers and then sometimes it's hosts. Once in a while, it's cooks too. to get throughput there. So it really depends on the restaurant and what they need and the types of experience of people that are in the restaurant. So it's not a one size fits all.
As we think about the budgets that we're setting for our fiscal '27, there are some north of 6 investments baked into the numbers that we'll be sharing as part of our guidance when we come out with that a quarter from now. So just to be very clear, there will be some investments that they will be baked into the guidance that we provide. And then beyond that, there's a lot of other things that we're working on. Some of them don't really have to do with investments, just deploying different types of labor deployment or instruction. So we'll make sure that all of that is clear for you guys and that nothing is surprising.
So I would like to add on to that. So also remember, with our labor model and especially the north of 6, as we have more guests in the restaurant, it naturally scales up. So I don't know that it's a true -- really -- it's not going to be like -- I'm not anticipating it to be a really big investment. Also, when Kevin talks about some people are already spending more than our labor card, that's not just the north of 6. We have scaled that back to a lot of the restaurants, we're saying staff for the traffic you want. So a lot of that is built in our current run rate. We're going to formalize it next year. It will be an investment. There will be some investment, but it's not going to be as material as it has been in the last few years when we really had to staff up to just get that base model right. I feel now it's more of a lot of fine-tuning on the investment side.
Got it. I appreciate all that color. Maybe just flipping to the remodels. I know it's early in the process. But I'm just curious, as you're going through with the first 4 stores and now the planned, I believe, 8 to 10 more coming, are you seeing an opportunity to maybe do anything different in the back of the house as well with respect to either equipment or any of the processes that you've got -- or the build, hence, the processes get better in the back of the house?
Yes. So -- and it may not necessarily be tied directly to the reimage program, but we're always looking at the heart of house. We have a whole cross-functional team that is dedicated to looking at the equipment. Again, north of 6, part of that is to optimize the heart of house equipment packages. Do we need to add an extra fryer? Where do we need? At what levels do we add a separate combi oven? So we're looking at all of that. We're also thinking about that as we design the new prototypes on making sure that we have the space laid out just right and that we have the model built for those higher volumes and the equipment that we'll need moving forward. So it's absolutely a focus that we continue to look at different pieces of equipment, how do we improve either the quality of the food or the speed of our service. And so we have a whole team just working on that at all times that we could deploy.
Your next question for today is from Brian Harbour with Morgan Stanley.
With the reimages, are there elements of that, that sort of help with throughput? Or is that more of just like an aesthetic thing? Could you talk about that a little bit?
Yes. So right now, it's more of the exterior, the inside is paint and just how the look and the feel of the restaurant. But we're always looking at our tables where, for example, in one of the previous reimages, we put in some big community tables in the bar. Well, we realize a lot of people don't like sitting at the community table. So as we go through, we make sure that those community tables are gone, those are separate tables. So any time we have the opportunity to update the tables or optimize the tables, we're doing that. And we're making sure we look at that really not necessarily in the reimages, but in the new units as well that we have the optimized tables and we have the most tables to help with throughput.
Yes. But it's other than the tables, it's mostly cosmetic throughput. Our 2030, Heart of the House restaurant team is focused on what is the equipment that can improve throughput. So like an example that we're looking at right now is a new type of grill. A flat top that all of the space is usable. It's really consistent in terms of heat across the grill. So you can put more burgers and they cook more evenly. That's an example that would have improved throughput. In addition, there's -- they have a manual clamshell attachment that would be able to cook on both sides. We tested computer clamshells a few years ago and thought they were not as reliable as they need to be, but this one likely would be more reliable. So that's an example where the equipment would give us more throughput and lower ticket times on burgers, which is obviously a huge part of our business. But I would consider that kind of separate from the reimage program.
Okay. Got it. Makes sense. Mika, how are you feeling about food inflation at this, I guess, more as we think about like fiscal '27, do you expect that to sort of reset higher? Is it something you'll sort of address with price when the time comes? Or could you talk about that?
Yes. So I mean, it's -- we'll probably give you more -- I'm going to give you more details in next quarter when we set guidance for next year. But there's always puts and takes, but there is going to be pressure with beef. I mean that's clearly out there. Luckily, that's not the total basket for us. We're a varied menu, so we have different opportunities. Obviously, we sell a lot of chicken as well. But yes, we're going to continue to see pressure in commodities as we move forward. It will probably be similar levels that you've seen us in the past or this last half of the year, we've had that mid-single-digit inflation. So I'm anticipating that will be something similar as we move forward into F '27.
Your next question is from Brian Vaccaro with Raymond James.
Congrats on the continued strong momentum. Mika, just following up on that last question on commodity inflation. Did I hear correctly that you do expect low single-digit inflation in the fourth quarter? And maybe just any clarity on what's breaking a little bit more favorably for you even in the near term compared to the mid-4s you did in the last quarter?
No. So it's mid-single digits in the fourth quarter, and that's what I expect to continue into next year, Brian. And so beef will continue to be a pressure for us. I was just saying there could be some gives and takes out there on different contracts. But in general, we're going to have inflation. It will probably be in the mid-single digits next year as well is what I'm anticipating now. More specific details to come as I give guidance next year. I'm just kind of giving a guideline now. We'll give more information on that next quarter.
Okay. Sorry, I thought I misheard the lows. So that's helpful clarity. Advertising. Yes, that's great. On the advertising front, I think you said it was flattish year-on-year as a percent of sales in Q3. Just ballpark, how much do you expect ad spend to be up year-on-year in the fourth quarter?
So in the fourth quarter, it will probably be in the $5 million to $6 million range for the fourth quarter.
Okay. All right. That's helpful. And then just a bookkeeping one for me. Can you share the sales mix of 3 for Me, kind of how that splits between $10.99 and the higher tiers and also on Triple Dipper?
Absolutely. So we continue to have about 20% of our guests eat on the 3 for Me platform. Approximately 40% or a little bit less are eating on the $10.99. That converts to total 3 for Me is about 12% or almost 13% of our guests. But on the $10.99 version, less than 5% are actually eating -- of our total sales is $10.99. So that's being pretty steady for us, I would say, as we move through. What was the second piece of your question, Brian?
Triple Dipper.
Triple Dipper. Yes, they're hanging in there. So last quarter, it was right at 16%, and that's where it is now. So hanging in there with the Triple Dipper.
Your next question for today is from Nick Setyan with Mizuho Securities.
I think I heard you guys say ad spending went a little bit into Q4 from Q3. Can you just remind us what the year-over-year growth was in Q3, what it will be in Q4? And then how are you thinking about ad spend in fiscal '27? Can that grow as a percentage of sales? Is it going to be flattish? And in terms of just spending by quarter, that would be great or at least directionally. Any color there would be very helpful.
All right. Sure. So advertising in the third quarter ended up being fairly flat year-over-year on a dollar basis and a percent of sales basis. It will pop up a little bit. We had to move some things into the fourth quarter just some timing of some things, how they happened. So in the fourth quarter, I expect that to be a little bit higher as a percent of sales and probably, like I said, $5 million to $6 million up year-over-year.
Next year, again, more color when I give guidance for next year, but I would expect it to be similar as a percent of sales, a similar amount there. There's always inflation on ad spend. So we will be spending some more dollars, but probably a similar percent of sales as we move forward. I don't have the cadence yet, Nick, to share on quarter-to-quarter in F '27. Again, we'll get into more of that at the end of this fiscal year as we kind of guide for next fiscal year.
Your next question is from Andrew Charles with TD Cowen.
Great. Mika, you talked about the likely mid-single-digit inflation in 2027 led by beef and plans to roll off price as you're prioritizing value. And so I know we're going to give the specific guidance next quarter, but I'm just thinking qualitatively, what are the opportunities to drive margins just beyond sales leverage while you cited that you're not immune from the industry's contracting alcohol mix as well?
Right. So moving forward, again, we feel like our strategy is a top line strategy. So we will get margin leverage from that. But we will look into ways, I think, as the brand -- we've kind of been in this turnaround mode. We're getting more into the stabilized mode where we have, again, a lot more talent, stabilized teams. And what we've seen over time is as turnover goes down, you have better talent, you always get more efficient in whatever you do. That could be labor, that could be how we spend the dollars. For example, R&M is one that we spent a ton of money in over time. We do think, like I said, we had a lot of deferred maintenance. Now we're moving into preventative maintenance. We also think there's going to be opportunity now to just find ways to have more efficient spend as we move forward. And we have a lot of initiatives kind of behind the scenes working on that. So there'll be just different areas of the business.
Again, labor. I think labor is one that as the teams continue, turnover goes down, productivity goes up. Like we said, we may have to invest in some pockets. But at the same time, we're having teams that just get better and better at what they do and you have some natural opportunities there. So we'll continue to look across the whole brand. We've had a lot of growth the last 3 years. There's probably a lot of opportunity to optimize some of those expenses as we move forward. So that will -- again, will be more things that we look at in the future, but I think there will be opportunity there. But even excluding any margin initiatives, I still think we can expand margins and grow the top line. We feel really great about our mid-single-digit same-store sales and mid-single-digit growth over time as we move forward.
That's helpful. And then as we think about the ramp in new stores, and you talked about how 2029 more of a steady rate. And again, we'll hear more about this at Investor Day on the specifics. But just kind of curious, I mean, are you piloting opportunities to lower the cost of the box as we get ahead of this to better understand kind of what the Chili's of the future really looks like?
Yes. I mean, absolutely, we always look at how can we optimize costs in the box. I mean I will say just over time, especially post-COVID, there has been inflation in how you build the restaurants. The great news is we took our AUVs from around $3 million to we talked about approaching $5 million. So that gives us a lot more opportunity. With our improving AUVs, that doesn't give us a lot of opportunity to necessarily shrink the box because we're trying to accommodate more guests, but we are always looking at that. But what I will tell you is the returns we've seen even on the restaurants we've been growing over the last few years have been great. We feel really confident in that, and we're really set up to build some restaurants with some great returns as we move forward. But we're always looking to see if there's opportunities to optimize the box and our spend.
Your next question for today is from Chris Carril with KeyBanc Capital Markets.
So I guess just following up on earlier questions about the check. Can you update us more specifically on how you're thinking about the mix component of check moving forward here over the near to medium term? And Kevin, I believe you mentioned the $3 to $4 check gap to the competition. So any additional thoughts on the long-term check opportunity would be helpful.
So Chris, do you mean on the check? Just we're always looking for opportunities to grow mix. But right now, like Kevin said, just recently, we've seen some softness in mix, though it was very interesting that as soon as we saw softness in mix, we saw our traffic start to accelerate. So again, that's why we feel very confident about mid-single digits and positive traffic as we finish up this fiscal year. Now moving forward, we're always looking for opportunities to grow check. We've done a great job of it over the last 3 years. We'll look to continue to optimize. But if I'm thinking longer term, we know what that pricing strategy is with the same-store sales, we talked about that range. And then I think we're really going to be focused on growing traffic on top of that.
Yes. As far as like what guidance we give the teams on $3 to $4 below category, we don't think about it that way. That's more of an output that we report out to everybody about -- it's a verifiable demo that we're lower priced than our competitors. The way we think about value is -- and we need this across the entire menu is how do we create abundant value everywhere in our menu so that when people leave Chili's, they're like, wow, that was an incredible value. And we've been slowly renovating our menu to get to that value across the entire menu. We started with burgers and fries and fajitas, and we have it in margaritas. And now we obviously did in chicken crispers. Now we're doing chicken sandwiches.
The next to go will be salads and steaks, and we did it with ribs actually last year, where it's a much more abundant value. Even if the price is a little higher, you get 50% more ribs that are meatier and it's a bigger plate. So that's the way we think about it. It's like when we're in the test kitchen with our operators, we're like, hey, is this something that's going to be wow value? And if it's not, we got to continue to work on it. And then the outcome is the things that we report to you on price and how we're lower than the competitor. But the important thing is when I get a plate at Chili's, do I feel like that was wow value that I want to come back for.
Got it. That's helpful. And then just turning to Maggiano's. Now that George is overseeing marketing for Maggiano's in addition to Chili's, can you maybe speak to how you're thinking about marketing for the brand and what that could look like when you do begin to see signs of traffic stability and growth?
Yes. It's -- we're less than 50 restaurants. So it's never going to be this big national TV thing that like Chili's has. So what George -- the lens that George is bringing to the business right now is empathy for the guest experience because at the end of the day, we've got to improve food service and atmosphere at Maggiano's if we want to grow traffic over time. So he's looking at things like menu presentation, family style, the entire guest experience from the time you get into the lobby to when you sit down to when you check out. These are all things that we need to bring a guest empathy lens to, and that's primarily what he's focused on right now. Should we get that into a place that we're really excited about, will we do some demand creation? Probably. But given that it's -- we're not a national brand, we don't have Maggiano's everywhere, it's never going to be like what you see at Chili's.
Your next question for today is from Christine Cho with Goldman Sachs.
Could you give us a quick update on the off-premise trends and whether that channel has proven more resilient in the increased kind of check management standpoint? And I know there has been clearly a stronger emphasis on elevating the in-restaurant experience. But do you see an opportunity to lean further into the off-premise channel going forward?
Yes. So our off-premise, it's been hanging in there. it's usually been about, what, 23%, 24% of total sales. So it's been pretty steady. It did have the same negative traffic that the dine-in did or the overall brand did this last period. But with that being said, we do think there's opportunity. We've really been focused on the dine-in experience, and we think there is opportunity to, again, take friction out of that whole guest experience with off-premise. We can think -- we think that we can improve that experience, get better throughput. So it will be a focus as we move forward.
