Brinker International Q3 FY2026 Earnings Call - Chili's Comp Sales Accelerate Amid Chicken Sandwich Launch and Operational Overhaul

Andrew Strelzik, Analyst, BMO5: Good day, and welcome to the Brinker International’s Q3 FY 2026 conference call. It is now my pleasure to turn the floor over to your host, Kim Sanders, Vice President of Investor Relations. Ma’am, the floor is yours.

Andrew Strelzik, Analyst, BMO2: Thank you, Holly. Good morning, everyone, 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 third quarter were released earlier this morning, are available on our website at brinker.com. As usual, Kevin and Mika will first make prepared comments related to our strategic initiatives and operating performance. 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.

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. Of course, 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.

Andrew Strelzik, Analyst, BMO1: Thank you, Kim, and good morning, everyone. Thank you for joining us as we discuss our financial and operating performance for the third quarter, as well as our outlook on the remainder of fiscal 2026. Q3 Chili’s same-store sales of +4% marked our twentieth consecutive quarter of same-store sales growth and outpaced the casual dining industry by 420 basis points. This strong result was rolling a +31% from last year for a two-year cumulative comp of 37%. A list of the top 500 largest restaurant chains for all of 2025 just came out, and I’m proud to say Chili’s is now the number 2 casual dining brand for sales, in addition to maintaining our status as the number 1 casual dining traffic brand.

To put our sustained growth into perspective, if Chili’s nearly $1 billion of sales growth in calendar 2025 was its own business, it would be larger than most of the restaurant chains on the list. After delivering a +15% in calendar 2024, we often were getting asked, "What’s going to be the next Chili’s?" With the 21% we posted in calendar 2025, the answer was resoundingly Chili’s. In 2026, our sales growth has consistently outpaced the industry, with our outperformance continuing to accelerate from 320 basis points better in February to 550 points in March and now 560 points month to date through April.

Chili’s momentum is sustaining, driven by quarterly improvements in food service and atmosphere, as well as continuing to make Chili’s more fun, more easy, and more rewarding for our team members. These experience improvements, coupled with our everyday value leadership, represented by a per person average guest check that is $3-$4 below competition, are supporting a powerful flywheel of traffic sales growth, margin expansion, and reinvestment into our business. Now I’ll give some updates on the Chili’s business. We spent Q3 continuing to work on the fundamentals, preparing for our new chicken sandwich platform launch, and bringing in new guests with relevant marketing to experience Chili’s. In Q3, our restaurant teams remained squarely focused on the fundamentals of the guest experience.

From a food standpoint, our primary focus was chicken breading and cooking perfection, which involved retraining the teams on perfect execution of hand-breading our Chicken Crisper and chicken sandwich lineup, which will ensure those items are freshly cooked, hot, and crispy. A key differentiator of our chicken sandwich is that we hand-bread the chicken in-restaurant. We believe a freshly breaded filet tastes better than chicken that has been breaded and fried by machines in a factory, frozen, shipped hundreds of miles, and then refried in a restaurant. In anticipation of our Q4 chicken sandwich launch, our teams were busy ensuring restaurants were ready for the guests that will come in, including reinforcing daily procedures for sparkling clean restaurants and emphasizing key areas to double down on Chilihead hospitality, our differentiated customer service that drives memorable experiences to grow sales and traffic over time.

While our competitors ramp up limited time offers, we spent the quarter investing time in operations, training, and culinary resources into everyday capability that more closely correlates with long-term sustainable traffic growth. We believe doing fewer things back bigger and better is a more sustainable way to build traffic and grow our business over time. The result is continued momentum on the business, attracting new guests in and retaining the ones we have converted. Dine and GWAP, or guests with a problem, continue its three-year decline, finishing the quarter at 1.9%. Food grade finished at 75%, and intent to return was also an all-time best at 79%. Our operational improvements continue to deliver better experiences for our guests, and our tokenized cohort tracking yielded similar results from previous quarters.

New guests are coming into the restaurants and following the pattern of existing guests on frequency, which gives us confidence growth will continue to sustain. Our chicken sandwich platform launched on April 14th with our new menu drop. The lineup features 2 sandwiches at our $10.99 3 for Me opening price point, the Big Crispy and the Spicy Big Crispy, which includes fries, a bottomless Coca-Cola drink, and bottomless chips and salsa. Given a wide range of guest preferences, we also offer 3 flavored chicken sandwiches, Nashville Hot, Signature Honey-Chipotle, and Buffalo, with 2 sides as well as the Big Crispy Deluxe with lettuce, tomato, and bacon. All sandwiches are served with our Chili’s signature house-made ranch for dipping and dunking that our guests absolutely love and pour on everything.

