Operator: Good morning, and welcome to the Brinker International First Quarter Fiscal 2027 Conference Call. At this time, all participants are in a listen-only mode, and we will open the floor for your questions after the presentation. If you wish to join the queue to ask a question at any time, you can press star one. Should you wish to remove yourself from the queue, press star two. It is now my pleasure to turn the floor over to your host, Kim Sanders, Vice President of Investor Relations. The floor is yours.
Kim Sanders: Thank you, Joanna, and good morning, everyone, and thank you for joining us on today's call. Here with me today are Kevin Hochman, Chief Executive Officer and President of Brinker International and President of Chili's, and Mika Ware, Chief Financial Officer. Results for our first quarter were released earlier this morning and are available on our website at brinker.com. Kevin and Mika will first make prepared comments related to our strategic initiatives and operating performance. Then we will open the call for your questions. Before beginning our comments, I would like to remind everyone of our safe harbor regarding forward-looking statements. During our call, management may discuss certain items which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Kim Sanders: All such statements are subject to risks and uncertainties which could cause actual results to differ materially from those anticipated. Such risks and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC. On the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations. With that said, I will turn the call over to Kevin.
Kevin Hochman: Thank you, Kim, and good morning, everyone. Thank you for joining us as we share insights from our first quarter and our outlook for the remainder of fiscal 2027.
Kevin Hochman: Q1 Chili's same-store sales were +10%, outperforming the casual dining industry by 720 basis points. This strong result was lapping a +21% in Q1 fiscal 2026, and a +14% in Q1 fiscal 2025, for a three-year cumulative comp of +52%. Our Q1 sales result was driven by traffic increases of 6% versus year ago. Chili's traffic has now beat the industry the past 12 quarters. I am proud of our Chili's team rolling industry-leading comps from Q1 last year and two years ago with even more very strong comps in Q1 this year. Our guest experience improvements and our everyday value leadership continue to support a powerful flywheel of traffic, sales growth, margin expansion, and reinvestment in our business. This steady approach is why the business will continue to win. Some have repeatedly said we cannot possibly continue to comp on top of big comp numbers.
Kevin Hochman: Our Q1 result, putting three consecutive years of double-digit comp growth driven by traffic gains, provides ample support that our strategy is sustainable even with a difficult macro. In Q2, we feel good about our ability to not only comp positive, but deliver a mid-single-digit comp for two reasons. We continue to convert new guests into regular guests, which means sustainable growth regardless of the prior year comp, and we have very strong commercial and operational plans to keep the flywheel going. While it is clear the consumer is challenged, we feel we are positioned to continue to win in this environment through market share growth. Our experience improvements, combined with our everyday value leadership, position us to win trips. A sustainable traffic-led strategy based on the fundamentals of why a consumer goes out to eat will continue to win the day.
Kevin Hochman: Now let us talk about the specific food and hospitality initiatives in Q1 that helped keep the momentum going. We continued our advertising and operations focus on the Big Crispy Chicken Sandwich, and it was a key driver of incremental traffic throughout the quarter. Customers are responding to the size and quality of the sandwich versus fast food, as well as the price certainty of a $10.99 for a large and abundant complete meal. Customer reception to Big Crispy has been very positive, and our traffic momentum is proving the sandwich reception has been great. In Q1, we maintained the 55 sandwiches sold per restaurant per day we saw in Q4. Customer social media comments tell the story. Quotes include, "Those commercials weren't lying.
Kevin Hochman: This thing is the bomb." "Chili's is making it affordable to go out to eat again." In addition to continued focus on the Big Crispy, we also completed the upgrade of several lower mixing menu items during the quarter. During our Investor Day, we outlined plans to renovate most of the remaining 40% of the menu that has not been touched over the next few years. Recent menu changes included upgraded ice cream to the famous Blue Bell premium brand, the addition of sausage as a new protein to our high mixing pasta menu, the return of cheesecake, a highly requested non-chocolate dessert, and a newly renovated Kids Pepper Pals menu with the addition of ice cream floats, Shirley Temples, as well as the return of grilled chicken bites, cheese quesadillas, and mini molten.
Kevin Hochman: On the hospitality side, ongoing simplification, removing friction for our team members and managers, and North of Six initiatives are continuing to improve the guest experience. Q1 was the first quarter we removed GWOP from our general manager bonus. As planned, this does not stop our customer experience improvement. Chili's Google ratings hit an all-time best in Q1 of 4.3. Key operational initiatives this quarter focused on the fundamentals of making our existing menu items more consistently. We had another full court press on Big Crispy execution, focusing on scratch-made batter and hand breading perfection, as well as ensuring fillets go out freshly cooked, hot and fresh every time. With the sausage addition to our pasta menu, we took the opportunity to retrain teams on pasta perfection, which includes how to cook the pasta for optimal taste and texture, as well as retraining on all pasta menu item recipes.
Kevin Hochman: Our last big upswing for the quarter was the initiative called Staff to Grow Your Business. With all the incremental traffic coming in, we believed it was the perfect time to roll out North of Six best practices on staffing so restaurants can continue to take on more guests without sacrificing the customer experience. As part of this big upswing, we also retrained all above restaurant leaders and managers on how to write perfect labor schedules based on North of Six learnings, which is one of the most difficult tasks for our restaurant managers. While our competitors were hard at work launching new items and new offers, we continue to keep operations focused on the fundamentals of delivering a great restaurant experience.
Kevin Hochman: We believe this focus will allow us to spend more time on what is important versus creating limited time offers that will not have a lasting impact on the business. Marketing continues to bring guests in, and our restaurant operations continues to bring them back. Now I want to give an update on Maggiano's. I am pleased to report the successful rollout of our new banquet operations program in Q1, where we have, one, restaffed our banquet sales managers we moved during COVID. Two, streamlined banquet execution. And three, created single point ownership of the entire process to ensure guests receive great service through the entire banquet planning and event day experience. This cross-functional banquet team was formed back in January, and we are now seeing great results from these efforts. Banquet sales were up 11% for the quarter versus year ago.