Yes. I mean the big opportunity is just the overall experience of picking up. It's not -- the improvement that we've made from the dine-in, we still have opportunity to do on to go. Our quote time calculator hasn't been updated in a while. And since our ticket times are so much faster, a lot of times we quote times that are way longer than when the food is actually made. So we've got to get that thing updated. We've got to make the experience for pickup a lot more seamless, ideally with some order boards, so you would know where your order is and whether it's ready to be picked up. And then we just made some investments in packaging that are already in all the numbers that you guys have to make the actual experience, getting the food at home a whole lot better. So to me, the important thing is let's get the fundamentals right before we go try to put any kind of gas on it, and we've got some work to do there.
We have reached the end of the question-and-answer session. And I will now turn the call back over to Kim Sanders for closing remarks.
Thank you, Holly. That concludes our call for today. We appreciate everyone joining us and look forward to updating you on our fourth quarter and fiscal year 2026 results in August. Have a wonderful day.
Thank you.
Thanks, everyone.
Thank you. This concludes today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
Brinker International, Inc. — Q3 2026 Earnings Call
Brinker International, Inc. — Q2 2026 Earnings Call
1. Management Discussion
Good day, and welcome to the Brinker International Q2 F '26 Earnings Call. [Operator Instructions]
It is now my pleasure to turn the floor over to your host, Kim Sanders, Vice President of Investor Relations. Ma'am, the floor is yours.
Thank you, Holly. And good morning, everyone, and thank you for joining us on today's call. Here with me today are Kevin Hochman, Chief Executive Officer and President of Brinker International and President of Chili's; and Mika Ware, Chief Financial Officer.
Results for our second quarter were released earlier this morning and are available on our website at brinker.com. As usual, Kevin and Mika will first make prepared comments related to our strategic initiatives and operating performance. Then we will open the call for your questions.
Before beginning our comments, I would like to remind everyone of our safe harbor regarding forward-looking statements. During our call, management may discuss certain items, which are not based entirely on historical facts. And any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such risks and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC.
And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations.
And with that said, I will turn the call over to Kevin.
Thank you, Kim, and good morning, everyone. Thank you for joining us as we discuss our financial and operating performance for the second quarter as well as our outlook on the remainder of fiscal '26.
Q2 Chili's same-store sales were plus 8.6%, outpacing the casual dining industry by 680 basis points. This strong result was rolling at plus 31% from last year for a 2-year cumulative comp of 43%. This was our 19th consecutive quarter of same-store sales growth with a 3-year cumulative comp of 50% and a 4-year comp of 62%. The Chili's turnaround is real, it is sustaining and we have no intention of taking our foot off the gas, which means we will continue to be focused on improving our food, service and atmosphere as well as continue making Chili's more fun, easier and more rewarding for our team members. Q2 results were driven by our world-class marketing and brand building that brought guests in and continued improvements in food service and atmosphere that brought guests back.
Now I'll give some updates on the Chili's business. We talked last quarter about the need to bring back our Skillet Queso based on guest feedback. That reintroduction has been successful. We are now selling 20% more Southwestern Queso and the original Skillet Queso versus the prior 2 queso lineup. In addition, our relaunched nachos featuring our signature chicken bacon and house made ranch is now 170% bigger business than the previous nachos with guests loving our new nachos. We have also completed our bacon upgrade to thicker bacon strips and our Bacon Cheeseburger upgrade, which now features triple the bacon in the prior burger. That Bacon Burger upgrade is doing 43% more sales than the prior Bacon Burger.
What's important to take away from these examples is as we upgrade the menu offerings while attracting a new generation of guests, we continue to build bigger, sustainable sales layers in the business. Over the past 3 years, we have had success with these many renovations, crispers, margaritas, burgers, ribs, frozen margs, and now queso and nachos with more segments still ahead of us to upgrade.
Next on our list is our super premium chicken sandwich lineup, which will launch chain-wide in April with a substantial advertising campaign. Chicken sandwiches is a very large market with over 80% of people buying them at least once last year and is by far the biggest segment of all restaurant chicken servings. It has the potential to drive customer traffic, both with new and existing guests.
We believe our new chicken sandwich lineup is superior, distinctly on brand and highly differentiated than what is in the market today. Bold signature flavors unique to Chili's, terrific value with abundance and a traffic driving opening price point within a 3-tier lineup. We'll also be advertising in a big way, leveraging that sharp price point to drive awareness and traffic.
The sandwich lineup has done exceptionally well from a mix standpoint in merchandising only [ test ] in 200 restaurants, and we expect even bigger numbers when we launch nationally in April with advertising and earned media attention.
From an operations perspective, we've also made great progress in Q2. We successfully eliminated net total fixed menu items, which will continue to make it easier for our teams to serve hot delicious food more consistently. One of the keys to our success has been staying disciplined on food innovation, which means avoiding launching food limited time offerings. This allows us to focus our efforts to improve our core offerings, simplify operations and keep field leader attention on ops fundamentals like hospitality and great food, avoiding limited time offer distractions to maintain efforts on the core business has continued to drive guest scores.
The daily metric we measure, guest with a problem, or GWAP, improved to 2.1% versus 2.9% for Q2 last year. For perspective, when we started the turnaround journey over 3 years ago, we were at about 5% and has been consistently getting better every quarter as we keep hitting on different fundamentals in the business. We are also now seeing real movement in syndicated external guest perception metrics, which allow us to track not just progress against ourselves but even more importantly, how we are improving versus our competitive set.
When we started this turnaround, third-party syndicated data places at the bottom or near the bottom of our competitive set in all 7 of their key metrics that correlate to future sales growth. In the last quarterly snapshot of these metrics, Chili's is now in the top 3 of all those metrics: quality, value, service, atmosphere, taste, cleanliness and overall experience. Yes, there's still room for meaningful gains, but our guests experience progress through our operational improvements is very encouraging.
The other important takeaway from this data is where we have repositioned ourselves on value, which allows us a long runway for growth. In the past 3 years, we have captured value leadership in casual dining and the broader restaurant industry. And while we earn that leadership value position, we were also able to improve restaurant operating margins from 11% to 18% while baking in hundreds of millions of dollars of guest experience investments into the going 4-wall economics. The brand repositioning and operational improvements have delivered big results. Chili's was the #1 traffic brand in casual dining for the entire 2025 year. And what's even more encouraging is Black Box data is telling us, our per person check average is still more than $3 less than our direct casual dining competitors and more than $4 less than casual dining as a whole. Simply put, Chili's has been repositioned to win for the long term, and that's exactly what this team is going to do.
On the Maggiano's business, we are making progress in the turnaround pillars of food service and atmosphere I talked about last quarter. Based on guest feedback, we brought back Gigi's Butter Cake, Eggplant Parmesan, Baked Ziti and Classic Meat Sauce. On the value front, we've also increased pasta portions by 20% and have up portions on select other dishes that had opportunities, including our meatball dishes, salads, stuffed shells and crispy mozzarella.
As a result of bigger portions, value scores have improved in the past few months. We did see some sequential improvement in the business during the quarter and sales being our internal expectations for the first time in a while. Still lots of work ahead of us on service atmosphere and team culture, but these are encouraging green shoots and small wins.
Maggiano's is now only 8% of our company sales and 3% of our profit contribution, but it can be a source of growth in the future given the white space opportunities. This is why improving 4-wall economics of the brand and getting momentum back in the business is important.
Q2 marked another exceptionally strong quarter for Chili's with continued progress in food service and atmosphere, guest experience improvements, world-class marketing, a repositioning relevant and distinctive to Chili's brand, and our value leadership sets us up for continued market share gains and a long run of profitable growth. We won big results from Q2 last year with more big results this year, and that's proof that the strategy is working and that it's sustainable.
Lastly, I want to recognize our restaurant teams and our home office teams for quickly responding to winter storm Fern. I know many of us on this call view the storm through a lens of what it will do to sales or earnings, but on the ground, it's a whole lot more than that. Our restaurant teams have done an excellent job overcoming the challenges of the storm to reopen safely and quickly. Our field facilities teams are working tirelessly on restaurant repairs that are needed, and our restaurant support center has been incredibly responsive getting restaurants what they need. Hats-off to our [ VPOs ], our directors of operations, our managers, our team members and our restaurant support center for all that you do to overcome challenges like these.
Now I'll hand the call over to Mika to walk you through fiscal '26 second quarter numbers. Go ahead, Mika.
Thank you, Kevin, and good morning. Brinker successfully comped the comp, delivering another quarter of positive same-store sales growth, led by 8.6% growth at Chili's, lapping a 31.4% increase from the prior year. With fiscal '26 more than halfway complete, we expect to achieve our fifth consecutive year of same-store sales growth and second consecutive year of traffic gains, demonstrating our continued momentum and sustained growth. We have grown our customer base by leaning into our everyday industry-leading value, core menu improvements and marketing initiatives to position us well in a competitive and challenging environment. And by focusing on the fundamentals of food, service and atmosphere, we continue to improve operations, bring guests back and deliver consistent positive growth.
For the second quarter, Brinker reported total revenues of $1.45 billion, an increase of 7% over the prior year, with consolidated comp sales of positive 7.5%. Our adjusted diluted EPS for the quarter was $2.87, up from $2.80 last year.
Chili's top line sales growth was driven by price of 4.4%, positive traffic of 2.7% and positive mix of 1.5%. These results were bolstered by the continued success of our Margarita of the Month program, which performed well during all months of the quarter. Notably, we exceeded our expectations in November with what guests and the media coined, The Wicked Margaritas, which sold approximately 1.5 million more drinks than a typical Margarita of the Month.
Another callout for the quarter, Christmas Day traded out of the second quarter into the third quarter, resulting in a favorable comp sales impact of 1.2%.
Turning to Maggiano's, the brand reported comp sales for the quarter of negative 2.4%. As Kevin mentioned, we saw some encouraging progress as the team executes on its Back to Maggiano's strategy, which is designed to improve our value proposition, optimize our service model and ensure atmosphere is clean and well maintained.
At the Brinker level, restaurant operating margin was 18.8% compared to 19.1% in the prior year, a 30 basis points decrease year-over-year, mainly due to Maggiano's sales deleverage and the additional investments needed to help improve that business. However, at Chili's, we saw a 40 basis point increase in restaurant operating margin year-over-year, mainly due to sales leverage partially offset by incremental investments in labor and advertising and higher health and workers' compensation insurance cost due to increased restaurant headcount.
Food and beverage for the quarter were unfavorable by 20 basis points year-over-year due to unfavorable menu mix with 0.8% commodity inflation offset by price. Labor for the quarter was favorable 30 basis points year-over-year. Top line sales growth offset additional investments in labor, higher health insurance costs and wage rate inflation of approximately 3.3%.
Advertising expenses for the quarter were 2.9% of sales and increased 40 basis points year-over-year due to additional weeks on TV. G&A for the quarter came in at 4.1% of total revenues, 20 basis points higher than prior year due to increased restaurant support -- restaurant center support resources, partially offset by sales leverage.
Depreciation and amortization for the quarter came in at 3.8% of total revenue and increased 30 basis points year-over-year due to an increase in our asset base from equipment purchases, partially offset by sales leverage.
Second quarter adjusted EBITDA was approximately $223.5 million, a 3.6% increase from prior year. The adjusted tax rate for the quarter increased to 18.8%, mainly driven by higher profits, which increased at a greater rate than the offset generated by the FICA tax tip credit. Capital expenditures for the quarter were approximately $63.7 million, driven by capital maintenance spend.
As discussed, in 2026, we started our reimage program for Chili's. We just completed our first 4 reimages, and we'll use the learnings to inform our long-term reimage and new unit growth strategy. We expect to complete another 8 to 10 reimages during the balance of this fiscal year before ramping up to 60 to 80 reimages in fiscal 2027. We expect to fully roll out both our reimage and new unit growth programs during fiscal 2028. At Maggiano's, our main focus areas will be guest-facing repairs and maintenance and a smaller scope reimage program.
Our strong free cash flow provides sufficient liquidity to maintain our disciplined capital allocation strategy, allowing us to invest in our restaurants and return excess cash to shareholders. In the second quarter, we also repurchased an additional $100 million of common stock under our share repurchase program to support our ongoing commitment to returning capital to shareholders.
In terms of our expectations for the balance of the year, as noted in this morning's press release, we're raising our fiscal 2026 guidance, which includes: Annual revenues in the range of $5.76 billion to $5.83 billion; adjusted diluted EPS in the range of $10.45 to $10.85; capital expenditures in the range of $250 million to $260 million; and weighted average shares in the range of 44.7 million to 45.2 million.
This guidance also includes the negative impact from closures caused by winter storm Fern through Tuesday, January 27, which includes approximately $20 million in reduced revenues and a decrease of $0.15 in adjusted diluted EPS. Prior to the storm, Chili's comps, including the negative holiday flip, were running solidly in the mid-single-digit range, giving us a good glimpse into the health of the base business. Once we get through the negative impacts of the weather, we expect Chili's same-store sales to return to the mid-single-digit range.
Additional assumptions underlying our guidance largely remain unchanged. We still anticipate wage inflation in the low single digits and our tax rate to be approximately 19%. Our commodity inflation is now anticipated to be in the low single digits for the fiscal year due to the removal of Brazil-based ground beef tariffs this past quarter and better-than-expected poultry and dairy commodity prices. However, due to rising beef prices, we still expect mid-single-digit inflation for the back half of the year. We remain confident our plans will enable us to lap the upcoming quarters and continue to significantly outperform the industry on sales and traffic at Chili's.
