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FDD Talk: The Chili’s Grill & Bar Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on February 3, 2016

in Casual-Dining Restaurant Franchise, FDD Talk 2017: Food Franchises, Franchise Earnings, Restaurant Franchise

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Chili's Restaurant Photo by carlossalinas

In this FDD Talk post, you’ll learn the following:

  • Section I – Background information on the Chili’s Grill & Bar franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Chili’s Grill & Bar franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of Chili’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • average sales, gross profit, total operating expenses, total non-controllable expenses, restaurant contribution, depreciation, and EBITDA for the 12-month period ended June 24, 2015 of the 805 company-operated Chili’s Restaurants that were open for at least 30 months before June 24, 2015

Section I – Background Information

Chili’s Continues High-Tech Rollouts

Technology is a crucial element at Chili’s, which has focused heavily on digital solutions for guests over the past several years. The casual dining restaurant chain has been working on digitizing its restaurants since 2013, when it started testing Ziosk tablets at select restaurants.

The tabletop devices were rolled out in 2014 for guests to browse the menu, order food and pay for their meals while also playing games and getting news and entertainment updates. The tablets are well-utilized, bringing in three-quarters of Chili’s credit-card sales.

In 2015, the chain introduced My Chili’s Rewards, a loyalty program that brings together technology, personalization and gaming while enabling guests to earn and redeem points. In six months, more than 4.2 million customers joined the rewards program.

In January 2016, the chain also joined Amex’s Plenti loyalty program. Users can earn and redeem points for multiple brands, and by the second half of 2016 they’ll be able to participate fully in the Plenti program while keeping their current loyalty status with Chili’s.

Chili’s is also overhauling its online ordering system in the first half of 2016, partnering with digital ordering company Olo. ApplePay will be gradually rolled out in 2016 as well.

Chain Started in Former Post Office

Chili’s serves American food with influence from Tex-Mex cuisine in restaurants that are decorated in Southwest themes. The restaurant chain was founded in 1975 in Texas by Larry Levine, who opened the first location in a converted post office in Dallas. By the early 1980s the company had grown to 28 locations.

The chain is now owned by Dallas-based Brinker International. Norman E. Brinker purchased Chili’s Inc. in 1983 and took the company public, and Chili’s Inc. was renamed Brinker International in 1991. Brinker also owns Maggiano’s Little Italy.

Brinker Acquires 103 Chili’s Restaurants from Franchisee

Brinker International acquired Pepper Dining Holding Corp. in June 2015, which brought 103 Chili’s franchised restaurants, a quarter of the 435 domestic franchised restaurants as of the third quarter ended March 25, 2015.

Burritos Join Chili’s Menu

Chili’s added burritos in August 2015, including a grilled smoked chicken burrito highlighted by pico de gallo and a smoky pasilla-honey chile sauce. The Smothered Prime Rib Burrito, representing the introduction of prime rib to the menu, comes with pico de gallo, ancho-chili sauce, green chile sauce and corn-black bean salsa.

Also debuting was Chili’s Fresh Tex menu featuring reformulated sauces for a number of dishes, including the brand’s signature Chili’s Baby Back Ribs.

Robust Menu Delivers Variety of Choices

Chili’s features a varied menu of ribs and steak; spicy tacos, quesadillas, fajitas, enchiladas, burritos and Fresh-Mex Bowls; chicken and seafood; and about a dozen homestyle sides such as mashed potatoes, black beans, corn on the cob, and asparagus with garlic roasted tomatoes.

Lower-calories options are collected in the Lighter choices menu. The restaurants also offer lunch combos and a $20 dinner for two with multiple choices for appetizers and entrees, as well as desserts, beverages and a kids’ menu.

Section II – Estimated Costs

  • Please click here for detailed estimates of Chili’s franchise costs, based on Item 7 of the company’s 2015 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis

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