Kevin Hochman: While banquets are only 15% of the Maggiano's business, this initiative is important for two key reasons. One, it shows us that we can turn around Maggiano's results with focus in deploying cross-functional resource at a single-minded goal. And two, banquets are Maggiano's number one marketing vehicle to introduce guests to the brand, as the vast majority of banquet guests have never eaten at a Maggiano's. Big congratulations to the Maggiano's team for rebuilding our banquet capability, an important part of the brand's DNA. Before I close out my prepared remarks, I also want to provide an update on the industry check averages we shared at Investor Day. We were recently informed by our third-party data aggregator, Black Box Intelligence, that there were errors in the industry benchmarks for casual dining per person average.
Kevin Hochman: Importantly, they confirmed our PPA remains below the competition, though the differential is now narrower than what we previously have quoted. The new data is expected to be included in the November update. We are confident our overall experience and price point provide the best value to guests. One last piece of quick recognition before I close out. A big thank you to our Bedford Chili's GM, Nikki Castro, and our Pinnacle Park Chili's GM, Kara Miller, and their restaurant teams for allowing me to work hourly team member roles for a week in October. I learned some really important things, including while it's easier to work at a Chili's today than it was five years ago, there's still lots of opportunity to make it a whole lot easier. So thank you, Nikki, and thank you, Kara, and thank you to your teams.
Kevin Hochman: As we discussed during our September investor day, the Chili's business has been rebuilt for the long term sustainable growth, and our focus is on playing offense to keep this exceptional performance going. The powerful flywheel of traffic, sales growth, margin expansion, and reinvestment in our business supports all of the investment needed to maintain the momentum, create a new layer of growth through new restaurant development and re-images, as well as return significant capital to shareholders. This quarter of comping double-digit sales over the past two years with double-digit growth this year is proof positive this sustainable strategy is working. I'll hand the call over to Mika to walk you through fiscal 2027 first quarter numbers. Go ahead, Mika.
Mika Ware: Thank you, Kevin. Good morning. Brinker started the year strong with its 22nd consecutive quarter of same-store sales growth. Our momentum and consistent focus on the fundamentals continue to support sustainable long-term growth. This momentum drove strong year-over-year revenue growth, positive traffic at Chili's that meaningfully outpaced the industry, and restaurant margin expansion. Brinker reported total revenues of $1,476,000 with consolidated comp sales of +9.1%. Our adjusted diluted EPS for the quarter was $2.77, up from $1.93 last year, a 44% increase. Chili's comps were +10.1% in the quarter, building on double-digit comp growth in both fiscal 2026 and 2025. This was driven by traffic of 6.4% and price of 3.7%, with mix coming in flat.
Mika Ware: This represents cumulative traffic growth of over 28% over the last three years, demonstrating our ability to build on the increasingly strong foundation of our business, bringing in new guests and keeping existing ones coming back. Chili's strong everyday value platform continues to resonate with guests, led by the success of the Big Smasher, Big QP, and now the Big Crispy Chicken Sandwich. We are also focused on increasing throughput in our restaurants, allowing us to bring more guests through our doors as we reduce bottlenecks and streamline operations. We continue to have confidence in sustaining positive growth as we move through the year with our marketing brings guests in and operations brings them back approach. For Maggiano's, the brand reported comp sales for the quarter of -3.4% with -5.1% traffic, -0.3% of mix, partially offset by price of 2%.
Mika Ware: At the Brinker level, restaurant operating margins were 17.7%, 150 basis points improvement year over year, primarily driven by sales leverage, partially offset by unfavorable commodity costs, as well as higher hourly labor costs. Food and beverage costs for the quarter were unfavorable by 10 basis points year over year due to 3.3% of commodity inflation and unfavorable menu mix, partially offset by price. Labor for the quarter was favorable 90 basis points year over year. Topline sales growth and productivity offset wage rate inflation of approximately 2.6% and additional investments in labor. Restaurant expenses were favorable by 70 basis points compared with last year. Sales leverage offset higher costs for repairs and maintenance, advertising, insurance, rent, and other inflation-related expenses. Advertising expenses for the first quarter were flat to the prior year at 2.5% of sales due to sales leverage offsetting slightly higher spend.
Mika Ware: G&A for the quarter came in at 4.3% of total revenues, 10 basis points higher than prior year due to higher performance-based compensation and additional restaurant support center resources, partially offset by sales leverage. Depreciation and amortization for the quarter came in at 3.8% of total revenues and decreased 20 basis points year over year due to sales leverage offset by increased depreciation on capital spend. First quarter adjusted EBITDA was approximately $209.1 million, a 21.3% increase from prior year. The adjusted tax rate for the quarter increased to 19%, mainly driven by the increase in income, which was partially offset by a higher FICA tax tip credit. Capital expenditures for the quarter were approximately $63.4 million, driven primarily by capital maintenance spend. Regarding our Chili's reimage program, we have completed a total of 20 reimages to date.
Mika Ware: We have another 13 currently under construction and expect to complete a total of 60 to 80 during fiscal 2027. In fiscal 2028, we will start a planned cadence of 10% of the fleet annually. While it is still early in the program, and we will continue to evaluate and read the results as more time passes. We anticipate the cost of each remodel to be in the $500,000 to $600,000 range, with sales lifts of approximately 3% to 5%. We are pleased with these early results, as we know it's important to preserve the fun, welcoming, and relevant atmosphere that we're known for. As we continue to refine the program, we will look for additional opportunities for cost efficiencies while retaining the quality of the reimage package.
Mika Ware: Turning to new unit growth plans, as we announced at our recent Investor Day, we'll be targeting 2% to 3% annual unit growth by fiscal 2029, supported by AUV growth from $3 million to $5 million and improved four-wall unit economics. We have visibility into a decade of new development with over 300 potential trade areas identified. The growth opportunities include capturing under-penetrated markets like Washington and the Pacific Northwest, executing infill strategies in core strongholds like Texas and Florida, expanding in high-growth secondary markets like the Carolinas, and leaning into a small town strategy. That said, our growth will be modest in fiscal 2027, but we already have ample sites in the pipeline and will ramp up significantly in fiscal 2028, with expectations for our new run rate to be in place for fiscal 2029.