In summary, our second quarter results reflect the continued strength of our strategy. Chili's industry-leading everyday value continues to deliver for the guest, not only on overall price, but also on overall experience. As we look ahead, we remain focused on delivering sustainable long-term growth. Our continued momentum and plans for the remainder of this fiscal year gives me confidence in our ability to deliver on expectations, and our strong financial position will allow us to continue to invest in the business and return cash to shareholders, unlocking future growth potential.
With our comments now complete, I will turn the call back over to Holly to moderate questions. Holly?
[Operator Instructions] Your first question for today is from Dennis Geiger with UBS.
2. Question Answer
Congrats on the strong results. First, I just wanted to ask a little bit more on contributors to the strong traffic and sales growth in the quarter. You gave a lot of color. Beyond the margarita campaign, just curious if any other notable shifts in contributors. As we think about 3 For Me and where that was mixing Triple Dipper mix, et cetera. Anything to call out there?
Go ahead, Mika. Sorry, we're in different locations because of the ice storm. But go ahead, Mika.
I'll start with some of the things. And Kevin, you can fill in some color. So as we've talked and we've guided all year, our pricing has been very stable, kind of right in the middle of that 3% to 5% range.
What I will say on mix is, yes, we were very, very happy with the performance of the Margarita of the Month. But overall, our mix was still positive. That was driven not only by the margaritas, but continued success in Triple Dippers. They were up still year-over-year, even lapping the big numbers from prior year, and some appetizer sales with the new quesos out.
So we're not seeing any huge changes. We're still really happy with how our menu is performing, how our sales are going. And again, our traffic, we were very pleased with the traffic. Throughout the quarter, we had positive traffic that before the storm was continuing on. So nothing huge in it that changed. Kevin, if you want to add some color to that?
Yes. I was going to say the same thing with a little bit different angle of -- it's just more of the same. So we continue to streamline the menu. We continue to improve operations and make the needed investments to improve the overall guest experience. And then we see that in the internal metrics and then that allows us to both attract new guests with things like the 3 For Me and the Margarita of the Month program that did really well in November and December, but then also allow us to retain existing guests. So we don't see any frequency changes. So we don't see frequency changes in existing guests when we keep bringing new guests in and they start looking like existing guests pretty quickly in terms of frequency, that's how you sustainably grow over time.
So like I shared the GWAP metric, guests with a problem continuing to hit record lows. Our food grade scores went from 68% last year in Q2 to 74% this year. We also saw quarter-on-quarter improvements in food grade, and same thing with intent to return was 32% last year, it's almost 78% this year.
So you just look across the board, the internal metrics continue to get better. And this is what I keep saying, as long as we keep focusing on the fundamentals of casual dining and we are honestly looking in the mirror saying, are we going to be better this year than last year and we continue to have this world-class marketing, there's no reason why the comp will continue to grow. So we're just going to -- it's going to be kind of a boring quarter, we say, on our new drivers, and it's like, well, they're not new drivers, but there are new things we're doing to drive those drivers. And I couldn't be more proud of the team.
Great. Appreciate it, guys. And then just one more. You guys both gave good color on sort of back half of the year revenue and comp expectations. And I think you talked about a strong quarter-to-date even with a calendar shift pressure, I believe. Anything else on kind of the back half of the year as it relates to top line expectations? Anything embedded from a stimulus tax rebate perspective or Kevin, anything else to share on some of those big levers, which sound exciting through the back half of the year?
Yes, Dennis, so let me kind of talk about that. So we, like Kevin said, expect more of the same. So we're forecasting for Chili's mid -- solid mid-single-digit comps for the back half of the year. We've talked about pricing. I think, again, mix may moderate a little bit in the back half of the year just as we continue to lap those really big Triple Dipper numbers.
And then traffic. What I would say is, prior to the storm, we would have expected traffic positive in both Q3 and Q4. We may have a little pressure with the storm and the holiday flip on traffic just because of those 2 events. It could be flat to slightly negative traffic in Q3, but we expect positive traffic in Q4. So really, it's more of the same, but that's some of the detailed color into what we expect the same-store sales to do over time.
Your next question is from Chris O'Cull with Stifel.
Yes. Mika, I just want to follow up on that last question. Can you just maybe elaborate on -- or level set us on the comp cadence that's embedded into the back half of the year guidance?
Yes. No, it's going to be pretty steady as we go. So January, we'll have the storm and the holiday flip. But after that, I expect it to be very steady mid-single digits. There's not a lot of flips in and out, and the quarters will be very similar to each other is what we expect.
Okay. Perfect. And then, Kevin, you guys have successfully used the $10.99 anchor to drive the 43% to your comp. But the barbell strategy relies on guest eventually, I would think trading up to premium items like the Triple Dipper and then maybe the new ribs. But as you lap these massive traffic gains, how do you prevent the $10.99 price point from becoming a structural ceiling on the pricing power? Is there any long-term risk that you're training your most loyal new guest or your new guest, I guess, to never leave that price point?
Yes. Well, so that we've talked about for several years now, it's very important for our team to have offerings for all guests because if too much mix gets in the $10.99 price point, obviously, the math doesn't continue the math. So one of the first thing that we do is we have what we call the barbell strategy, which we talked about, which is we have good, better, best price tiers because not every guest wants the cheapest thing on the menu somewhat different benefits or different features and the things that they buy.
So like when we launched the chicken sandwich -- when launched the chicken sandwich, it's not just going to be a hot opening price point that we advertise on TV. We're going to have chicken sandwich with benefits. We're going to have more premium chicken sandwiches that can take you all the way up to the highest tiers, and then we're going to see to manage that.
So the outcome when you do this is that you keep the $10.99 sales mix constant. You don't let it grow too much because that's when the margins can get out of wax. So as long as we continue to bring innovation, not just at the $10.99 price point, but at other price points that we keep other parts of the menu interesting and we hold the mix on all those parts of the menu, we shouldn't have any issue continuing to advertise $10.99.
Now 5 years from now, I know we might be in a different position. It's hard to predict how -- what will happen with COGS inflation, et cetera. But because we have such a varied menu, and we've done a really good job merchandising and we continue to innovate on higher tiers like ribs and margaritas, et cetera, we're continuing to drive people into that mix.
We don't see -- we don't have like specifics in detail. We don't see, in general, a lot of training up and down the menu. So people kind of gravitate to what they want to gravitate to and they stick with it. So like the 3 For Me, consumer tends to come more often. They actually spend more over the course of the year because they come more often versus higher-priced guests. They don't come as often, but they're worth a lot to us because they spend more when they're there. But like I get asked a lot of questions about our people, people bounce all over the menu and you just don't see that much of that.
Makes sense. Congrats on a great quarter guys.
Your next question for today is from David Palmer with Evercore ISI.
I had a question on the reimaging. Is there any one of the prototypes that you're testing that is emerging as the most exciting, perhaps the one that you feel like has very good odds of being the go-to-market option that can be rolled out quickly and with significant sales lifts? And if so, what can you tell us about the learnings from the reimaging?
David, thanks for the question. So there's two reasons why we're doing these first four. One is to understand the levels of investment and which ones make the most sense. And then the second is to get operational learnings so that we don't make this -- if there is any mistakes in the first four, we don't make them as we roll them out to the balance of the system. And obviously, we'll continue to learn beyond just these first four.
The first thing I would tell you is the guests and the team members absolutely love all 4 of the reimage units. And there's a lot of clearing in our system to get that across the system. So that's good. It's too early to declare victory on sales lifts. The initial results look pretty good. We're pretty excited about that. But it's nothing that we would publish and that you could take to the bank. Obviously, we want to understand more and look at test versus control and all that good stuff.
So overall, the first thing is they look like completely different restaurants and when all of you guys are here for our Investor Day later in the year, you'll be able to tour them. So we'll make sure we spend time where you can see them firsthand, this first four and get your eyes on them to see there's a market difference. I mean basically the comment I typically hear from the managers is like, we have a new restaurant, which is really cool to hear because these are really old restaurants that haven't been touched a while.
The second thing that we've learned is that -- so each of the 4 have different elements to them. And the good news is the one that has actually the lowest cost is the one that everybody is gravitating towards is the best. So some of the ones that cost a little bit more that had a little too much done on the inside and are a little too busy. So we're learning like, hey, less is more in some of the interior units. But things like the bar part of the reimage has been phenomenal. I mean it literally just makes the whole building feel different, not just the bar area that creates an energy and a vibe, and it is distinctly Chili's. I mean you go in and you're like, wow, it feels like I'm back in Chili's when it first started but in a modern way.
So that's the second thing we're learning is that we probably don't need all the bells and whistles, like for example, a couple of the restaurants have these oversized margarita shakers that we actually pulled from the old, old Chili's, and it's something that just feels like it's clutter. It's not really adding versus some of the tile tables that we've added and some of the cheaper fills actually make a bigger impact. So we're going to be obviously focused on the things that make the biggest impact for the lowest cost. So that's a good learning.
And then lastly, we're learning a lot about the operational opportunities with rolling them out. So for example, we're learning there's just a lot of extra dust and a lot of extra work that's coming in that construction. So we've got to do a better job of like masking and taping and tarping, and those are important things to know as we roll out further. We're learning about some of the tile work that we're putting by the bar is actually not needed and it adds additional expense that's not needed. So just using the tiles on the table tops on the exterior and on the sides of the bar, but not the floor of the bar is making the maximum impact.
And then we're also learning about some of the operational opportunities. So like, for example, we're bringing back tile tables, but we're doing it in a smart way where they're much easier to clean. So like the old tile tables that were so cool are really difficult to clean the grout in between the tiles. And so what we're basically doing is a printed pile table that looks three-dimensional, but then has an acrylic top on top of it. We're finding that those are a little hard to clean, not the tile, but because that's a printed unit, but the actual plastic is starting to buckle under the heat of skillet. So that's an example where we're just going to spend a little bit more time getting the right tabletop on that.
So that's what we're learning from it. It's both operationally, how do we make sure that's sound. And then two, what is the right investments. But I will tell you, we are extremely bullish about this, and we can't wait for you guys to see what we've done.
Your next question is from John Ivankoe with JPMorgan.
It's actually a follow-up on the previous question. In terms of remodels, which obviously, you're planning to accelerate into '27. I think you said 60 to 80, but correct me on that with potential further acceleration...
John, you're cutting out. [Technical Difficulty]
Looks like his line dropped. We'll take our next question from Jeff Farmer.
Just cutting to the weather and all the calendar shifts that the industry is facing. What is your read on casual dining segment trends in December and January? So ultimately, I'm trying to ask you guys if you think the demand backdrop is stable, is it softening? Is it improving? Any color there would be helpful.
Well, it's just like what you guys are seeing, it's mixed, right? Like December was tougher for the industry, but then January was really good. And then the weather hits, which kind of stopped that trend. So I mean, candidly, it's a lot of mixed signals.
What I've told our team is just continue to focus on the things that we can control, which is food service and atmosphere, whether the economy gets better and the consumer gets better or worse, having a better experience is going to win trips, which is what's happened in the last couple of years for our business. So if the macro gets better, that will be more tailwind for us. If the macro doesn't get better, we're going to continue to steal market share from those that aren't improving their food service and atmosphere.
But to answer your question directly, December didn't look great, January was better, weather stopped everything. We'll see what happens when we get out of -- fully out of the weather with the strength that we saw in January restart. So -- but it's similar to what you're seeing.
Okay. And then, Mika, with the updated guidance, can you just sort of level set us on the restaurant level margin and G&A as a percent of revenue expectation for fiscal '26?
Sure. So looking out into the back half of the year, what I would say is our restaurant level margin will probably decrease a little bit in the back half versus what we posted in Q2. And really, it's the line I think everyone should look at is make sure the cost of sales line is it's going to be pretty similar to what you saw in Q2, maybe a little bit higher.
I talked about the kind of influx in commodity pricing in the back half. But also that mid-single digit includes some of those investments we've made in things like bacon and ribs and some better cut chicken. But with that being said, there are going to be phenomenal margins in the back half, very steady, similar to what you saw in Q -- maybe just a little bit less as some -- as we kind of wash through some of those laps year-over-year.
And then G&A real quick?
G&A is going to be very similar to what you saw. We were 4.1% of total revenues in Q2. I expect similar numbers as you move through the fiscal year, very similar to what you saw in Q2.
Your next question is from John Ivankoe with JPMorgan.
Can you hear me?
We can now.
All right, super. Yes, talking about travel disruptions. I'm doing this from the airport and I have this big long question and was literally just talking to myself. So thank you for the patience on this.
The question is actually a follow-up to the remodel question. Obviously, remodel is an important part of the Chili's business. And I think I heard you say, correct me if I'm wrong, that you're planning 60 to 80 remodels in '27 with the further...
Looks like he lost his line again. We'll move on to Jon Tower with Citi.
Just a couple, if I may. Maybe starting off, I know obviously your launch [indiscernible] in the chicken in April with advertising, I believe it's a soft launch now or soon in stores. But curious if you're attacking the marketing side of the equation any bit differently than what you've done with the previous 2 product launches on 3 For Me, the 2 burgers? I know it's -- you don't want to -- if it's not broke, you might not want to [indiscernible], but is there a different track you might be taking this go around?
Well, we think that high prices are more relevant than ever. So every time we think we're -- that the consumer is going to get bored of our messaging, like this just keeps coming back up in social media and in the [ site guys. ] So -- and I think you guys see it all the time that consumers are really frustrated with high pricing in lots of different areas, not just restaurants. And so the idea of continuing to attack that head on with unbeatable value and abundance continues to win for us. So there's no reason why we would change that.
Got it. And then just maybe to the store-level employees and specifically thinking about incentives over time. Obviously, you have a fairly ambitious goal to get to roughly $6 million AUVs across the Chili's store base over time. I'm just curious how you're thinking about store level incentives for the managers and where they sit today versus where you might optimally see them going over time?
