Chili's 'kitchen of the future' retrofit drives menu changes, sales

Chili's 'kitchen of the future' retrofit drives menu changes, sales

More than 100 Chili’s Grill & Bar restaurants have undergone what chain parent Brinker International Inc. calls the “kitchen of the future” retrofit, installing new equipment that helps reduce labor costs and pave the way for menu expansion and increased sales.

Dallas-based Brinker’s 1,534-unit Chili’s division expects the kitchen retrofits to be a key driver in its guidance of a 400-basis-point, or 4 percent, improvement in net margins. The accompanying front-of-the-house reimaging program is expected to continue a 3-percent to 4-percent sales lift that Brinker has seen in completed units.

A Brinker spokeswoman said Chili’s was “installing them at a pretty fast clip.”

Two restaurant securities analysts, who recently toured a fully retrofitted Chili’s unit in Raleigh, N.C., said the kitchen equipment will cut energy costs and allow for more menu innovation. The equipment include in the first phase a new combination convention-steam oven and a new food warmer, and in a second phase a conveyor oven and an infrared oven.

Barclays Capital analyst Jeffrey A. Bernstein said in research note that the new equipment provides easier preparation of such dishes as pasta, seafood and flatbread items.

“Management is currently experimenting with a couple of these new items (with bolder taste profiles), including salmon, baked pasta, cheesesteak sandwiches and flatbread offerings, and such could result in new future menu platforms for the brand,” Bernstein said. “Overall, the company aims to use its product pipeline to focus a little less on shorter-term promotions, and more on longer-term menu innovation.”

Brad Ludington of KeyBanc Capital Markets Inc. said the centerpiece of the kitchen initiative is an oven that uses convection, steam and a combination of the two to replace both a smoker and a tilt skillet that previously were used to prepare products such as ribs, mashed potatoes and pasta.

“The combi oven provides a higher quality product at a more consistent pace by cutting much of the human error that previously resulted from preparing multiple products at multiple stations,” Ludington wrote.

The second major piece of equipment in the first phase is a rethermalizer food warmer, the KeyBanc report said, “which is essentially a large fryer that uses water to more evenly heat products such as soups. This took the place of up to six microwave ovens per unit and allows prep cooks to focus on other tasks vs. having to manage the microwaves.”

Bernstein said Chili’s has divided tasks between prep and portioning cooks and more experienced cooks who work the line, requiring less multi-tasking.

According to the analyst reports, Chili’s management said unit-level labor cost savings since the first phase kitchen retrofit was completed in the second quarter have totaled between 50 and 60 basis points, or between 0.5 and 0.6 percent. The savings, which total as much as $300 per week per unit, were gained through the combination of paying a lower effective wage to prep cooks and reducing prep hours by about 10 hours per week.