Mika Ware: Our strong free cash flow provides sufficient liquidity to maintain our disciplined capital allocation strategy, allowing us to invest in our restaurants, keep debt levels low, and return excess cash to shareholders. We continue to support this approach by repurchasing $125 million of common stock under our share purchase programs during the quarter. In this morning's press release, we shared that we are updating the fiscal 2027 targets provided on our last earnings call due to our Q1 outperformance and continued business momentum. We expect to significantly outperform the industry in sales and traffic while delivering another year of same-store sales growth in fiscal 2027.
Mika Ware: Regarding the updated targets, we expect F27 annual revenues in the range of $6.23 billion to $6.33 billion, adjusted diluted EPS in the range of $13.30 to $13.90, weighted average shares in the range of 42 million to 43 million, and capital expenditures in the range of $265 million to $285 million. The assumptions underlying our targets remained unchanged, including the expected impact of the 53rd operating week in the Q4 of approximately 2% increase in total revenues and $0.70 in incremental earnings per share. We anticipate the Q1 will be our strongest on a year-over-year same-store sales basis, with more moderate gains in subsequent quarters as we lap higher prior year comparisons. Despite these tougher comparisons, Q2 is also off to a strong start with high mid-single-digit same-store sales growth, primarily led by positive traffic that continues to meaningfully outpace the industry.
Mika Ware: While consumer sentiment is creating some pressure on check and mix, the underlying strength of the business gives us confidence in our outlook. We are optimistic about our ability to continue growing sales and traffic while maintaining a disciplined approach to our full-year expectations. As we look to the rest of the year, I am confident in the direction of the business and our ability to drive consistent long-term growth. We are executing on the fundamentals of operational improvements, marketing, and value across the menu while adding incremental growth through reimages and new units. These initiatives will continue to generate new and repeat visits and deliver solid traffic and sales growth. With our comments now complete, I will turn the call back to Joanna to moderate questions.
Operator: Thank you. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press star one. We do ask if listening on speakerphone today, please pick up your handset while asking your question to provide optimal sound quality. Once again, please press star one on your phone at this time to join the queue to ask a question. Please hold a moment while we pull for questions. First question comes from David Palmer with Evercore ISI. Please go ahead.
David Palmer: Great. Thank you. Thanks for your comments on the quarter today because I know people are going to be focused on any changes that you are seeing in the industry. Maybe I could ask you a question about it since you talked about your sales in particular. What insights can you give us about what is going on out there with the consumer? We have heard that perhaps there was a little bit of wobbliness with the 100,000 and over consumer, maybe you could speak to what you have seen even on a weekly basis and looking into your demographics and any other insights. We would love to hear from you on that. Then I know that also, if I threw in another one, it would be on inflation.
David Palmer: A lot of focus on freight and other costs, kind of getting into the cost picture by what would be the end of your fiscal year, I will pass it on. Thank you.
Mika Ware: Great.
Kevin Hochman: Let me handle the consumer question, David. Good morning. Then I will have Mika do the inflation question. We are seeing what most of you guys are all seeing, which is a consumer that is under pressure with what is happening with gas prices and the interest rates. What we have seen, and we talked about this on the prepared comments, is we still see very strong same-store sales, primarily driven by traffic. We have seen a little bit of mix slippage, which we think is the consumer being under pressure. It is very similar to what we have talked about in the past, which is, if trips do pull back because of the macro, that consumer is going to pick places they trust, and the stronger are going to get stronger, and the weaker are going to get weaker.
Kevin Hochman: I think that is what you are seeing with us growing market share driven by traffic. We launched the chicken sandwich at $10.99 as a traffic-driving strategy for just this. This is exactly how it is playing out in the way we had hoped in terms of growing market share. We believe as long as we continue to improve food service and atmosphere and make us an obvious choice for consumers that may be going out a little bit less, but they know they are going to get a great value and a consistent experience. We believe we are going to continue to grow enough market share to continue to win, and that is what is reflected in our guidance.
Mika Ware: Yeah. David, on your inflation question, specifically around the oil prices and freight. No, we have had that pressure. The good news is all of that is built into the guidance that I gave. So we probably have about $7 million built into our numbers and our expectations. Most of that for us is going to hit in restaurant expense. So that is where that lies. It is not necessarily in food and beverage costs, but yeah, we are feeling those pressures. The inflation I spoke about in the prepared comments, that is built through. Luckily, our sales are helping us to still have great margins and flow through.
Kevin Hochman: That has been job one from the start of the turnaround has been, we are going to grow faster and grow enough volume to improve our margins and to overcome any inflationary pressures, and that is exactly what is happening in the business right now.
David Palmer: Thank you.
Operator: Thank you. Next question comes from John Ivankoe with JPMorgan. Please go ahead.
John Ivankoe: Hi. I am going to ask a topical question if I can. In terms of the promotion awareness trial repeat of the Big Crispy Chicken Parm, hopefully I am getting that right. Do you expect to kind of go back to kind of traditional media and really drive awareness of it? Do you think enough people know what the product is, appreciate how it is differentiated? Just talk about, at least from your perspective, how you think that product could or should build as we move throughout the Q2.
Kevin Hochman: Yeah. So, hey, John, good morning. Let me just give you a little context of what we are trying to accomplish with that, and then I will give you a status update of where we think it is right now versus where it could be. This is what we call a big swing. These are swings that we take in marketing. Some of them hit, some of them do not hit. In Q1, I think the swings that we took they all pretty much landed. That is, I think, why we were +10 and more. This one is a big swing, similar to the one that we had done when we launched Nashville Hot Mozz. This was a quote unquote "secret menu item." We had trained our teams on how to make Nashville Hot Mozz.
Kevin Hochman: We released that via social media, and we had no POP, and we had no menu presence until a few months later, and it obviously worked incredibly well. On this one, we are applying that same playbook, but the one thing I think we are learning in the first week of it being available nationwide is it is much easier to order that Nashville Hot Mozz, even if it is not on the menu, because you order like a Triple Dipper, or you order mozzarella sticks, so you can just ask for it in this other flavor, versus this is an entirely new sandwich. Some guests are more forceful and say, "Hey, do you have the sandwich I saw on social media?" Other guests are kind of like, "Hey, I do not see it on POP or on the menu.
Kevin Hochman: I am not going to order it." Now, that is all going to change the first of the year. Our table tents for the next 3 months will all have-
Mika Ware: First of the month.
Kevin Hochman: I am sorry, first of the month.