Yes. It's something we talk about a lot. We look at like the best-in-class competitor and they are masters of ownership at the general manager level. And part of that is their incentive structure. They do other things, too, that we're obviously studying. And right now, we're in the camp of, let's get our managers trained so they can be true owners of the business. For years, we started pulling things off of their P&L in effort to make their bonuses more and more fair and control more of what happens in the restaurant. And we've got to unravel some of that so that they actually understand the P&L, understand the areas that they can improve their bottom line and their top line and then start rewarding for them once they're trained and have the tools to do that.
So the first step has been, number one, what we launched and a new P&L tool as part of our overall [ Oracle ] upgrade. That's done, and they've been trained on that. Secondly, we're teaching the principles of extreme ownership to our managers. We started with our directors of operations and above and now we've been rolling that out over to the general managers and the management team inside the restaurants. We're going to do that for at least a year, maybe even a little bit longer before we actually change the incentive structure. I do anticipate that we will change the -- some of the long-term -- or I'm sorry, some of the bonus structure for the directors and above before that. So we'll try to roll that out to the directors first and make sure that we got -- they're [ abiding ] and their understanding before we would ever go to the manager level. But we're at least 1 to 2 years out from actually changing the incentive structure of the managers.
Your next question is from John Ivankoe.
Okay, we're blaming this on the ice storm. So I'm in the airport, and this one is not going to drop. So the question was on remodels. Remodel is obviously a very important part of your story in '27, '28. I think I heard you say 60 to 80 remodels in '27, followed by a greater increase in '28. So just confirm that.
And secondly, as we think about new unit development into '28 and beyond, I mean, that is something that you're planning to accelerate in the Chili's business in '28, and I'm not going to ask you for TAM at this point on this conference call, but what are we thinking in terms of percent unit growth that's kind of right for the Chili's brand at this part of the brand's life cycle in '28 that maybe can be established for a long term?
And Mika, you know where I'm getting with this question is how we should just think about broad capital intensity of the business in '27 and '28 as this is such an important part of our model? And thank you, guys, so much for the patience.
Yes. So John, let me start. There's a lot of pieces to your question. First, yes, I'll confirm we want to ramp up in '27, fiscal '27 with the 60 to 80 is our current plan. And then the goal in '28 is to get to about 10% of the system, which would get us a little bit over 100. So you did hear that right, and we're very excited about it.
Okay, on the new unit growth. And so what I would say is next year, well, this year has been pretty flat with what we've opened versus what we -- some of the leases expiring, et cetera, what we've closed. Next year, you're not going to see that much of a bump because remember, it's an 18- to 24-month cycle. So that's from 2 years ago when we weren't really leaning into new units. But what I can tell you with all the progress we've made on building the team and all of the sites that we have at the front end of the funnel that we're putting in, I do feel like you're going to see a significant difference in F '28 in the new units that we're able to post for that year.
So that is correct. We haven't communicated an exact target of new unit growth. But it will be in the low single digits, I would say is something that could be in the realm of expectations for what we can do. So again, that will be something that we go into more detail on when we get to that Investor Day and talk about what we think the universe of Chili's could be, what we think that new unit growth cadence will be over time.
But we do know that we can build more Chili's, and we're really excited about it, especially with the change in the business. The areas of opportunities have opened up for us because our business is so much stronger on where we can build in different areas, different locations. We've learned a ton. So we're really excited about it as we move forward. So I hope that's helpful.
It is. And I guess, as we're thinking at this point, I mean, do we think that there might be an opportunity long, long term to maybe double the Chili's brand relative to what it is? Or am I may be getting ahead of myself, kind of the question of just thinking about what this brand could be now that it has the returns, the permission and the capital to once again start to expand this footprint again?
Yes, again. No, I don't know that we're ready to say the numbers. I think double is quite aggressive. But yes, we think we can build more Chili's. And again, more to come. The great news is the company has plenty of capital available to do it, too. So that's not a constraint for us to continue to invest in the business and return to the shareholders. So we feel really good about our capital allocation strategy over time and our ability to invest back in the new unit growth and grow from profitable Chili's.
Your next question is from Brian Harbour with Morgan Stanley.
Mika, just so I'm clear on the food cost comments. Are you saying sort of tariffs is helpful, but look, there's some other things that sort of offset that? So you're not really changing your outlook for commodities?
Yes. No. My outlook for commodities, we did have favorability in the tariffs. So it is more favorable than it was last quarter. But what I'm saying is I'm reiterating that the back half of the year is going to be in that mid-single digits. That does include some of the investments we've made in things such as ribs and bacon. We made some investments in poultry. And so we're -- I'm just trying to level set everybody on commodities have looked pretty favorable in the front half. In the back half, it will be that mid-single digit. And then to help guide people on what does that mean, I was just trying to say, hey, you've seen our food and beverage cost in quarter 2, I think we'll have a similar number in quarter 3 as we move forward. So just trying to help people kind of understand what would that turn into within 10 to 20 basis points.
Okay. Got it. And with sort of the chicken sandwich revamp, did you change any of the timing at all on sort of the soft launch? Is that still as expected? Are you -- is it fair to say you're not kind of giving yourselves credit for that in your revenue comments or you sort of just view it as one of the drivers that have been ongoing?
Go ahead, Mika.
I would just say, the chicken sandwich, what's in the guidance is we have it in over 200 restaurants now where we're getting all the learnings. The real launch will be late in April, and that's when we'll go on TV. And that's really critical for the chicken sandwich because this is about driving traffic with a very appealing product that we have. And so that's the timing that's built into the guidance that we gave.
Kevin, you can give more color on that.
Yes. I mean the thing to understand is in the 200 restaurants, when you don't advertise it, you're just basically going to be moving mix. You might get a little bit of repeat, but if it's only a 3- or 4-month period, it's not going to be a ton of repeat that you get. So you're really just trying to test for what are consumers saying about the sandwich, can we execute it with excellence given it's going to drive a lot of mix the way you merchandise it, what is the feedback that we're getting on the sandwich.
But you're really not going to see a major change in the business other than some mix shifts until you launch the TV advertising and start bringing people in with the sandwich. So I wouldn't read too much in the restaurants that we put in other than it's encouraging. When you see something mix significantly more and the feedback is really good, there's always a good sign that it's going to do even better when you go on TV.
Your next question for today is from Brian Vaccaro with Raymond James.
Kevin, just back to chicken sandwich. Could you remind us just the changes that you've made to quality and the flavor profile? And maybe level set us on where your existing chicken sandwich mix is and just kind of how you frame that potential opportunity? And then more broadly, just what's your latest thinking on the timing for other menu upgrades? Are you still thinking about steaks and salads maybe moving into fiscal '27? Just curious there.
Yes. So I'll let Mika answer the exact mix question while I give you the update on the platform. So the first thing is the base sandwich, and we had fixed the recipe on that about a year ago where we went to a very focused build that you see in kind of the most popular or the biggest innovation in, I would say, in fast food history or modern history, which is the Popeyes Chicken Sandwich, which is a very basic build and we wanted to look at that and learn from that.
And so that's what we did about a year ago. We basically have a brioche bun, a semi-cured pickle, mayonnaise and a very large hand-breaded chicken breast that we think is incredibly abundant in the category. I mean I don't have the exact data to say it's the biggest, but when you eat it, you might think it's the biggest. And so that was done.
And then we're going to start bringing in some flavor updates to it, which I can't go into the details of, but there'll be a variety of sandwiches in different benefit spaces based on some of the signature flavors that we have as well as a new flavor that we don't have in the restaurants today that mixed really well when Popeyes launched the sandwich.
And then we're going to have a good, better, best tiering of those sandwiches. So we'll have a base sandwich at a hot price point. We'll have a sandwich with benefits at a median price point. And then we'll have a super premium that will have like bake-in and produce and things that you expect in the super premium sandwich at a super premium tier.
And then we're also going to bring some additional [ sides ] innovation and the cup innovation to that lineup to make it even more exciting and more distinctly Chili's. So it really will look like a completely new lineup to the guests, and it's in areas that we know that consumers are excited about chicken sandwiches, but done in a very unique Chili's way, not just in the flavor profiles, but the abundance and value that we think that you're going to get.
And so I'll talk about the mix. Right now, the mix is very low, Brian, because we aren't merchandising it on the menu, it's not on TV. So it's just one item on the menu in our handheld section. So very low, but there are big plans for how we merchandise it, how it's going to be on TV. So we do know that there is a big room for mix to grow there. And we do think, again, the chicken sandwich is designed to be a traffic driver.
All right. That's very helpful. I was going to ask one on the balance sheet as well. Mika, you only have $20 million left on the revolver, I think, and you've got the $350 million notes at 8.25. Just how are you thinking about the refi opportunity on the notes through calendar '26? And is there an opportunity to maybe move those notes on to the revolver second half of calendar '26 and maybe shave off a few hundred bps on the interest rate?
Brian, right now, we don't have that in the works, but we are watching it closely. So if the opportunity arises where we can take out the bonds early, and it makes sense for the revolver and save us some money, we'd absolutely do that.
Remember, it's just different aspects that when you do it in the fees, you have to pay upfront. But it is something we're watching. So right now, I would say we don't have that planned, but we're going to continue to watch it.
Your next question is from Eric Gonzalez with KeyBanc.
Congrats on the strong results. I'm just curious about the timing of marketing investments this year. I know there was an uptick in spend in the second quarter. So if you could just confirm that you stayed in that range of $9 million to $10 million incremental advertising. And then how does that look as you get into 3Q and 4Q, particularly around the chicken sandwich launch?
Yes. No, we did stay in that, Eric. So we had the biggest increase year-over-year in Q2. So that did happen, and we said that was about 2.9% of sales. I think the percent of sales will stay fairly stable as we move forward. The year-over-year increase isn't as much in 3 and 4, but exactly what we said did happen in Q2.
And then just quickly, just regarding the winter storm. I mean how quickly do you expect to bounce back there? And what are your expectations in terms of how long the effects could linger?
Yes. No, that is the big question. So it was quite a challenge to be. We had to quantify the impact of the storm while the storm is still happening and unfolding. So that is why I was pretty purposeful in saying, this is what we know as of Tuesday and what the impacts are. So that is what we have built into that guidance. We'll see the -- historically, we have had some bounce back when people get a little bit of cabin fever. Now on the flip side, I will caution, we lost a Friday, Saturday, Sunday. We're on a Monday, Tuesday, Wednesday when it bounces back.
So there could be some upside, but what I will say is we don't have a ton of upside built in that we just kind of have all systems go from Wednesday on. So upside or downside on the storm could still be kind of playing out a little bit. But we think we got the bulk of the impact captured with what I communicated earlier and the $20 million decrease in revenue and the $0.15 to EPS.
Your next question is from Christine Cho with Goldman Sachs.
Congrats on the quarter. In the last call, you mentioned that the under $60,000 income was your fastest-growing group contrary to kind of the broader industry trends. Have these trends continued to this quarter? And are there any other observations on spending across various consumer cohorts?
And additionally, are you concerned at all that the QSR pricing growth continues to track below the casual dining average and how that would impact the overall category value perception?
Yes. So from an income cohort standpoint, we didn't see much shifting in the quarter, like the low-income cohort is no longer the fastest growing. So there was a little bit of shift down and a little bit of shift to the higher income cohorts, but it wasn't anything like that was so obvious that I'll be willing -- we should proactively highlight to you guys on the call. So just a little bit. We haven't seen any kind of trade down, but mix has been pretty healthy.
So I would say, not really made any major shifts or changes versus last quarter. I know that's a little bit of bucking the trend from what you see in the industry, but I also think that we do have industry-leading value, which is helping insulate us to some extent.
As far as the QSR question that you -- the second part of your question, I'd say we still have industry-leading value on TV. We still have -- when you look at casual dinings having a renaissance, and you look at our -- I mentioned on my prepared comments, when you look at the PPA or per person average versus our casual dining competitive set, direct competitive set, we're $3 under them or $4 under the broader casual dining.
So we don't really -- we feel like we're really positioned to win regardless of what happens with the macro between the operational improvements that we've made where we've positioned ourselves and then our everyday value, which looks pretty darn good. So I'm not particularly concerned. I think we get asked that every time a competitor from Chicago decides to put a $5 meal out there. And we just keep chugging along. And I think it's because when you look at the overall value for what you pay, for what you get, it does feel superior to what's out there, and we're going to continue to deliver that.
Your next question for today is from Sara Senatore with Bank of America.
Just I guess maybe a couple of clarifications. One, Mika, you pointed out that you had positive mix in terms of the check impact, but I think, negative in terms of margins. Can you just talk about that? I mean it didn't sound like there was a lot of shift in terms of consumption or I guess, kind of choice. But I don't know if that was maybe a little bit more on the value side.
And then also, sorry if I missed it, but you lowered the CapEx guide. I don't think that's because of the lower kind of cost of remodels. It sounds like those are still in test, but just wanted to maybe understand that, too.
Okay. Yes, great, Sara. So first of all, we'll start with the mix. Yes, mix was positive and a little less positive. One reason that margins went down year-over-year was, if you remember last year, it was really about the lapping of last year when we accelerated our business, took a huge step change in the business. We weren't able to staff our labor as quickly as we needed to a year ago, October. So we kind of overearned in quarter 2, which I caution people about as we were lapping that even coming into this year. So I think that's probably what's in play with the margins more than just the overall health of the margins and the health of the business and the flow through. So again, that's kind of what's built in the run rate.
