Strong sales bring smiles to Chile's executives

Nation's Restaurant News, May 18, 1987 by Joe Edwards

Strong sales bring big smiles to Chili's executives

Trouble in the oil industry, high unemployment throughout the region and a new 21-year-old minimum drinking age have conspired to put a damper on restaurant sales in Texas. But at Chili's, sales are strong and smiles in the executive suite are as broad as the big Texas sky.

Comparable-store sales rose 6 percent chainwide last year to more than $1.9 million a unit, even though more than half of the company's restaurants are in the economically-depressed Oil Belt states of Texas, Oklahoma and Louisiana. Outside the Oil Belt, sales rose 15 percent. New units have been posting annualized sales of about $2.1 million. In the most recent quarter, profit jumped 45 percent to $1.5 million on a 50 percent rise in revenue to $42.5 million.

Chili's executives are pleased, but they are not content.

"I view our group as gazelles,' declared chairman Norman Brinker in a recent interview. "We're nervous all the time, nervous about new restaurants, nervous about new areas, but we can run all the time, and that's important.'

Chili's, which was founded in 1975 as a quality burgers-and-chili joint by Larry Lavine, who has since left, has grown to a $176-million-a-year company with 9,000 employees and 115 restaurants in 19 states. By contrast, in fiscal 1984, Chili's reported $44 million sales from only 30 restaurants in six states.

The company's expansion has been steady, but not breakneck. In the process, Brinker and his highly-regarded executive team have moved Chili's into the casual restaurant segment from the more limited "gourmet' burger segment that it helped define.

In retrospect, the menu expansion of the last three years helped protect Chili's against the fate suffered by Flakey Jake's, J.J. Muggs, Moxie's, Spoons, and other gourmet burger chains that sparkled for a while in the early 1980s.

"What they did was beyond comprehension,' Brinker said of one nearly-defunct gourmet burger chain. "They broke every tenet of expansion.'

From the onset, Brinker emphasized slow expansion, preferring the development of strong training and other support systems to quick unit openings. He also preferred company restaurants to franchise development.

He said he remembers sitting back in January 1984 and musing, "I'm not sure this will travel.' At the time, Chili's had several units outside Texas that were "doing okay,' but national expansion--he wasn't sure about it.

Brinker, however, was brought up on expansion--first at Jack in the Box and later at Steak & Ale, which he founded, expanded into a large steakhouse chain and then sold to Pillsbury. Brinker remained with Pillsbury until 1983, helping to develop the Bennigan's chain and to resuscitate Burger King. Now Bennigan's is one of Chili's top competitors.

Jim Parrish, chief financial officer, said three elements came together in the summer of 1984 to give Chili's a much-needed shot-in-the-arm: New menu items, including a chicken sandwich and fajitas, were added; a marketing campaign was put into place, and a new, upscale look was introduced.

Chili's will open 23 company units and at least 12 franchised units this year, an expansion pace with which top management is comfortable. Expansion in 1987 will include new restaurants in Detroit, Chicago, Los Angeles, and parts of the Carolinas, Tennessee, Florida, and California.

Clustering restaurants in specific markets has been a strategy that has clicked for Chili's, according to president Ron McDougall. The company's expansion pace is picking up, McDougall said, because "staffing is locked in place. It took time to grow a management team. We're to the point now that we're off the sprint and into the marathon.'

Stability at the top, contentment in the ranks

When talking about his company, the 55-year-old Brinker sounds most proud of Chili's employment record. "In upper management, we have virtually no turnover,' Brinker boasted.

Creed Ford, senior vice president of operations, has been with the company since taking a job at the very first Chili's back in the 1970s. Ed Palms, vice president of design, construction, and purchasing, has been working for Brinker for more than 15 years. President McDougall followed Brinker over from S & A Restaurant Corp., along with several other executives, including Hal Smith. Smith is one of the only top Chili's executive to leave since Brinker arrived--and he did so to fulfill a lifelong ambition to be a chief executive officer (of Chi-Chi's).

A stable headquarters staff helps attract talent, Brinker maintained. "Longevity--it attracts extremely good people. It all feeds upon itself. It's what makes it work so well.'

Brinker is equally proud of the results of a recent survey of the company's 9,000 employees. Some highlights: 91 percent agree with the company's policies; 97 percent believe the policies are fair; 89 percent believe that Chili's disciplinary actions are fair, and 96 percent said they enjoyed the opportunity to make suggestions.

McDougall quickly cites the reasons why Chili's has come on so strong in the last three years. "We know who we are,' he declared. "We stress who we are, what we're all about. We make sure all the players know what we're all about.'