Mika Ware: Yeah, not year. 1 November, yeah.
Kevin Hochman: First of November. Sorry. Thank you. With the table tent merch. I think we are going to learn a lot more in the next coming week or two about how much it takes off because they are going to be something that people can point to and say, "I want to order that." Right now, it is doing a little over two a day, which is a little short of what we expected it to do. But I think the difference on this one that we are learning is it is not an easy thing to order, and once we have that merchandising in the restaurant, we would expect it to pick up again. Let me answer that in a few weeks when we see what is going on once we have some merchandising in the restaurant.
John Ivankoe: That's what I was looking for. Thank you.
Operator: Thank you. Next question comes from Dennis Geiger with UBS. Please go ahead.
Dennis Geiger: Great. Thanks, guys, and congrats on the strong results. I wanted to ask a little more on the 2027 guidance. I know we can back into some of the items, but after the strong Q1 same-store sales, very good momentum still into Q2. Anything more specific on your assumption for Chili's same-store sales for the year? I guess really for the back half of the year in particular.
Mika Ware: Yes. Dennis, what I would say is for the back half of the year, Q2, Q3, and Q4, we're back to the mid-single-digit same-store sales expectation with positive traffic. October, again, we're thrilled with the start to October. We're just aware of, and you guys remember, we had a huge November last year, so we do have a big lap right in the middle of the quarter. We feel very confident in our ability to lap that with positive sales and traffic. But right now we're in that same mid-single-digit same-store sales. We have a lot of momentum, and we're really excited about it.
Dennis Geiger: Awesome. Thanks, Mica. Just as far as value goes, can you give us the latest update, considering the backdrop in particular on where the 3 For Me mix is, where that $10.99 is, and if anything incremental on the check management maybe that you're suggesting. I think we heard a QSR a couple of weeks ago talk about number of items per order. It sounds like you're not the only one that's seen that, but just if anything incremental as we think about value and where the consumer is. Thanks, guys.
Mika Ware: For Q1, when we think about the 3 For Me platform and specifically the $10.99. The 3 For Me platform, it's pretty similar to what it has been. It ticked up a little bit, maybe 50 basis points. I always say we're in that 20%, 21% range. So we're a little over 21%. So really right where we expect it to be. So a little bit of an uptick. As far as the check management goes, in Q1, like we said, our mix was flat. Kevin alluded to this. We did see in October our mix has gone a little bit negative, but our traffic has more than made up for that. Our traffic is two-thirds of our same-store sales right now. So our traffic is accelerating.
Mika Ware: So we're seeing those guests maybe do a little check management in alcohol and dessert, but they're seeing more guests come to Chili's as that's where they think the affordable choice is. So that's really working out for us.
Dennis Geiger: Awesome. Thanks, Mica.
Operator: Thank you. Next question from Chris O'Cull with Baird. Please go ahead.
Chris O'Cull: Thanks. Congrats on the great results, guys. Kevin, I am just curious what you believe is driving the quarter to date strength, because I believe that is happening during a period where you were not particularly heavy on national advertising, at least until very recently. If that is correct, what potential is there maybe for further acceleration as you do get back into some more heavier media?
Kevin Hochman: Well, I do not think it is anything different than what we have been doing year after year now. This idea of marketing brings them in and then ops brings them back. We shared at investor day, Chris, the token data where we said, "Hey, we have anywhere from 3 to 3.5 million new tokens come in," and then we track their frequency as a monthly cohort to see, do we maintain that frequency as we continue to fill the bucket with new guests? We do not have the data for this past quarter yet in terms of repeat from new guests, but there is no reason to believe that is changing based on the guest metrics that we have. I do not think it is anything new or different. I think it is we have great marketing. We had some big swings.
Kevin Hochman: We had a really good July Margarita of the Month. We had the Big Crispy advertising going with that direct comparison to a large QSR's chicken sandwich, which is really before your eyes, how much value you get with $10.99 in Chili's. Then we had a great rollback Chili's golf merch thing, which is another big swing just to get into the zeitgeist and be relevant with our guests. Then we have continued to have operational improvements. We talked about the Google scores, which is an external measure. That is not something we even measure. That is just, we get from Google being an all-time high of 4.3. It is just kind of more of the same. I know that sounds a little boring. I wish it was more of a Merlin act where we pulled out some LTO and it did it.
Kevin Hochman: It is really just about the fundamentals of casual dining, delivering great everyday value for our guests, and then executing like crazy. The guest is seeing that and they are coming more often. I think that is why we are seeing traffic accelerate as the consumer is becoming under more pressure.
Chris O'Cull: Okay, fair enough. Mica, can you provide some additional color on the returns you are seeing on the remodels as you ramp them up? Just in terms of flow through. I understand you have given the comp list. I am curious what the flow through looks like, especially as a relative to the investment.
Mika Ware: Yeah. Chris, really what they are doing now is covering the cost of capital. Early on, right now we are at the $600,000 investment. We talked about 20% of the fleet is going to need that higher investment. The other 80%, it will probably get closer to $500,000. Again, we are so early in this program. We think we can continue to get some costs out of those reimages while just maintaining the quality of the reimage. I think we are going to see some efficiency there. Also remember, these are fairly new. We need to read them over time. Again, we are getting that 3% to 5% lift even as we continue to add on new restaurants. Again, that is above and beyond all the incredible momentum that we are seeing in the business. So we are still really pleased with this because we know the reimages need to happen.
Mika Ware: They need to keep as part of our pillars on the atmosphere. We have got to stay relevant, and we think it is part of the overall program. More to come on specifics on returns as we continue to refine it over time, but it is just really early right now.
Chris O'Cull: Okay. Thanks, guys.
Operator: Thank you. Next question comes from Jeff Farmer with Gordon Haskett. Please go ahead.
Jeff Farmer: Thanks. Mica, can you update us on the restaurant level margin expectation for the year, and the backdrop of the stronger same-store sales numbers you are seeing?
Mika Ware: Sure. Absolutely, I am happy to. Taking a step back, if we look at the full year, what I am expecting in restaurant level margin improvement is about 70 to 90 basis points improvement year over year now, especially with the strong Q1 that we have had. I do want to say, I need to maybe smooth out the quarters a little bit, just thinking about some of the laps that we had in prior year. What I would expect in Q2, I would expect restaurant level margins to be roughly flattish year over year, with maybe a little pressure on labor because, as Kevin said, we are really leaning into labor. We kind of do opposite what everybody else does.