The same with the restaurant expense. As our restaurants got busier, it took us a little bit to ramp up and get those expenses caught up with kind of the new traffic levels. And we've continued to invest in the business and now we're lapping some of that. So I feel really good about the flow-through and the margin profile overall. So it's really strong and really healthy. And if I take a step back and just look at the full year, I guided that I think we can improve restaurant-level margins 30 to 40 basis points even with the impacts of the storm that could put a little pressure on us. I still feel very confident in that number on growing the margins over time. So I feel like if there's any variability in the quarter-to-quarter, it's really back to some timing of expenses or investments and a little bit of seasonality, but I feel really good about margins overall.
Great question about CapEx. Really just taking a look at it at the midpoint of the year, we realize it's not necessarily because reimages are less expensive. We're still finalizing the scope of that. We are doing a few less than we originally planned. I think the bigger nugget in there is we had a placeholder for maybe a potential new equipment rollout that now, after the teams have moved down a little bit further on that, we realized we aren't going to have a new big equipment rollout. So we went ahead and updated that in our forecast and just tightened it up a little bit. So plenty of capital out there. We're just tightening up the forecast.
Okay. That's helpful. And then just on the margin, I guess I was referring to COGS specifically. You had said it was, I think, 20 basis points unfavorable because of many.
Okay. So that is really -- what we're seeing is there's a lot of investments into the quality of the food that we're lapping. So ribs is very material investment we talked about. We were serving 1/3 ribs and 2/3, we did the big shift from imported ribs to domestic ribs. So that's just an example of we put a lot more of quantity and quality into the cost of sales line. And so that's where I'm just saying, hey, you see kind of a new run rate in cost of sales. It's a combination of we do have some more -- we still have commodity inflation in there, but then the investments we're making into that COGS line. And so that's kind of what's hitting there.
And if you do mix into more expensive items, which is fine, that puts a little pressure there. You always have higher penny profit. But if you're selling more than more expensive one, there's some more cost of sales associated with that, too.
Your next question is from Jeff Bernstein with Barclays.
Great. Kevin, I was intrigued by your prior comments on the restaurant level leadership model. I think you mentioned that you have a peer that successfully operates with a market partner, more of a market partner ownership model, more akin to maybe a franchise model, which you know well from past days. So I'm wondering if you could just -- any more color conceptually about the pros and cons versus the more traditional company operated manager model that most of the industry uses. It does sound like maybe you're considering a shift? I know others have talked about the potential to benefit retention, engagement, compensation. Just wondering if there's any more color in terms of how you would implement it, it would seem like that will be a material change to your economic model, but presumably more of an ownership structure for long-term further improvements. So any incremental color would be great.
Jeff, so I think conceptually, all of the stakeholders are aligned that we want to do something here, like we believe that when we hear from the managers, they want to have more of a stake and ownership in the company, especially when they see with how the company has performed.
We believe that it would be a good thing for them to have more ownership over the results, both in terms of their personal compensation as well as just how they run the restaurants. So I don't think anybody is really debating like, should we do it. It's really the how. And the challenge for us is when you benchmark the model that you were talking about earlier, they tend to pay lower base salaries and then they put more into the variable comp, and that puts us in a difficult position because we're not going to lower base salaries and put it in the variable comp, that's not going to be received very well.
So we've really got to figure out what's the how to do this in a way that is going to work for everybody, and not just hope that in the year that we make the change that people aren't upset about it because they would be because you're moving comp that you can be confident into something that's more variable. So we've got to figure out a way that wins for everybody and not just on 1 or 2 items. So that's what we're going to have to work through.
At the same time, we still got a couple of years where we just got to continue to build scale and capability and the ability to own the restaurant. So that means building the best team, holding people accountable, making sure that you really are owning your restaurant in the facility. These are new muscles that quite frankly, you haven't asked these guys to do in a while that we've got to build up over time before we change any incentive structure. And I wish it was more simple and we could just flip a switch and kind of replicate the models that we see that works, but we're just starting from a different place.
Your next question is from Andrew Strelzik with BMO.
I was wondering if you're seeing the mix of traffic growth shift between new customers and increasing frequency. And I guess, what I'm trying to think through is as you brought back all these new customers over the last couple of years, as you kind of worked through the brand repositioning, is the opportunity mix between those 2 buckets evolving and kind of how you potentially evolve the strategy to address the 2 buckets as you move forward.?
Andrew, it's Kevin. We don't see really a change in how we're doing this. It's pretty simple. It's like, number one, continue to have a great experience so that you don't leak guests. And so that's what we see on the frequency of existing guests that's not changing. And then use our world-class marketing and great value offer and great new positioning to drive new guests in. And so if you're not leaking guests and you're bringing new guests in and then they quickly are starting to look like existing guests in terms of their frequency pattern, that's a recipe for sustainable growth.
So what I lean on my team is don't change that strategy, but we better have ideas every quarter to get better and better on the experience because that's the flywheel. We know the marketing guys can do it. They're doing it right now. They're continuing to just really reinvent the industry and what can be done with advertising and marketing, and hats off to them. So as long as we continue to improve our experience over time, there's no reason why this [indiscernible] won't stop. So I don't anticipate changing the strategy. It's just making sure that we continue to execute it quarter after quarter so we continue that because the key to this whole thing is having a great experience because that's going to both retain existing guests and stop the leak and be able to attract new guests because of the things that people are saying about our brand. And we're just going to continue to do that.
Okay. That's helpful. And one clarification. Last quarter, you talked about the earnings drag from Maggiano's. Can you share what that looks like through the back half of the year?
Andrew, that's me. So really, just what I would say is in the guidance that I gave, we haven't changed the expectations for Maggiano's very much. And so what we're expecting is their same-store sales will probably be in the negative mid-single-digit range for the back half of the year. So probably just more of the same on that. So if we get some more green shoots out of Maggiano's and I think we can start improving that, but they're still going to have a drag year-over-year in their margins.
We have reached the end of the question-and-answer session, and I will now turn the floor back over to Kim Sanders for closing comments.
And that concludes our call for today. We appreciate everyone joining us and look forward to updating you on our third quarter fiscal 2026 results in April. Have a wonderful day. Thank you.
Bye, everyone.
Thank you. This concludes today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
Brinker International, Inc. — Q2 2026 Earnings Call
Brinker International, Inc. — Q1 2026 Earnings Call
1. Management Discussion
Good day, and welcome to the Brinker International Earnings Call for Q1 Financial Year 2026. [Operator Instructions]
It is now my pleasure to turn the floor over to your host, Kim Sanders, Vice President of Investor Relations. Kim, the floor is yours.
Thank you, Paul, and good morning, everyone, and thank you for joining us on today's call. Here with me today are Kevin Hochman, President and Chief Executive Officer and President of Chili's; and Mika Ware, Chief Financial Officer. Results for our first quarter were released earlier this morning and are available on our website at brinker.com. As usual, Kevin and Mika will first make prepared comments related to our strategic initiatives and operating performance. Then we will open the call for your questions.
Before beginning our comments, I would like to remind everyone of our safe harbor regarding forward-looking statements. During our call, management may discuss certain items, which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such risks and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC.
And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations.
And with that said, I will turn the call over to Kevin.
Thank you, Kim, and good morning, everyone. Thank you for joining us as we share insights from our first quarter and our outlook for the remainder of fiscal '26. Q1 Chili's same-store sales were plus 21.4%, outperforming the casual dining industry by 1,650 basis points. This strong result was lapping a plus 14% in Q1 last year for a 2-year compounded comp of plus 39%.
Our Q1 sales result was driven by traffic increases of 13% versus a year ago, and Chili's has now beat the industry the past 8 quarters on traffic as well as completed our 18th consecutive quarter of positive same-store sales growth. I'm so proud of our Chili's team rolling industry-leading comps from Q1 last year with even more industry-leading comps in Q1 this year. World-class marketing and brand building is bringing guests in and continued improvements in food service and atmosphere are bringing guests back, and that momentum feels great.
Our food and hospitality initiatives in Q1 continue to deliver momentum for the business. The ribs upgrade has been a success with the ribs business now running 35% up in sales and significantly improved profitability, which is also up 29%. Food grade scores on tickets with ribs are up and guest feedback has been very positive on the taste. On the beverage innovation front, the frozen Patrón Margaritas platform is now selling 2x the units of the old platform despite a higher price point for the more premium ingredients. Q1 new items are winning and helping progress our food grade scores in addition to growing sales.
On the hospitality side, ongoing simplification, removing friction from our team members and managers and the North of 6 initiatives are continuing to improve guest experience scores. Our main metric for experience guests with a problem is again at an all-time low at 2.1% versus 2.7% last year in Q1, with food grade and intensity return scores also at all-time highs.
And on atmosphere, our first 4 remodel pilot restaurants should be completed by the end of this quarter, and we will start getting a read on how they are performing. The modern Greenville prototype is about making a Chili's as Chili's a Chili's can be by going back to the first Chili's ever built on Greenville Avenue and getting back to what makes Chili's like no place else.
Given what everyone is seeing in the industry right now, I thought it would be helpful to talk a little bit more insight on what we're seeing at Chili's with the consumer. I'm going to share what we are seeing with the consumer household income levels and some new token data on Chili's guest behavior. Chili's continues to grow sales across all households of all income levels. And while others in the restaurant industry are seeing households with lower income pull back, we are seeing just the opposite.
Our customer base is very representative of the U.S. consumer across all income cohorts, but our cohort growing the fastest is actually now households with income under $60,000. It's clear that the better than fast food campaign we've been hammering over the past 2 years has positioned Chili's as an important value leader in the industry, and we are gaining market share with low-income households while others are reporting softness with that group.
I also wanted to share some new capability mined from our tokenized data. We now have sufficient data to understand as more and more new guests come into Chili's, what is happening to the guest frequency over time. The intent is to have a better understanding of the sustainability of guest traffic we are bringing into the business via TV and social advertising. We track each group of monthly customers separately and what their visitation and purchase behavior is over time.
For example, we have a July 2024 cohort who represents all of the guests that came into Chili's during the month of July 2024, whether they are new to Chili's or regular guests, and we can track how often they have come back over time. We can do the same analysis with the guests who came in, in August 2024 and get the same data about that group. We then look at frequency of those groups over time to understand how well we are retaining them, which also tells us how sustainable Chili's traffic trends are.
So here's what we learned tracking monthly cohorts. For both new and regular guests, trip frequency is staying very stable regardless of the cohort. What this means is our restaurant experience is bringing guests back and retaining the traffic over time versus bringing them in once and having them not come back to Chili's. This data, along with our quarter-to-date sales and traffic trends, give us confidence we'll be able to roll over the Q2 plus 31.4% sales growth and the plus 19.9% traffic growth from prior year.
Now I want to give an update on Maggiano's. Chief Operating Officer, Rich Kissel and I have had the opportunity to go deeper into the business, and we have a better understanding of the opportunity to get Maggiano's stabilized and growing again. The turnaround starts with a better understanding of Maggiano's positioning. which when it was growing at its best, was about abundant and scratch-made Italian American favorites with warm and attentive service and then putting those pieces in place to deliver on that positioning consistently.
The back to Maggiano's plan has 4 pillars: getting back to classic recipes and scratch-made Maggiano's guest favorites with the abundance that differentiates Maggiano's, improving service levels and speed of service through new labor deployment and simplification as well as the elimination of tests that don't benefit the teammate or the guest; three, focusing repairs and maintenance on guest-facing areas while reimaging the balance of the estate; and four, getting pride in ownership back with our Maggiano's management teams.
We recently concluded the annual Maggiano's Conference in Orlando with the brand's top 150 leaders and the response to the new strategy and the green shoots of the execution plan was very encouraging. The Maggiano's leadership response was, we need to get back to Maggiano's, and many specifically gave me the feedback and felt like they are now being listened to. I look forward to providing updates on how the Maggiano's turnaround plan is progressing on future calls.
Our continued momentum at Chili's is proof our strategy is working and gives us confidence in our ability to lap our high sales comparisons this fiscal. I especially want to thank our Chili's heads for their hard work and commitment to what sets Chili's apart, providing great hospitality and delicious food and drinks in a fun and friendly atmosphere. I also want to recognize our Maggiano's teammates for their engagement in our Back to Maggiano's turnaround plan and their understanding of the changing strategy and plans. Their leadership and positive attitude and passion for returning the brand to its roots is exciting to see, and I know will lead to better results in the long term.
Now I'll hand the call over to Mika to walk you through fiscal '26 first quarter numbers. Go ahead, Mika.
Thank you, Kevin, and good morning, everyone. Brinker delivered another outstanding quarter led by Chili's, which marks our sixth consecutive quarter of double-digit sales and positive traffic growth, sustaining the strong momentum we built last year. Our investor growth strategy and everyday industry-leading value continue to position us well in a competitive and challenging environment, enabling our delivery of consistent positive results by focusing on the fundamentals of food, service and atmosphere.
For the first quarter, Brinker reported total revenues of $1.35 billion, an increase of 18.5% over the prior year, with consolidated comp sales of positive 18.8%. Our adjusted diluted EPS for the quarter was $1.93, up from $0.95 last year. Chili's reported top line sales growth with comps coming in at positive 21.4% driven by positive traffic of 13.1%, positive mix of 4.3% and price of 4%. We continue to see strong year-over-year top line growth, same-store sales and traffic well above industry averages and significant restaurant margin expansion at Chili's.
Our improved operations, menu innovation and effective marketing have brought more guests to Chili's and in a crowded environment full of limited time-only promotions, our consistent everyday value sets us apart.
Turning to Maggiano's. The brand reported comp sales for the quarter of negative 6.4%. As Kevin mentioned, we are focused on stabilizing and improving the business utilizing our new back to Maggiano's strategy, which is designed to improve our value proposition, optimize our service model and ensure our atmosphere is clean and well maintained.
