In this FDD Talk 2017 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 2017 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Chili’s Grill & Bar franchise, based on Items 5 and 6 of the company’s 2017 FDD
- Section IV – Presentation and analysis of Chili’s Grill & Bar’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
- 2016 average and median reported net sales for the 808 company-operated Chili’s Restaurants that were open for at least 30 months before June 28, 2017
- 2016 average and median gross sales for the 284 franchised Chili’s Restaurants that were open for at least 30 months before June 28, 2017
Section I – Background Information
13 Things You Need to Know About the Chili’s Grill & Bar Franchise
Cuts Down Menu to Focus on Core Items
1. In mid-September, Chili’s rolled out its new pared down menu – removing about 40 percent of the menu items and choosing to focus on its core items such as burgers, ribs, and fajitas. Kelli Valade, President of Chili’s, said that cutting down the menu will allow the brand to “reinvest in meatier burgers, ribs, and fajitas” and that the company “apologize[s] to any Guest who misses a departed dish.”
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3. To help ease the loss of several of its menu items, Chili’s released to Pinterest recipes for its most popular dishes that were removed. The brand says that the recipes will stay up indefinitely so that customers “can continue enjoying their favorites from the comfort of their own home.” Chili’s also produced easy-to-follow recipe tutorial videos to go along with the Pinterest recipes.
4. In addition to encouraging customers to make their favorite items themselves, Chili’s created a series of send-off videos for its most admired dishes and shared them on the brand’s social media channels.
Cuts Corporate and Field Staff in Restructuring
5. At the start of 2017, Chili’s laid off around 50 employees from its corporate staff and more than 30 people from its field director team as part of a restructuring. Brinker International Inc., the parent company of Chili’s, told employees that the layoffs included nine regional directors, 29 area directors, and nearly 50 corporate employees.
6. A company spokesperson said, “This new structure ensures that we are well organized to leverage our resources more effectively and prioritize our efforts to help reduce complexity, ensure clarity in roles, enhance collaboration, and improve efficiency in decision-making.”
7. The last time Brinker conducted a large-scale layoff at Chili’s was in 2008 when the brand cut 125 positions at its corporate headquarters.
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8. In early October, to promote the brand’s new menu, Chili’s introduced an updated version of the jingle for its famous Baby Back Ribs. In the TV ad accompanying the new version of the jingle, Chili’s let customers know that it was focusing on its ribs, burgers, and fajitas and that these items were going to be larger and “meatier.”
9. Steve Provost, Chief Marketing and Innovation Officer for Chili’s, said in a statement that the brand admits it had “lost [its] way a bit and needed to take a step back to successfully move forward,” which included reviving its iconic jingle. He also said that the company didn’t want to just release the original jingle, but wanted to also let customers know that “Chili’s is Back, Baby.” This new slogan was also featured in the commercial.
Company History
10. Chili’s Grill & Bar was founded in 1975 by Larry Lavine in Dallas, Texas. Lavine wanted to open an informal, full-service restaurant that served homemade Texas-style chili and burgers. He is credited with opening one of the the first casual dining, full-service restaurants. The first location was so successful that Lavine opened a second location a year later in Houston, Texas.
11. By the early 1980s, there were 23 Chili’s locations in the Southwest. Lavine decided to sell the company to Norman Brinker in 1983. By the end of the 1980s, Chili’s updated its menu to include its iconic Baby Back Ribs (and aired the Baby Back Ribs jingle for the first time), salad, buffalo wings, and fajitas.
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Entrepreneur’s Franchise 500
13. Chili’s has not appeared on Entrepreneur’s annual Franchise 500 list in the past decade.
Section II – Estimated Costs
- Please click here for detailed estimates of Chili’s Grill & Bar franchise costs, based on Item 7 of the company’s 2017 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Chili’s Grill & Bar’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.
Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis
Part 1 – Average and Median Gross Sales of the Company-Owned Chili’s Restaurants for the 52 Weeks Ended June 28, 2017
- Part 1 of this Financial Performance Representation provides the actual average and median Reported Net Sales of certain company-operated Chili’s Restaurants.
- Reported Net Sales are Gross Sales (as defined in the Franchise Agreement) less the value of complimentary products provided by the Restaurants to customers and employees.
- This sales information is based on the operating results for the 12 periods ended June 28, 2017 of the 808 company-operated Chili’s Restaurants that were open for at least 30 months before June 28, 2017 (“Company-Owned Restaurants”).
- Data represented in Item 19 reflects a 52-week fiscal year that ended June 28, 2017.
- Chili’s closed 8 company-owned Chili’s Restaurants during its 2017 fiscal year. These 8 closed restaurants were located in California (2), Colorado, Florida, Massachusetts, Michigan, Tennessee, and Texas. This sales information excludes the 8 restaurants as Chili’s did not operate these restaurants for the full year.
- Chili’s temporarily closed one location for 12 weeks due to flooding in Louisiana during Chili’s 2017 fiscal year. This location is not included in this information.
- The 808 Company-Owned Restaurants represent 86.2% of the 937 total company-operated Chili’s Restaurants in the United States open as of the end of the reporting period. Information for company-operated Chili’s Restaurants outside of the 50 United States is not included in this Item 19.
- The average length of time the 808 Company-Owned Restaurants have been open is 16.7 years.
- Typically, company-operated Chili’s Restaurants are located in large, metropolitan areas. The location of a restaurant (whether company-operated or franchised) and the demographics of the geographic area can have a material impact on sales and expenses.
- The Company-Owned Restaurants offer substantially the same products and services to the public that franchised Chili’s Restaurants are expected to offer.
- Chili’s company-operated Chili’s Restaurants use a uniform accounting system, and the sales data pertaining to the Company-Owned Restaurants was prepared by Chili’s in-house accountants on a basis consistent with generally accepted accounting principles during the period covered. This sales information has not been audited.
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