Mika Ware: Labor is one of our secret sauces where when those guests come in, we want to make sure that we are taking care of them and capturing all those guests. We do not shy away from that. Q3, I think you are going to see a return to the 20 to 40 basis points that I always talk about with mid-single digit same-store sales. In Q4, there is more upside there, particularly in the food and beverage line, because we are going to be lapping from a year ago, the tomatoes and the lettuce, we talked about that last year. We have a little bit more upside there. Again, full year, and that does include the 53rd week, that 70 to 90. The 53rd week is worth about 30 basis points.
Mika Ware: Hopefully that helps everyone to kind of get those quarters in line and a little more visibility on how we expect restaurant level margins to progress throughout the year.
Jeff Farmer: Very helpful, and just same sort of topic area, at least on the margin front. Updated G&A guidance, I think it stood at approximately 4% of sales on the last call. Where does G&A stand right now?
Mika Ware: Yeah. It is going to hover around that for the full year. It may be 4%, 4.1%. We do have some incremental performance-based compensation there, especially after the first quarter. It will smooth out over time, but it is going to still be in that 4% to 4.1% range for the full year.
Jeff Farmer: All right. Thank you.
Operator: Thank you. Next question comes from Andrew Strelzik with BMO. Please go ahead.
Andrew Strelzik: Hey, thanks for taking the questions. My first one is about the throughput initiatives. I am curious, as you talk to the traffic strength, if you are seeing any measurable benefit from those throughput initiatives in Q1 or even the quarter to date period. Maybe just looking for an update on where the rollout of some of those drivers stand today.
Kevin Hochman: Yeah. We have seen a slight decrease in ticket time, but it was not significant enough to worth reporting. I think if we see it over a few quarters and it continues to track, then we would probably share that. But we feel very good about what is happening. Number one, as I talked about in our prepared comments, we rolled out really the best practices on how the North of Six restaurants manage labor cards and labor productivity at peak. We retrained all of our above-restaurant leaders on how to write proper labor schedules, and have incorporated all the best thinking and best practices in the North of Six restaurants into the business. That is point one.
Kevin Hochman: Point 2, we have a quarterly rollout going on right now on Hoststand, and that's a pretty big initiative for us because just one missed four top per day is almost a point in sales. It's a pretty big opportunity for us. We have nothing baked in the guidance, so anything that we can get out of here is upside. We did four things this quarter. One, we reestablished talent standards for the host position, as well as staffing appropriately for the volume. Five years ago, there were a lot of restaurants that didn't even have a host on. Now we're talking about three, four hosts in some of the restaurants. Number 2, we trained on what we call Aces in Places. Defining multiple Hoststand roles.
Kevin Hochman: We call it meeter, seater, and greeter, and then making sure that managers are at the floor for large parties. That tends to be a bottleneck, when a party of 8 or 12 come in and they all want to sit together. Making sure managers get involved there. Three was retraining on our iPad training for Hoststand. This is all about how to properly use the software, with the end goal of making sure that we quote zero false waits. False waits, I think I talked about this in an earlier earnings call. False waits are a very common thing in casual dining where, through improper preparation or lack of labor scheduling, the restaurant gets backed up, and so the servers are kind of pushed to put people on false waits.
Kevin Hochman: We want zero false waits in our restaurants, meaning we want them quoting the exact quote time that the system is quoting. All these things are rolling out right now. I would expect by November, December to start seeing some progress on Hoststand. We are currently rolling out, we've talked about this for a while, it should be done by the end of the calendar year, of rolling out the new team member handheld interface, which eliminates over half of the taps that are required in order to ingest an order from a table, which would help with ordering time. We have a lot going on in terms of throughput. There's a whole host of another initiatives on to-go that we have yet to share, that is just getting started now. As we get updates, we'll share them.
Kevin Hochman: But feel very, very good about what we're attacking. I hope in future calls to be able to share metrics like what we talked about at Investor Day, like dine-in times and ticket times, and things that would give you some sense of in-process metrics that would let you know that productivity is happening. I will say, when we look at North of Six restaurants, who have nailed throughput, everything's better. Food grade scores are better, GWAP is better, productivity is better, they save on the labor line, and ticket times are lower despite having way more volume. Certainly if we can crack the nut on this productivity thing, I would expect there to be upside from it.
Mika Ware: Hey, I would like to note on North of Six, they also continue to comp at the same rate or higher than the brand. So their ability to get even more traffic in continues to amaze us.
Andrew Strelzik: Okay. All right. That was super helpful. I just wanted to quickly ask, with the change to the manager bonus structure going into place, have you seen any changes in behaviors? I know you are leaning into labor more, certainly, but I guess I am just curious if you are seeing any changes to maximize throughput or anything like that since that has gone into place. Thanks.
Kevin Hochman: Yeah. There is a couple things that are going on. One is there is just a lot less distraction about the guest score. So we do not see as much, for lack of a better term, obsession about the GWAP scoring and the scores going up, and it is no longer a demotivator for our hourlys when folks are posting these scores. So I think the biggest thing that I have seen so far is just a lack of a distraction or wasted time on worrying about a score versus worrying about the behaviors. So that is point 1. The second thing that I think has come out of this is we rolled out a vastly simpler reporting structure in terms of the key operational metrics that we look at on a daily basis, to focus on a few ones that are incredibly important.
Kevin Hochman: So I feel like, when I go to restaurants and we have discussions with the general managers and the above-restaurant leaders, I feel like they are more focused on the more important things, and we get to the fewer, bigger things faster. So, I think over time, I would hope to see just continued operational improvement because of the simplification. But those are the 2 big areas that I have seen as a focus on what is important, and then the elimination of distraction of looking at these metrics on a daily basis, by individual basis, and really just focusing on the behaviors that are going to be required to deliver improved operations over time.
Andrew Strelzik: Great. Thank you very much.
Operator: Thank you. Next question comes from Andrew Charles with TD Cowen. Please go ahead.