At the Brinker level, we saw continued strong flow-through this quarter with restaurant operating margin coming in at 16.2%, a 270 basis points improvement year-over-year, primarily driven by sales leverage, partially offset by unfavorable food and beverage costs. Food and beverage costs for the quarter were unfavorable 60 basis points year-over-year due to unfavorable menu mix with 2.6% commodity inflation offset by price. We remain pleased with the stable mix and profitability of our $10.99 3 for Me value platform. It offers a compelling price point for guests seeking value while still allowing us to maintain margin profitability.
Labor for the quarter was favorable 120 basis points year-over-year. Top line sales growth offset additional investments in labor and wage rate inflation of approximately 3.8%. Advertising expense for the first quarter were 2.5% of sales and decreased 10 basis points on a year-over-year due to sales leverage. G&A for the quarter came in at 4.2% of total revenues, 30 basis points lower than prior year due to sales leverage, partially offset by increases in ERP system and support costs.
Depreciation and amortization for the quarter came in at 4% of total revenues and decreased 10 basis points year-over-year due to sales leverage offset by an increase in our asset base from equipment purchases. Our first quarter adjusted EBITDA was approximately $172.4 million, a 54.4% increase from prior year. The adjusted tax rate for the quarter increased to 18.5%, mainly driven by the increase in sales, which accelerated at a greater rate than the offset generated by the FICA tax tip credit.
Capital expenditures for the quarter were approximately $58.6 million, driven by capital maintenance spend. As discussed, in 2026, we are ramping up our reimage program for Chili's and expect to have 4 completed by the end of this calendar year for evaluation, while also working on our long-term new unit growth strategy with the goal of fully rolling out both programs during fiscal 2027 helping us return to positive net new unit growth. And for Maggiano's, as Kevin said, our main focus will be on guest-facing repairs and maintenance and a smaller reimage program before shifting gears to new unit growth.
Our strong free cash flow provides sufficient liquidity to maintain our disciplined capital allocation strategy, allowing us to invest in our restaurants and return excess cash to shareholders. We supported this approach by repurchasing $92 million of common stock under our share repurchase program. With regard to fiscal 2026 guidance, we are reiterating the targets provided on our last earnings call. Chili's is on track to beat our original goals for the year, but those gains will likely be offset by softer results at Maggiano's, along with the investments needed to stabilize that brand's performance.
We are also currently expecting higher tariffs on commodities, along with higher inflation in workers' comp and health insurance claims. With all these factors and the current economic uncertainty, our overall guidance for the company stays the same. The assumptions underlying our guidance largely remain unchanged, except we now anticipate commodity inflation, inclusive of tariffs in the mid-single digits rather than the low single digits as projected last quarter.
Despite these headwinds, we remain confident our plans will enable us to lap fiscal 2025 and continue to outperform the industry on sales and traffic at Chili's. We still anticipate that the first quarter will be our strongest on a year-over-year basis with more moderate gains in subsequent quarters due to last year's high comparison base. Despite challenging comparisons and a weaker macroeconomic environment, Q2 is off to a great start.
Given the high comp numbers we are rolling this quarter, we thought it would be helpful to share quarter-to-date sales with expectations for the balance of the year. Chili's quarter-to-date sales are in the high single digits, and our expectations are Chili's same-store sales will normalize on average in the mid-single-digit range for the balance of the fiscal year. We will continue to manage the business for the long term and make investments strategically, so the timing of expense impacts may not be spread evenly across all quarters.
In summary, our first quarter results reflect the continued strength of our strategy and the disciplined execution focusing on the fundamentals of food, service and atmosphere. Chili's continues to lead the way with exceptional performance, driven by industry-leading value platforms and guest favorites such as the Triple Dipper and our frozen Patrón Margaritas. As we execute the Back to Maggiano's plan, I am excited to partner with Kevin, Rich and the Maggiano's team as they return the brand to its full potential.
As we look ahead, we remain focused on delivering sustainable long-term growth by sticking to our investor growth strategy and our continued momentum gives me confidence in our ability to deliver positive results this fiscal year.
With our comments now complete, I will turn the call back over to Paul to moderate questions. Paul?
[Operator Instructions] And the first question today will be from Chris O'Cull from Stifel.
2. Question Answer
Kevin, thanks for the segmented consumer information. I was just hoping maybe you could elaborate on how Chili's plans to yet leverage tokenized consumer data now to enhance consumer engagement or drive growth.
Well, the biggest thing is we're starting to learn how to use it. So obviously, this is new capability, what I shared on my prepared comments on the cohorts by month. So that's the first thing we're going to start doing is just tracking each of these monthly cohorts separately to understand our new guests repeating as often as the previous cohorts, what is happening over time as well as understanding when we look at guest metrics like GWAP or food grade, how is that impacting the frequency over time. So we're going to have a better understanding of the impact of some of the investments that otherwise were much more difficult to quantify in the past.
Separately, I think we're going to start understanding the impact of initiatives on our menu, right? So whether it's the ribs upgrade or the frozen upgrade or whatever it is, we can start understanding for the guests that have that on a transaction level data, are they coming back more frequently and then we can start linking food grade scores to how frequently guests come.
So I think the -- I've always said, I think the big upside is going to be better understanding the big investments that we make in the business and how they're performing versus necessarily marketing to guests using CRM. I don't love that type of discounting from a long-term standpoint of the business versus using our money to advertise how great the brand is. But I think we -- this was a really great quarter and the strides that we've made in being able to leverage the token data.
That's great. And then we've seen several restaurant chains struggle to get a lift from recent value promotions, even some with much more marketing support. I know Chili's recently launched or returned with the big QP value message. I'm just -- and obviously, the comp trends sound great, but I'm just wondering how is it performing against your expectations? And if there's any color you can maybe provide around second half innovation for that platform?
Yes. So we feel really good about the value platform. So I can give you just a little bit of history because I know everybody is wondering about what happened with the Triple Dipper advertising that we had rolled at the end of Q1. And we put the triple -- so if you recall, the last couple of years, we've been driving the $10.99 message pretty consistently, and that has obviously worked tremendously well to drive market share for Chili's.
And about 6 months ago, we contemplated the idea of what if we could put Triple Dipper on TV. I think the macro was in a little bit different place at the time. We went and created the advertising and the macro kind of turned, and we decided to go ahead with the Triple Dipper advertising regardless because we wanted to understand is that another quiver in our arsenal to be able to drive traffic.
And so we turned on that advertising in September. We did see lifts in the business, and we actually saw more new guests come in from the Triple Dipper advertising than we've seen as a percentage of the total lift than we've seen from the value advertising. However, the overall lift was not as great as what we saw from the big QP. And so based on where the macro was, based on the overall lift, we decided that even though we think Triple Dipper could be used again, especially if the macro gets stronger again because of the volume response we got from new guests, we felt like it was important to get back on value. Once we got back on value, we saw the lifts improve again.
So I think the $10.99 burger deal that we have in the market is still as relevant as it was when we introduced it a few years ago on TV. I do think in the back half, so to answer the last question, Chris, the back half, we need to refresh that message. We're going to have some big innovation coming. It's going to be ready to go in Q3. We're going to launch it in Q4. If we feel like we need to pull it up for any reason, we can. But that's going to be a completely new initiative under the $10.99 platform in a very big segment for guests.
So we're very excited about the news that we're bringing to the business, and we think that's going to continue the momentum on value.
Congratulations on another great quarter.
The next question is coming from David Palmer from Evercore ISI.
Just a 2-parter here, Kevin, and thanks for all that detail. I wanted to maybe take your insights out first, and just to ask more specifically about the young consumers. I think there's a concern around younger consumers, maybe Gen Z would define it with regard to not only their economic issue of higher unemployment lately, but also you had a massive -- or it was -- it's been perceived that you had a massive wave of trial around the cheese pull and the Triple Dipper last year, and that younger cohort would -- that you would likely be down with them and that would weigh in your traffic this fiscal 2Q in particular. So if you could address what you're seeing, particularly with regard to young consumers?
And then I just wanted to ask you separately, just on the renovation of the menu, you're pretty far along in the journey there. Maybe you could just kind of summarize where you are and what's left to do and how that's going to progress through the fiscal year?
Okay. So thanks, David. So let me start with the younger consumer question. So there's 2 things that we think about in terms of that younger consumer demographic. One, for the younger consumers that we've brought in, are they coming back as frequently as all new guests? And that answer is yes. So we're not seeing any difference in the age of the consumer and how frequently they come in if they're new. So that's good.
The second is, are we continuing to bring new young consumers in, right? And right now, when we look at like our TikTok trends, they basically have stayed the same since we saw the original the cheese pull go viral over a year ago. So I know a lot of folks have said, "Hey, that's going to peter out." We really haven't seen that. So if you look at like the monthly views, it stayed very high. Now that said, it is the marketing department's job to keep our brand relevant with young people because they're not going to stay on the same thing forever. Everybody knows that, right?
And so one of the things I'm proud about our world-class marketing department is they're constantly thinking about every quarter, what are the things that we're going to bring to bear to make sure that we stay relevant with all guests, especially and with the emphasis on staying relevant and making the brand relevant again with Gen Z. So I don't see that letting up. In fact, I think as our marketing budgets continue to grow, as the business continues to grow, I think you're going to see more of that and not less of that.
So -- but the 2 things that we're focused on with the young consumer are making sure that they are repeating as much as other guests, and that's really about guest experience. And then secondly, are we bringing new guests in or new young guests in through both advertising and social media and on TV as well as some of these marketing stuff that we do.
And then separately on the food renovation journey?
Yes. Thanks for the reminder on that. So we're continuing to do that. So what next on the docket is going to likely be for next fiscal is -- well, we got the chicken sandwich platform in the back half that we talked about in previous calls. And then the following fiscal, right now in the plan is steaks and salads and there'll probably be a few other things. We've learned a lot with the queso upgrade.
So obviously, I think people are probably interested in that. One, the new queso is doing quite well. So we're pretty pleased with the sales of it. What we have learned though is not a replacement for the old queso. So we've got a lot of fans out there that have said, "Hey, this is a completely different queso. We want the old Skillet Queso back," and that's why we recently announced a few days ago, we are going to bring that back.
We are very confident that with the 2 quesos, it's going to be a significantly bigger business than it was with the old 2 quesos. So at the end of the day, it's going to be a good thing for our sales. Obviously, we're hoping to maintain the traffic with those Skillet Queso guests. So right now, it's going to cause us to look at some of those favorites that we looked at renovating and saying maybe we need to slow down a little bit on those things to make sure that we're not missing our existing guests and making sure we're bringing them along.
So that's probably a learning from the queso. I don't think it's really a very concerning thing at all. In fact, it's a good thing that we learned on a smaller item. So as we think about renovating some of the bigger items like pasta, where our eyes are wide open to what we need to work on. At the end of the day, we got to continue to make our venue tighter, and we got to continue to make it better if we want to continue to get these great results on Chili's.
The next question will be from John Ivankoe from JPMorgan.
The question is I'm getting back to the original Chili's. And I wanted just to understand better what that might mean. And Kevin, the question is on cooking platforms and even staffing around cooking platforms. Conveyors are one thing you guys did, Merrychef, TurboChef's style ovens, another. But do we have an opportunity to maybe focus more on the grill, focus more on the broilers. So talk about the possible complexity or maybe need of putting back in some of this equipment and whether such a change would benefit the customers and your products and whether that would actually require additional labor or just a reallocation from labor that you currently have?
John, it's Kevin. So thank you for the questions. Let me start with the first one on the reimaging program. And so the intent of the reimage program, and folks will be able to see it by the end of this quarter, we'll have it in 4 restaurants here in Dallas, is to go back to that original Greenville Chili's, understand what made Chili's so darn special and then bring that into a 2025 version of the prototype. So that's things like having a true margarita bar and then talking about the things that make us special, whether it's the Presidente or our ribs or our fajitas, right?
And when you went into a Chili's way back when, it had a very different vibe than other casual diners, and that's what we want to bring back to it. Some of our more recent renovations, when we look at the last reimage program, it took some of that real cool characteristic and that personality out of the box. And we've been leaning forward to it in our advertising and the way we talked about the brand, there's no reason why we can't do that also in the restaurant.
So I'm excited about -- if you look at the rendering of those images, if they come out even close in real life when we do the reimaging, I think guests are going to be really excited because it's going to feel like more like Chili's, not less like Chili's, but in a modern fun way.
And then separately, the other question that you had, which was on kitchen equipment. That is part of our -- we have a 2030 Heart of House team, cross-functional team that's looking at based on the volumes that we've been bringing in and the continued growth in the business as well as where do we want to take our food next level, what is the type of equipment that we need in the restaurant. We've been working very closely on figuring out fryer capacity.
And then the other one is how do we get flame back into the building, which I think that was what you're referring to on the char boilers. We don't have anything yet to announce yet. I mean we haven't even put a charbroilers into a restaurant to start understanding labor deployment changes, how much cost there is, et cetera. But once we have line of sight to a test on that, we'll make sure to bring everybody along to understand what it could mean for the business, what it could mean for going operating cost, depreciation, all that stuff.
The good news is charbroilers aren't very expensive. So it's not like it's a major piece of equipment that's going to be a huge investment. But really, it's going to change the way the part of house operates, and that's why we need to test it. So there is some investment, obviously, but the bigger thing is going to be making sure the operation runs as smoothly as it is now in the future with the charbroiler. So once again, once we have more insight to share on that, we'll make sure we share with all of you.
The next question will be from Jeff Farmer from Gordon Haskett.
