Brinker Turns Focus From Digital to Physical to Boost Profits

As casual dining brands look to balance the needs of meeting omnichannel demand and protecting their margins, Chili’s owner Brinker International is turning its focus away from its virtual brands.

On a call with analysts Wednesday (Jan. 31) discussing the company’s second-quarter fiscal 2024 earnings results, the casual dining giant discussed the ongoing impact of its decision to turn its focus away from its digital menus toward its brick-and-mortar brands — a move that came to boost profit margins.

“We are still experiencing the year-over-year impact of the planned de-emphasis of virtual brands, including the discontinuation of Maggiano’s Italian Classics and materially reduced promotional activity for It’s Just Wings,” Joe Taylor, the company’s executive vice president and chief financial officer, said. “In the second quarter, reduced virtual brand activity negatively impacted Chili’s traffic by approximately 2.5%.”

The brand’s original hopes to integrate the It’s Just Wings menu into its core Chili’s brand, prominently featuring the items to drive up the average check of bar orders, backfired.

“Many of those guests were trading down from entrees, versus either that incremental add-on to a bar tab or an incremental trade-up on an appetizer, so we will remove the pictures of wings off the menu,” Kevin Hochman, the restaurant group’s CEO and president, told investors.

For restaurants whose core focus is the on-premise experience, delivery can have its drawbacks, even as consumers continue to demand omnichannel availability from their favorite brands. As Brinker pivots away from the channel to boost profits, competitor Darden, parent company of Olive Garden among other popular full-service brands, is finding that third-party delivery can negatively affect consumers’ perception of its restaurants’ value.

“We still feel really confident about our decision to [stop] the third-party delivery, even if we had to price more to cover that,” Darden President and CEO Rick Cardenas said on an earnings call last month. “Our consumer would see that as our price, not necessarily the price for delivery.”

PYMNTS Intelligence’s study “Connected Dining: Rising Costs Push Consumers Toward Pickup,” which drew from a survey of more than 2,100 U.S. consumers, revealed that 58% of takeout customers said they pick up their meals to save on the delivery fee. Plus, 48% of consumers reported that they have been more likely to pick up their restaurant orders themselves rather than have them delivered due to inflation.

Overall, digital does not seem to be much of a focus for Brinker International right now, although Hochman noted that Dominique Bertolone, the recently-appointed president of the company’s Maggiano’s Little Italy brand, will be the “perfect leader to accelerate the brand’s dining off-premise … growth.”

Consumers, for their part, continue to seek digital ordering options. Research from PYMNTS Intelligence’s study “Consumer Interest in an Everyday App,” which drew on insights from a survey of more than 3,300 consumers in the United States and Australia, found that 1 in 4 U.S. restaurant customers exclusively orders food using internet-connected devices. Plus, another 36% do so both via traditional channels (in person or by calling) and via internet-connected devices.