Andrew Charles: Great. Thank you. Kevin, I wanted to ask on the marketing side, we have seen you guys partner with celebrity brand fans, including Snooki most recently, and Lizzo about five months ago. Should we think about this as a pattern that you have the opportunity to run these collaborations every six months or so, or do you expect future collabs to be further apart?
Kevin Hochman: Well, I can just share with you how the marketers think about this. Typically we sit down with a calendar, or they sit down with a calendar and they look at, okay, when are we launching things? Where are consumers seasonality-wise? What is happening in the restaurants? And they typically make the plan to try to always be on with some type of interesting thing happening in the business. So if the food is leading the way because we are launching the Big Crispy, they let that sing. But if we have times where it has been three or four months into the Big Crispy launch and we feel like we have to get new news to make sure that we continue to build relevancy for this brand, they will come up with ideas based on some specific strategy. Right?
Kevin Hochman: The example of the Lizzo example that you gave was, "Hey, we have these new improved ribs. There are 50% more bones from the portion size. They are fattier and meatier than the old rib that we had, so they are much better value. How do we create excitement to get people to come into ribs, given it is not a bigger segment that we are going to go put on TV?" That is where the team came up with, "Hey, let us reboot the ribs jingle.
Kevin Hochman: That is something that is really part of our history, and let us get a big performer to sing that." That is where Lizzo came in. On the Snooki one that you are referring to that is most recently, in the innovation kitchen, we tasted a lot of different chicken sandwiches to see which ones could really stand out given how big that filet is.
Kevin Hochman: We talk about it is over 80% bigger than the leading QSR's chicken sandwich, and it is handmade. The batter is from scratch. This is a vastly superior chicken sandwich. We are looking for ways to create some excitement by it. The team saw Chili's way of doing chicken parm with the cheese pull, so that is where that sandwich was invented, right? Then we said, "How do we create excitement in social media?" That is where Snooki came from. It is not necessarily on a cadence of every six months. It has to do with what is the priority for the quarter that we want to drive, and in this case, how do we continue to launch and sustain our chicken sandwich launch? How do we create new news virally? That was the idea behind it.
Kevin Hochman: It really just starts with what is the priority and what we want to drive with the guest, and then the marketers then use their creatives to figure out what we are going to apply to that.
Andrew Charles: That is very helpful. Then, Micah Ware, I know you gave the commodity inflation by quarter for the year that you expect for food inflation. Can you give that for labor inflation as well?
Mika Ware: Yeah. Labor is just going to be in that 3% to 5%. It was a little bit less than 3% this quarter.
Kevin Hochman: Yeah.
Mika Ware: Closer.
Kevin Hochman: 3. Closer to 3.
Mika Ware: Closer to 3% all year.
Andrew Charles: Got it. Thank you, guys.
Operator: Thank you. Next question comes from Sara Senatore with Bank of America. Please go ahead.
Sara Senatore: Oh, thank you very much. I guess I wanted to ask just broadly about the casual dining segment. I know it is something we have talked about before. In particular, younger users. I think, Kevin, when you and I chatted, you suggested that maybe having more casual dining brands on social media gives younger consumers maybe permission to go. Could you just talk about that cohort in particular? I am trying to, I guess, figure out why it seems like just casual dining, the contrast between the comps and the casual diners we are seeing. You are obviously leading, but just broadly speaking, much greater than QSR or others. I know you talked about the relative value. But maybe you could just talk about that younger cohort in particular as a potential longer-term, maybe structural driver.
Kevin Hochman: Yeah. I think we see that in our business. I think you are probably referring to one of our competitors that have done this successfully, too. What I would tell you is, I think maybe we brought some of the more modern marketing techniques to casual dining, but they are not. I think within restaurants, they are pretty well known. I came from QSR, and if you actually look at the reports that come out about social media impressions, QSR tends to have more social media impressions than casual dining. I think the difference is what is happening is, one, it is new to casual dining.
Kevin Hochman: As George and team have brought social media to our business and people see the success that we have had, they are saying, "Hey, I could probably apply this to my casual dining concept." I think the second thing, which I think is different than QSR, is there are several casual diners that operate very well. When you have a good product and it shows up in social media and then people go to replicate it, if you have that experience, that is what grows, and that is what grows your business, right? I always talk about when we had the first kind of spark in social media, this was April of 2024, so about 2 and a half years ago.
Kevin Hochman: If people came in for the cheese pull and the cheese did not pull and the restaurant was not clean and the experience was not good, I do not think that would have lasted more than 2 or 3 weeks, and we would not be talking about this 30 months later comping a 10 on top of a 22 on top of a 14, right? I think that is the other thing that I think, Sara, I am not sure everybody quite understands is, it is not just about going viral. I think lots of brands go viral. What you saw with us, I think what you are seeing with one of our competitors in casual dining that is having some really good success with it is, you go into their restaurant, you go into our restaurant, you have a pretty good experience.
Kevin Hochman: It feels like that social media experience that you saw online, and that causes you then to repost and share your experience, and then that is when it has that virality. I would anticipate everybody trying to do this. I think the better operators are the ones that are going to really win out in this environment because you cannot fake a social media post, right? That person is going to post whatever they see and experience. If it is great, you are going to feel really good about that post, and if it is not great, you are going to feel the exact opposite. As long as the brands that do this are operating well like Chili's is, I think they are going to also win, too.
Sara Senatore: Yeah. Thank you very much for that. Then just quickly on Maggiano's. The banquet business, that is encouraging, and to your point, that is the real opportunity to market. Anything else that maybe has changed in the operating environment, whether in the Italian segment or anything that you have seen that might also be contributing, or this is really very specific to Maggiano's?
Kevin Hochman: Well, there's macro factors. I always tell our team we've got to just focus on what we can control, and what we can control is speeding up service and making it more consistent. Banquets is a great example, and the reason why I shared it, even though it's only 15% of the business, it's up double digits, and it was a big swing that we started 9 months ago, and now we're seeing the fruits of our labor, and our banquet bookings are ahead of year ago now when we look heading into the holiday season. To me, it was 2 things. One, it's a marketing tool because that's the way a lot of people are introduced to the brand.