You noted that you expect same-store sales to normalize. I think you said in the mid-single-digit range for the balance of the fiscal year. So from your perspective, does that mean across Q2, Q3, Q4 with all 3 quarters holding on to that mid-single-digit number or sort of an average where maybe some quarters higher or lower than mid-single digit?
Jeff, it's Mika. Yes. So it's just really once we start lapping that peak in November on that mid-single digit on average. And it is for the latter half of the year for Q3 and Q4. Q2 could be a little bit different where obviously, I just talked about how October is starting. November is going to be the peak gap or the peak lap for the full year. So that could be a little lower. And then December actually has a holiday flip in it, too, where we have Christmas moving into Q3. So we have about 100 basis points of traffic that could flip flop positive to Q2. It will reverse in Q3 negative. So Q2 could be a little bit higher than that, but that's what we wanted to communicate once we have these laps and it kind of normalizes, that's where we think Chili's will land.
Okay. And then one more. On the August call, I think you were pointing to 30 to 40 basis points of restaurant level margin expansion. You just updated your thinking on commodities. So how does that -- commodity inflation, I should say, how does that impact your thinking about restaurant level margin expansion for FY '26?
Yes. So with the softness at Maggiano's and some of the investments we need to make there, coupled with the tariffs, the margins could be more flat to slightly positive than positive 30% to 40% for Brinker. So we'll be watching that closely. I know that last time we talked about the tariffs, they were a little bit more fluid. Now they're starting to materialize. We took a little bit of price in October. We planned for a little bit more price in January to offset those tariffs.
Now how we're thinking about it is we're offsetting the tariffs with dollars in profit, not necessarily offsetting the margin impact. So again, those 2 things are impacting what we think Brinker margins will do for the full year right now.
The next question is coming from Dennis Geiger from UBS.
Congrats on the results. Mika, I wanted to follow up maybe on that question as it relates to traffic. I mean you gave us the comp from a mid-single-digit perspective. Just within that, is that sort of still assuming positive traffic? Is that the assumption as we look at the quarters from here? I guess the other piece of that would just be maybe thinking about where price shakes out for the year after your comments there. And just mix, I think, was flat was the expectation previously over the balance of the year. Is that still similar? Or there's some moving pieces there?
It's pretty similar. So price now, like I said, was at the lower end of the range. If we implement the price that I talked about in January, it will probably be about that 4% all year long for Chili's. And then we're going to lap some significant mix and traffic numbers. And so those could be negative to flat to positive, kind of in there more in a neutral-ish zone, I would say. So we'll see how well we lap those numbers.
[Operator Instructions] The next question is coming from Christine Cho from Goldman Sachs.
Congrats on another strong quarter. I just wanted to elaborate on your recent experience with the new queso. So firstly, how did the post-launch feedback compare to the feedback that you received during the testing and trial process? And if there were some discrepancies, are there kind of ways to improve the process to narrow the gap going forward?
And secondly, could you just talk about the feedback mechanisms you have in place to quickly kind of reverse the changes or respond to customer feedback in a timely manner as you did this time?
Yes. Thanks for the question. So let me just start with -- we have a very robust stage gate process on all the initiatives that we launched. So -- and we made a lot of changes to the business. So over the last 3.5 years. So the fact that we had one where it probably didn't go as well as we had hoped from a testing standpoint when we put it in market, we have a pretty good track record on these things. And the good news is we quickly learned in market that we needed to reverse course on removing the Skillet Queso.
In the test market, so just -- in the test that we did, we didn't test market like we do, let's say, the ribs upgrade or the chicken tenders because it's a small -- it's a very low mixing product. There's not like a bunch of equipment we got to go purchase. So the risk is quite low when we were to relaunch the queso. The feedback that we got inside the restaurants when we did kind of -- we do like an op shakedown for a period of time was quite good. The guests love the new queso.
We did learn that long-time guests were kind of hesitant about trying the new queso, and that's why we did the program with the My Chili's Rewards where we dropped a queso of the new queso in for everybody so that they could come try it on us versus them having to use their own money to try it, right? So that was our thought based on the learnings in the test market that we would drop a coupon in order to get people to be able to try and get over the hump to the new queso.
And clearly, once we went to market with it, the new queso has done quite well with newer guests, but the long-time Skillet Queso users were not excited about the new queso. It's just a different queso for them. And either they didn't want to try it with the coupon or they tried it and didn't like it. And so that's why we're bringing back the Skillet Queso. I don't know if we would do anything different going forward. I mean we put these things in market. We did learn what the risk was. We thought we had put together a plan that could bring the existing guests along. That clearly has not played out the way we had hoped. And so that's why we're making the changes that we're making.
A big part of this turnaround has been not just listening to team members, but also listening to our guests intently about the things and why they choose casual dining, food service and atmosphere. And for the most part, we've made a lot of really great decisions over time, both ones that are tested and ones that weren't tested. In this case, we actually did some testing. We learned about it. It ended up turning out different when we went to market. And so we've made some changes. But at the end of the day, we're going to have a bigger queso business.
I think people are excited. If you look at the social reviews, on our announcement of bringing back the queso have been quite positive. And I think we're going to make this a win for everybody. And so the newer guests are going to have the great Southwestern quesos that they love. And then the existing guests that love the Skillet Queso are also going to have that product.
Great. Appreciate the color. Just quickly, any update on how the North of 6 initiative is progressing?
Yes. We continue to tick off updates on North of 6. So the big ones that we had last quarter are declaring bringing more tankless water heaters into busy restaurants. The current water heater is not particularly what's the right word for it, reliable. And so that was one thing that we found was really the better restaurants have replaced the water heaters with tankless water heaters. It's not a huge investment across the system, and we're just starting with the high-volume restaurants on that.
The second big one has been something that we think can help with traffic is replacing -- we put some community tables in our last reimage across the system. So these are large format tables that most of the high-volume restaurants that have figured out this traffic thing have replaced those with smaller tables. We think that can help the balance of the system, especially on Fridays and Saturdays. So we're going to go ahead and make those replacements.
And then there's a couple of other smaller things that we're working on that hopefully will roll out this quarter. So the North of 6 initiative continues to go well. We continue to learn new things from those high-volume restaurants and roll them over time to the rest of the system.
So Christine, I want to add one thing to that. Something that we really learned from the North of 6 group is how they schedule their team members, and we've been able to utilize that information and really rebuild our labor model. So as traffic scales up at those other restaurants that we're able to be really efficient with our labor and make sure we keep that throughput going, too. So a lot of learnings there really help to inform us in that labor model as we build it for the balance of the system.
The next question will be from Sara Senatore from Bank of America.
I have a follow-up to an earlier question and then a question about Maggiano's. So the follow-up was just, I think, Kevin, you mentioned chicken is perhaps a fairly small mix. As you think about the products still to be renovated, how should I think about the mix compared to maybe what you've already done? I think there may be some sense that the biggest impact will already have been had because you've looked at, like you said, some of the core 5 menu items. Are these renovations that you're thinking about, are they still big enough to, I guess, move the needle on traffic? Or is this more just kind of a holistic people's perception about the menu quality just continues to ratchet up? And then a question about Maggiano's.
So I don't know if we're mixing some of the different items. So I said the queso is relatively low mixing. The chicken sandwich platform, so it's -- Chicken sandwiches are not a big mixer for Chili's. They're a humongous mixer for restaurants. And so that's why we think renovating the chicken sandwich platform could be a huge opportunity for us. It should be a much bigger percentage of our business because boneless fried chicken is one of the top 5 things that Americans eat, and it's been growing every year for several decades now.
So that's why we're very bullish about the chicken sandwich platform. And it's less of a renovation because we already have a very, very good chicken sandwich, and it's more about adding some flavors to the lineup and then advertising it on TV and making a big deal about it because a lot of folks don't even know we have this great fried chicken sandwich. And then, Sarah, what was your second question in addition to that?
Yes. No, that's very helpful. So the opportunity is much bigger than what you're currently mixing. Okay. And then the second question was on Maggiano's. I know it's smaller than Chili's, but obviously, the turnaround big enough to sort of move the needle on the outlook for earnings. Could you maybe talk about whether there's any difference as you see the turnaround versus what happened when you came to Chili's, would you say the demand environment presumably may be a little softer. I guess there you're competing in an industry where there's maybe more fragmentation, are there large competitors? I guess anything that would argue for why this might be a little bit slower going than Chili's?
Yes. So I think it's a lot of the same challenges. I think because it's not even remotely, I mean, it's less than 10% of our sales now. Because of the size of it and the fact that there's not like big TV budgets because it doesn't have a national footprint. I think the upside is probably less and the risk is probably less because it's only 50 restaurants. So what we're seeing is very similar issues with the facilities and deferred maintenance. So just getting the facilities back up to a place where we feel really proud to host guests and host our teammates in there.
Separately, I think we lost a little bit of what the North Star of Maggiano's is, which is when it was at its best, these are over-the-top portions, very shareable plates, food that sort of very consistent and hot with service that didn't feel like a chain restaurant. There's no reason why we can't get back to that pretty easily. This is not proprietary to restaurants. These are things that we just have to stay focused on and get out of the teammates way so they can do these things on a more consistent basis.
And then the good news is the investments that we need to make into the abundance is mostly on pasta and appetizers. So it's not going to really significantly change the profile of our COGS. So I feel like it's a very doable thing. I don't think it's going to be as fast or as dramatic as Chili's just because we don't have this shot in the arm to get a bunch of traffic for guests to experience the new Maggiano's as it continues to evolve. But I think over time, I think we'll see it stabilize and start to grow.
The next question will come from Andrew Strelzik from BMO.
I wanted to ask about the pricing strategy and how you implement that as you're taking a little bit more here in January and going forward. Is that -- do you take that across the menu? Is it more focused on the more premium items as you renovate those? How are you approaching it in what seems like an increasingly challenging environment?
Yes, Andrew. So we actually have a revenue growth team that is partnered with Deloitte. So we get a lot of input on how we execute our pricing strategy, and we have multiple tactics. So one of them is we do have different tier pricing across the nation, depending on where our restaurants are on different pricing tiers, which takes a little bit of price across the menu. And then we also look specifically at certain items, the elasticities and where we think we have more room to price where the guest is -- their willingness to pay on certain items in different regions and across there and compared to our competition. So we have -- it's a multilayered pricing strategy that we have that we put into place.
Okay. That's helpful. And on -- I know you said that you would roll out the new store growth plans moving forward. But is there anything you can share about where you are in that process, kind of what you've learned as you're going through it and kind of where you think unit growth ultimately could land over the longer term?
Yes. So like we said, we really have been spending our time now building up that team. We hired a new leader with Richard Ingram. He's now built his team up so that we can really evaluate the opportunity across the United States for Chili's and Maggiano's. And we're really excited about the prospects we know. What I can tell you is I don't have the exact number yet that we're prepared to share. But we do know that we can build a lot more Chili's, and we think we can build more Maggiano's.
So that team is really ramping up to do the 2 things that we want them to do. One is to get both reimage programs rolling and working very smoothly across both brands and then to ramp up that new unit growth. So more to come, but we do know the opportunity is there and that we can ramp up new unit growth, specifically at Chili's.
The next question will be from Brian Vaccaro from Raymond James.
Just on the updated guidance, Mika, could you give us a little more context on how much your expectations changed at Maggiano's versus the original guidance? And then I just had a follow-up.
Yes. So when we think of the original guidance, I think that the Maggiano's impact, it's actually going to be more pronounced most likely in the second quarter. So there's 2 things in the second quarter. Maggiano's typically, that is the quarter that they outperform. They earn almost half of their profits in the second quarter. So with them being a little bit softer right now, that will probably have a little bit more of an impact in Q2.
The other thing is, like I said, Chili's is doing great and exceeding our expectations. We do have some more tariffs that I talked about that we've factored in and some investments. Chili's the other call out, which we've talked about is Q2 is the quarter that Chili's sales originally accelerated. And then a lot of those expenses that were related to more guests and more team members in the building and some incremental investments, those materialized in Q3 and Q4. So you just want to make sure that we have all those run rates into the Q2 as we look at Chili's and Maggiano's.
But again, so as I think about the guidance, I think Maggiano's, it's going to be a little outsized in Q2. It could be 6% to 8% impact on our EPS. And then moving forward, I think it will have a lesser impact, but still weighing down a little bit of Chili's gains, but not all of Chili's gains.
Okay. And just to clarify that last comment, so 6% to 8% impact on your fiscal second quarter EPS. And it sounds like you're expecting maybe your second quarter margins to be down year-on-year after such an outsized margin performance in Q2. Am I interpreting that correctly?
Yes, you are. Actually just the timing.
Okay. All right. Great. Right, right. Some of the timing on bringing in labor, I think, last year, if I remember correctly, kind of lagging the traffic growth essentially to say it plainly. Okay. And then I was going to ask on margins also. The press release, it noted that repair and maintenance costs were lower. Could you just ballpark sort of how much that might have been year-on-year in the quarter? And I know it can change, but just your latest thinking on how much that cost line could be down as you continue to normalize the R&M spend?
Yes. So R&M was -- and this is Chili's R&M. There's a lot of different buckets there, is why I don't want to give you too specific of numbers. But in general, let's say it was down $3 million to $4 million in the first quarter. I don't know that it will be down that materially, but it is favorable year-over-year. And I think it will be the $10 million to $15 million year-over-year favorable for Chili's R&M. Some of that's going to be offset with some incremental investments into Maggiano's R&M, a little bit there, but there are some ballpark figures for you.