Kevin Hochman: But 2, I think it showed, hey, if this cross-functional team gets together, they focus on something that's important, they work together, they're going to have big results, right? The next big thing that we're working on right now, we have it now live in 1 restaurant, is taking the Chili's KDS technology, which is the back-of-house system that tells cooks what to cook and QA what to send out to tables. And we're taking that state-of-the-art system and putting it into Maggiano's. The current systems they have today, it's not doing Maggiano's a service in terms of temperature of food and how fast food goes out and how it coordinates across stations. So that's an example where I think if we get that done, it's probably going to take at least another quarter to get all the kinks out.
Kevin Hochman: If we get that done successfully, I would expect to see ticket times come down, total dine-in times come down, improved productivity on the weekends, which is where we need it. So, that's the next big swing, I think cross-functional product that we're working on, and I hope by next earnings call to be able to update that it's either been rolled out or is in process of in the majority of the system and soon to be fully rolled out, because I think that's going to be the next big push in improving throughput at that concept.
Sara Senatore: Thank you.
Operator: Thank you. Next question comes from Brian Harbour with Morgan Stanley. Please go ahead.
Brian Harbour: Yeah, thanks. Morning, guys. Could you just talk about both pieces of the off-premise business maybe? I know you talked a little bit about leveling that up at your investor day. When do you expect that would happen?
Kevin Hochman: Delivery and carryout are each about 12.5% of the business, roughly. So about a quarter of our business is off-premise. We are in process of a major cross-functional effort that is going to take several years to, we think, strengthen our off-premise business. We are not really focused on delivery per se. We are focused on all of the things that impact carryout and delivery. Even though delivery obviously has been growing from an industry standpoint, we are more focused on how do we make it easier for customers to order? How do we make it easier for both customers and drivers to pick up the food? Then how do we ensure that the food is as accurate to the order as possible and arrives in the best possible condition given it has got to travel for a period of time?
Kevin Hochman: The first things that we are working on this year are our promise time calculator. Essentially, as we have sped up our operations, the promise time calculator is a bit antiquated, so it quotes longer times than actually the food would be prepared. So you would get a text that, "Hey, your food is going to be ready in 25 minutes," and then 10 minutes later you get a text that your food is ready. We think we have got that solved with an interim solution now that is in restaurant. We are working on a longer-term solution that is going to be more reflective of ticket times and how fast our food can be ready to be ordered. The second thing that we are working on right now is improving the ease of ordering.
Kevin Hochman: The first project that is on the docket that hopefully we will roll out soon is just making the reorder button a whole lot easier to use. There is a decent percentage of people that just want to be able to either reorder or reorder with minor modifications on their order. The bold goal for that team is to get people's order time to less than a minute in order to make it a routine. When you look at the better players in off-premise, they have apps that are very easy to reorder food from and make any small edits to. We are trying to copy that. Then longer term, we are looking at things like the pickup experience with order boards, additional packaging upgrades to make the food present better and hold better, as well as some improvements in terms of accuracy.
Kevin Hochman: But it is going to be a multiple, Brian, it is going to be a multiple year initiative. We are still working on dine-in and we are in year 5. So I would not expect some magic wand and in Q3 all of a sudden to-go is fixed. I think it is going to be a long slug of looking at things in a very deep way, and then improving things over time, so that when you add it all up a couple of years later, we can be the leaders in casual dining to go. But I will tell you, it is a big opportunity for us because when you think about the Better Than Fast Food campaign, and that fast food tends to travel better. So, the bold goal is we want to be as easy as fast food but have a better value than fast food.
Kevin Hochman: If we can do that, I think you would see our off-premise business start growing a little bit faster than our dine-in business.
Brian Harbour: Okay. Kevin, I guess since you teased it, based on your time working in a restaurant, what do you think can still get better on the back of the house?
Kevin Hochman: Oh, everything. It is encouraging. I know that sounded like it was like, but it is encouraging. One of the biggest things that I spent about an hour and a half debriefing our leadership team of my experience there. The big umbrella aha was, even though I think everybody, and all the managers told me, and all of the hourlies told me, "It is so much easier to work here, Kevin Hochman.
Kevin Hochman: Thanks for your continued partnership on this." My observation was it is still not easy to run a Chili's. I do not think that is unique to Chili's. In casual dining, I think it is probably hard to run complex menus with table service pretty much anywhere, especially when you have a giant concept with over 1,000 restaurants. I had 2 main observations on that. One was we have to be continuously improving and making this restaurant easier to run.
Kevin Hochman: When we think about things like the Heart of House project, which is going to be fueled by AI. We think about almost like a completely new system that is an integrated, kind of like an ERP system, but for the Heart of House. That is going to make forecasting, ordering, inventory, prep, labor scheduling, it is going to make everything easier. Now, that is a 2 to 3-year project, so it is not like it is going to come this fiscal. But like that example, there is so much institutional knowledge that you need to have to run a Chili's because none of the systems are naturally connected. We have created some integrations, but most of them are manual integrations that the managers have to do, and it requires a lot of institutional knowledge.
Kevin Hochman: Point 1, there is still a lot of upside to make it a whole lot easier, especially with technology. The second thing is, even when we get all this stuff installed, it is still not going to be the easiest thing to run. It instilled in me the importance of retention in this ownership model. Because when you look at like North of Six restaurants, they have longer tenured managers. It is such a clear data point. Then having done it firsthand, I can see why. Because regardless of how much automation we can put in the business with technology, it is still going to be a difficult job. The longer we can retain our managers and have them have big careers, at Brinker and at Chili's, I think the better they operate, which is why the majority of North of Six restaurants have long-tenured general managers.
Kevin Hochman: I had like 60 slides of all the improvements that we can make. Brian Harbour, a lot came out of that. But the 2 big ahas were we still have so much low-hanging fruit that we can focus on to make this operation more seamless and a better guest experience. Then 2, how do we really take this ownership and retention and take it to a whole another level? Probably the guys that everybody is chasing in casual dining, that second part they know like the back of their hand. I think now I see firsthand why that is so valuable to our business.
Operator: Thank you. Next question comes from Margaret-May Binshtok with Wolfe Research. Please go ahead.
Margaret-May Binshtok: Hey, guys. Thanks for taking the question. I just wanted to follow up. I know you mentioned that there is some check management that is impacting desserts. But last quarter, you guys did talk a little bit about some of the dessert innovation that is coming, and also moving up desserts in that kitchen screen to help servers sell more. I guess, how do you think about leaning into desserts while seeing the check management that is going on right now?
Kevin Hochman: Yeah. So we saw some virality with the molten being served on top of a cookie. I think that is what drove incidents that quarter. The mix decline has really been more recent. So, this dessert incidence is more of a recent trend, post the virality of that molten cookie initiative. I will say, we are in test right now with bumping the desserts to the top of the screen. We want to make sure that we are not inadvertently slowing down other dishes. It is more important to turn tables than to create dessert add-ons. So that is why we are testing it versus just doing it. I will say from my last three restaurant visits, floating the idea that we are testing it, that everybody got really excited by it. So my guess is it is probably going to work.
Kevin Hochman: But we do not really have any updates on that because it is still being tested right now.
Mika Ware: Yeah, it is still early.
Margaret-May Binshtok: Got it. Just to follow up on the Big Crispy. I know we mentioned marketing earlier, and the pace of it. Just on the Big Crispy, I know you have the Chicken Parm one coming up, but should we think about more innovation opportunity on the Big Crispy platform, and is there a cadence we should be thinking about from here? Thank you.
Kevin Hochman: Well, right now we are focused on just advertising the Big Crispy on $10.99 with our, the majority of our marketing dollars are spent on whether a linear TV or connected TV and then digital. So the majority of our marketing spend is on this value message, find the Big Crispy. The Big Crispy Chicken Parm sandwich is mostly a PR and digital social media play, which is, it is not that it is not important, it is just that investments are a lot less than when we talk about a broad-based message about value. We are continuing to look at different innovations on the Big Crispy. We have seven variants right now that we have not talked about them all. So that is the other opportunity, is we have some very unique things like the Honey-Chipotle sandwich and the Nashville Hot sandwich. These are all very unique sandwiches within casual dining.
Kevin Hochman: So, we are going to evaluate whether we think we need to update the Big Crispy message next May. Do we need to bring new product news, or do we continue to see more traffic being built with just the $10.99 message? What we talk about here is if it is not broken, we do not fix it. So if we see that the traffic lifts are the same, call it in Q3 as they were in Q1 and Q2 from the Big Crispy advertising, I do not anticipate us moving off that message.
Kevin Hochman: If we see that starting to wane in terms of the traffic response to the advertising, then I think we would likely see some type of new product news, either on chicken or on hamburger, depending on what we think is more topical for the moment. But it is more the business results are going to drive whether we bring additional innovation.
Kevin Hochman: We're going to be preparing for innovation, but we're not going to be hard and fast that we are absolutely going to have to have a new chicken sandwich next May, because if the business continues to rock and roll, we would not move off that message.
Margaret-May Binshtok: Got it. Thank you.
Operator: Thank you. Next question comes from Chris Carril with KeyBanc Capital Markets. Please go ahead.
Chris Carril: Hi. Good morning. Thanks for the question. Kevin, you mentioned big swings a few times on this call. Can you maybe talk a little bit more about the efficiency of these big swings, maybe why you think they're landing more frequently? Is this a function of the overall momentum the business is seeing, or has something changed in the process to ensure the success here?
Kevin Hochman: Yeah. So just to be clear, we use big swings in 2 ways. Maybe it is because I always talk about fewer bigger with our team, so everybody adopts the word big swing. I think you are referring to big swings in marketing. We use big swings for 2 things. Big swings in marketing, meaning pick a couple of big swings every quarter to see what we can kind of take off into the culture and drive relevance to the brand. We also talk about big swings in operations. We pick about 3 big swings every quarter that we do a rollout on. They are typically based on the fundamentals of casual dining and typically tied to something commercially that we are driving, so that the business is hearing one message from us.
Kevin Hochman: I think your question is about marketing and we are constantly learning about what works and what does not work, and we are adjusting our plans based on that. The best example I can give you. It is not really formulaic. It is more, we think about it as on a value offer, we have large amounts of out-of-store advertising to drive the value message because that is broadly appealing. Then we use social and digital and PR to kind of try to go after specific groups of people that we think would have interest in learning more about Chili's and about whatever that item is. Then based on what we see in market, we adjust.
Kevin Hochman: If things hit, we try to understand what are the things that made it sticky and go, and when things do not hit, we try to learn from them and say, "What did we miss out on that we could have improved more?" Like for example, on the Big Crispy Chicken Parm that we just launched, realizing not having something to point to in the restaurant maybe limits the amount of business that we can have on that, but we are going to find out very quickly on 1 November when we have merchandising in the restaurant. But the best example I can share with you so you can understand at least how we approach it, is when we launched the Big Smasher in May 2024, we primarily did that with TV advertising.
Kevin Hochman: The next year, we layered on a bunch of social advertising behind it because we had all this great success from the social and the Triple Dipper. That social advertising was squarely on having people compare our burger versus a fast food burger, which is way more compelling when it is coming from a third party than it is from a company that is advertising on TV. In year 3, when we launched the Big Crispy Chicken Sandwich, we had all of the PR we had in year 2 and the social, but then we had 3 bouts of social. We did not just stop with the launch in social. We had a second hit with new messaging that was briefed to the influencers a few months later. Now we have the Big Crispy Chicken Parm, which is our third hit of social.
Kevin Hochman: I would tell you, it is just every year we are learning how to be more effective, and that is one of the things I really appreciate about our marketing team. George Felix and Jesse Johnson, they are very hungry to just how do we get better? Even though I would say they are probably the best in advertising in restaurants right now, every year they are doing a debrief on what could we have done better. I just feel like every year they just get stronger, right? That is why we are able to continue to bring new guests in, and then operations does their amazing job, and that is why we have the sustainable flywheel going. That is the best way I can describe it, is they are constantly looking at how they can make these things better. There is no formula of add another 30%, get another three big swings.
Kevin Hochman: That is just not the way they look at it.
Chris Carril: Got it. Thanks so much for all the detail there.
Operator: Thank you. At this time, I will turn the call back over to Kim Sanders for closing comments.
Kim Sanders: And that concludes our call for today. We appreciate everyone joining us and look forward to presenting our update on our Q2 fiscal year 2027 results in January. Have a wonderful day.
Kevin Hochman: Thanks, everyone.
Kim Sanders: Thanks, everyone.
Operator: Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