That's great. And then one last one, if I could just squeeze it in, bookkeeping. Could you share what the 3 for Me sales mix overall was and the tiers, the $10.99 versus the higher tiers? And then anything on Triple Dipper sales mix?
Yes. So you got it. Okay. So the great news is the 3 for Me overall mix was very steady right there in that 18%, just very similar to Q4. You also know -- we also talked about that last quarter, we introduced a new tier. So the $10.99 is actually down to maybe about 40-ish percent where it was before that, 50% to 55%. We have a new tier at $12.99, which is where some of that movement happened. So between the $10.99 and $12.99 tiers, you still have about 50% to 55% of the mix and the balance of the mix is in the higher tier. So very steady performance, not much change from Q4.
And then I think you said Triple Dipper still remains about 15% of total sales. So those Triple Dipper sales are just hanging in there and not moving. So that's great.
The next question will be from Jon Tower from Citi.
I appreciate all the color on the guest cohorts and their journeys after they've come to the company or come to the brand. I'm just curious, looking at the data, as these guests have come in, how are they drawn to the brand? Are they coming in initially and using 3 for Me out of the gates and then next visit moving along to something else on the platform? Or are they sticking with the 3 for Me when they come for the next visit? Any color you can provide on that would be great.
Yes. We don't have the transaction level data on what's that first basket of a new guest. What I can share with you is we've learned the 3 for Me guest they come more frequently and they're more valuable, even though their basket is a little bit lower each time they come, they're more valuable because they come more often. So 3 for Me and the Triple Dipper guests are more valuable than the average guest.
So we understand at least if they bought into that franchise, we know how often they come. But we haven't looked yet at what is in the basket for new guests other than we know young guests are the ones that are coming in through the Triple Dipper. So I mean, I think we're going to learn more over time. And I think that's a good question that you're asking. We probably should look into what is the entry point. Obviously, it probably is 3 for Me and Triple Dipper just based on what we've been putting heat on, but it would be helpful to understand that a little bit more depth. So thank you for the question.
Okay. And then, Mika, just curious in terms of your advertising spend. I know I think you said this quarter, you're about 2.5% of sales. Looking forward, any shifts? I know you noted that the second quarter, you're going to ramp that relative to what you had spent last year. But for the balance of '26, do you anticipate any other shifts relative to what you were thinking back in August?
No, we haven't changed what our expectations are, but I can reiterate that Q2 is the biggest increase year-over-year for Chili's advertising. I said that would be up probably $9 million or $10 million. Q3 has some incremental spend there and then Q4 is closer to flattish.
The next question will be from Brian Harbour from Morgan Stanley.
I guess on the margin side, I think most -- you're clear about most of that. But is there any other expense lines that you expect to be lumpy? I think you mentioned some additional labor investment. I think it was labor at Chili's. What's that related to?
Yes. No, it's not necessarily -- I think the labor was all built in there. I think it's more of the restaurant expense bucket. Some of -- I think that's where you need to make sure that all those expenses where I talked about maybe workers' comp and employee health, things like that to make sure that, that bucket is where you reflect a lot of just the incremental cost and inflation just related to more guests and team members in the building. Labor was a little piece of it as well. I think it's in the run rate. So I think Q1 is a good model of the run rates of these things, just to make sure as -- some of those are going to be lapsed in Q2 is what I was pointing out.
Yes, right. Yes, because that was impacted last year. When you talk about the tariff impact, are you basically referring to beef? And then is your comment that -- or could you quantify how much pricing was taken in October and plan to be taken in January related to that?
Yes. So it is primarily beef and ground beef is being impacted by the tariffs. So that is what's driving the majority of it, a little bit in shrimp. And then we took about 40 basis points of price in October. January is still fluid, but we're going to have to take more because a lot of these tariffs are impacting the back half of the year. So that could be up to 1% or so. Still flexibility there on the final decisions.
The next question will be from Jeffrey Bernstein from Barclays.
Kevin, my first question is just on the broader consumer that you talked about earlier. There's obviously lots of talk of a slowdown in discretionary spending across lots of categories, but especially at restaurants. Just wondering, do you see any evidence of such at Chili's? I mean it's hard to tell with such a strong 21% Chili's comp that could mask lots of things and even the high single-digit running in October. But any change you're seeing that would demonstrate or substantiate what people have been talking about in terms of a change or a slowdown in consumer spending, whether it's frequency or mix shift or anything along those lines that would give you an indication?
No. I mean, we obviously see it on Maggiano's, but we have not felt it on Chili's. I mean -- and that's why I shared the income cohort data that the under $60,000 household is actually growing faster than other cohorts right now. So I think we've got the sweet spot of being positioned as a great value and then delivering a consistent experience when guests come in. And I think that's made us a lot stronger, I think, than some others because of those investments that we made a few years ago.
The other thing I think people don't realize it's probably important to know is like everybody is like, hey, someone can undercut you or someone can put a better value on and they can. But look, we've been at this for a couple of years now, hammering the same message. And like I always tell the marketers, like our guests are not waiting for a Chili's ad, right? So like the fact that like we've been hammering the same message over and over and then we've been able to deliver on that experience when people come in, like we are in a very good position right now in a tough environment to be ones that can deliver a complete meal at a great value with -- that is just an abundant eat and then deliver that consistently across the entire chain it's a very difficult thing to be able to establish over time and then to deliver on the back-end experience.
So it's something that people don't realize. I think people just think that guests know all value offers that are available and they know the relative quality of each of the offers and the fact that we've been on the same thing over and over and then delivered consistently on it, that's a very different place than a lot of others that have thrown a lot of different offers out there, maybe not have made the same investments that we've made and then don't get the same results when they go on TV with great value. And then you guys wonder why.
And I'm sharing with you, I think part of it is we've been really consistent about what we've done, and we've actually made the investments to make the experience better. So I think we're positioned really well in this environment. Obviously, I'd rather have a better environment than to be positioned well in a tough environment, but I do think we're positioned really well to continue growing market share.
Got it. That makes total sense, and it's encouraging. My follow-up was, I guess, for Mika. As you think about the restaurant margin, I think you said now we should assume relatively flat for fiscal '26 versus the prior 30 to 40 basis points of expansion. The first quarter was 270 basis points of expansion. I think you kind of implied that the second quarter is maybe the toughest. But it seems fair to assume compression in the remaining quarters rather than just the fiscal second quarter to get to that flat. And being that, that's, again, compression despite a mid-single-digit or greater comp for the rest of the year, I'm just wondering how you think about that or what that suggests on the future kind of restaurant margin opportunity, your ability to expand them in future years, considering how strong the comps are still even with the easing right now?
Yes. No, good question, Jeff. So yes, I do think, again, quarter 2 is the one that's going to have the most pressure just because of, like I said, the timing of Chili's expenses and then just the impact of Maggiano's, specifically on that second quarter. Depending how fast Maggiano's can recover, I think it could have some incremental pressure in 3 and 4. So I think that's one of the things. But I do think that we could -- I'm not saying we're going to lose margin in both those quarters, but it could be tougher. The timing of expenses could make it that way, too. But -- so I think they could be flat to slightly positive as you kind of move out or a little pressure depending on the Maggiano's recovery in Q2 to Q3.
The next question is coming from Alex Slagle from Jefferies.
And following up on your commentary about delivering on the experience, a question on the people pipeline and your ability to hire experienced operators across the business. I mean, obviously, folks are seeing everyone at Chili's kind of getting paid well, probably having more fun. Imagine the quality stepped up significantly here and that comes a competitive advantage for you. Where are we on the path to step up the quality of your teams and the restaurants at both brands?
Yes. Thank you for the question. So number 1, we certainly are getting more candidates and higher quality candidates based on the results that we had. I remember when I started about 3.5 years ago, and you guys were telling me that my competitors were -- we were a talent donor to them. And I don't think that's the case anymore just based on the strength of the brand and the talent that's coming to us.
So number 1, we have a bigger and better talent pool to be able to pull both at the hourly and the managerial level. And then number 2, our big people push over the next couple of years, so kind of act 2 of our turnaround is really pushing to upgrade both the talent that's running the restaurants as well as provide them significant amounts of ownership training. So we feel like we need to get more ownership down to the restaurant level and delegate more of the decision-making down to them so that they're able to grow their business and run it like it's their own business. And that involves a couple of years of really training what extreme ownership looks like.
So we actually have our first round of that training rolling out this year. The initial response has been quite good. So I'm excited about what that can mean over time to our business. And then eventually, we're going to look at incentives about how to place long-term ownership incentives for the managers so that they can share in the long-term growth of the business that we expect to have over the next few years. So -- and then going forward. So I'd say right now, number 1, we're getting better talent coming into the business. And number 2, we -- our people focus right now has been to invest in making them more owners of the business and eventually, that will translate into some changed incentive structures.
The next question is coming from Margaret May Binstock from Wolfe Research.
I know you guys talked about it a little bit earlier about -- last quarter, you talked about leading into unprice pointed value messaging. So bring the Triple Dipper advertising on, is that what you were referring to? And then as you mentioned, shifting back more into value advertising, is that still consistent with value messaging that you guys have highlighted last quarter?
Yes. That was part of probably why we didn't get as quite a high volume response on the Triple Dipper messaging as we've had on $10.99 messaging is that doesn't have a price point at a time when customers are looking for what's the great value that's out there. So that's exactly what we're referencing.
So going forward, we should expect kind of leaning back into price point-centric value on television going forward?
Yes. Just to level set, I mean, the last 3 years, all we've had on TV has been $10.99 value messaging, and we spent 2.5 weeks on a non-value message. We learned a lot about it, brought new guests in, more new guests than the price point in advertising, but overall volume response was not as great. And so that's why we went back to $10.99.
And the last question today will be from Jim Sanderson from Northcoast Research.
Just wanted to talk a little bit more about your thinking regarding your new unit growth plan. Just wondering if multiple store formats are part of the narrative in that discussion, if you could potentially see a Chili's Express or maybe a reduction in square footage to allow you to enter a broader array of trade areas. Anything you'd be willing to offer on how you're looking at that opportunity ahead?
Jim, it's Mika. Yes, right now, we're looking just at the normal full street side footprint for Chili's. We're having great success with that. That's our bread and butter is the dine-in. And so we're going to continue with that format for the foreseeable future.
All right. And a quick follow-up question. I think you called out the ribs is doing pretty well. Could you provide us an update on how that mixed in the quarter and how you expect that to evolve going forward?
So really, what we were saying is, I mean, mix is probably about $150 million business, and it was up 35% in the first quarter with the new ribs. So we think that we'll continue to sell more ribs, and we're excited about those investments and being able to offer that quality play to our guests.
So it's about a point incremental mix way to think about it.
That's all the time we have for questions today. I will now hand the call back to Kim Sanders for closing remarks.
Thank you, Paul. That concludes our call for today. We appreciate everyone joining us and look forward to updating you on our second quarter fiscal 2026 results in January. Have a wonderful day.
Thank you. This does conclude today's conference. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Brinker International, Inc. — Q1 2026 Earnings Call
Financial data from Brinker International, Inc.
Revenue
Revenue is the sum of all sales generated by a company, e.g. for its products or services.
Revenue (TTM) metric explainedDirect Costs
Direct costs are the costs incurred directly in connection with the manufacture of the product or service.
Gross Profit
Gross Profit indicates how much of the revenue remains in the company after deducting direct production costs. If the percentage share of sales is calculated, this is referred to as the gross margin.
Gross Profit metric explainedSelling and Administrative Expenses
Selling, general and administrative expenses (SG&A) include all expenses for marketing and sales as well as the general administration of the company.
Research and Development Expense
Research and development costs (R&D) provide information on how much the company invests in the research and development of its products. The costs are particularly interesting as a percentage of revenue and in comparison to direct competitors.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the company's earnings before interest, taxes, depreciation and amortization. The EBITDA margin is calculated as a percentage of sales.
Depreciation and Amortization
Depreciation represents reductions in the value of the company's assets (e.g. due to wear and tear on machinery).
EBIT (Operating Income)
EBIT (Earnings Before Interest and Taxes) is the company's profit before interest and taxes, also known as the operating income. The EBIT Margin is calculated as a percentage of sales at
.
Net Profit
Net Profit represents the profit or loss after deduction of all costs.
Net Profit metric explainedStocksGuide Premium
| Jun '26 |
+/-
%
|
||
| Revenue | 5,807 5,807 |
104%
104%
100%
|
|
| - Direct Costs | 4,725 4,725 |
106%
106%
81%
|
|
| Gross Profit | 1,083 1,083 |
98%
98%
19%
|
|
| - Selling and Administrative Expenses | 236 236 |
103%
103%
4%
|
|
| - Research and Development Expense | - - |
-
-
|
|
| EBITDA | 847 847 |
97%
97%
15%
|
|
| - Depreciation and Amortization | 219 219 |
103%
103%
4%
|
|
| EBIT (Operating Income) EBIT | 629 629 |
95%
95%
11%
|
|
| Net Profit | 487 487 |
116%
116%
8%
|
|
In millions USD.
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Brinker International, Inc. Stock News
Company Profile
Brinker International, Inc. engages in owning, developing, and franchising Chili's Grill and Bar and Maggiano's Little Italy restaurant brands. It operates through the following segments: Chili's, and Maggiano's. The Chili's segment includes the results of company-owned Chili's restaurants in the U.S. and Canada as well as the results from domestic and international franchise business. The Maggiano's segment comprises the results of company-owned Maggiano's restaurants. The company was founded by Larry Lavine on March 13, 1975 and is headquartered in Dallas, TX.
StocksGuide Premium
| Head office | United States |
| CEO | Mr. Hochman |
| Employees | 83,840 |
| Founded | 1975 |
| Website | www.brinker.com |