This adds an additional point of differentiation you can only get at Chili’s. The sandwich platform was launched behind our Better Than Fast Food campaign, this time tapping into an insight we have seen among consumers frustrated with what they call shrinkflation, where portion size is reduced to offset rising input costs. For example, a post went viral a few months ago when someone posted a photo where a famous fast food chain’s burger pickle was actually thicker than the burger patty itself. We believe Chili’s over-the-top generous portions are a great way to resolve the biggest challenge facing our customers today. In a world of rising inflation, how do I get the best value for my money? Our TV ads both show and tell our chicken sandwich is way bigger than the leading fast food restaurant’s most premium chicken sandwich.

At $10.99, this addition to the 3 for Me platform is the perfect antidote for corporate shrinkflation. The launch campaign geared a before your eyes demo of a balancing scale holding our Chili’s Big Crispy in one pan with its lighter fast food foil in the other. The scale is not in balance, with the new Big Crispy demonstrating it is the exact opposite of shrinkflation, weighing down the scale heavily. Our test conducted in the Dallas-Fort Worth area, weighing a large sample size of sandwiches, the new Big Crispy filet was over 80% bigger than the leading fast food restaurant’s premium chicken sandwich filet.

I know many of you are interested in specifics on how the launch is performing, and while it’s only been two weeks in market with only one week on TV, initial response to the new sandwich platform has been encouraging. So far, the overall platform is selling 161% more sandwiches than pre-launch, and is significantly outpacing the numbers we saw in the 200 test locations. From a total business standpoint, we have been comping in mid-single digit sales in April with positive traffic, which is rolling up +29% in April, driven by the Big QP launch the prior year. As I said earlier, we have accelerated our sales outperformance versus the industry to 560 basis points in April, which only includes two weeks of chicken sandwiches.

While it’s still early, the initial results on both the platform and the total business are both encouraging. I also want to give an update on our North of Six initiative and how it will be a key to continued sustainable comp growth. A question we get asked a lot is, "With all the traffic growth you’ve had the past few years, do you still have capacity for more?" Let me start with the numbers. Our average traffic is now back to 2013 traffic levels, but that’s still about 20% less weekly guests from our peak in 2000 to 2005. Our North of Six restaurants serve anywhere from 20% to 80% more guests than our current average restaurant traffic. The first point is, we know we have a lot more capacity in the buildings.

The second question is, what are we learning from the North of Six restaurants? First of all, the dramatic business simplification has been a huge enabler for our restaurants, and the direction we are getting from the managers of North of Six restaurants is, we need more simplification. Our teams are going to challenge every requirement that slows down our restaurant teams. We’ll continue to remove items and processes that don’t help the guests or team members. A new initiative I’m most bullish about is speeding up cycle time, meaning looking at everything that goes into the total time of kitchen prep and the dining experience and finding ways to simply remove time. For example, if one of our restaurants are on a wait on the weekend, the average wait time is about 15 to 20 minutes.

That number is pretty good, but remember, that’s just an average, which means there are about half our restaurants with longer waits. We have enterprise project teams studying every bit of that wait to understand what are the bottlenecks we need to remove to reduce that cycle time, whether it be at the host stand, taking orders, kitchen ticket times, checking out the Ziosk payment system, and ultimately resetting tables for the next wave of guests. Chief Operating Officer Aaron White and our cross-functional teams are hard at work to reduce cycle times across the entire dining experience. I look forward to sharing new additional initiatives, which should be a continual tailwind for traffic on future earnings calls. On the Maggiano’s business, we are continuing to make progress in its turnaround.

When you adjust for Christmas Day falling in Q3 this fiscal and the January weather, we did see sequential improvement in traffic and comp sales. Customers are noticing more abundant portions, more generous family style, and the return of classic Maggiano’s dishes like eggplant parm and Gigi’s Butter Cake. Value scores are improving. We still have a lot more opportunity ahead of us with service and removing non-value-added process to improve Maggiano’s dining times. The important thing to know is we are making sequential progress. This turnaround, like the Chili’s turnaround, will take time, but as long as we focus on important areas of food service and atmosphere and make progress every quarter, I’m confident we’ll return this business to growth.

As a reminder, Maggiano’s is only 8% of our company sales and low single-digit percentage of our profit contribution. It can be a source of growth in the future given the white space opportunities. To close out, I want to do some recognition of our integrated marketing team and our supplier partners on industry recognition. The industry leading publication Ad Age named Chili’s the brand of the year for the second straight year, an award that has never, ever been awarded to the same brand 2 years in a row. This is an award recognizing the best work in all industries, not just restaurants.

In addition to Chief Marketing Officer George Felix and our marketing vice presidents Jesse Johnson and Steve Kelly, we have developed a deep bench of directors, managers, and a collection of world-class agencies in various disciplines who have delivered the results over the past three years to earn this industry recognition. The last bit of recognition I want to do is to congratulate our driver, Carson Hocevar, and the entire Spire Motorsports team for their first ever NASCAR Cup Series win in Talladega last Sunday, driving the number 77 Chili’s car. Carson is a servant leader to his team and his fans and always makes those around him feel special. He’s a perfect representative of what we like to call Chilihead hospitality that our guests experience in our restaurants.

Hats off to our Mooresville, North Carolina, Chili’s restaurant team and area director, Rachel Austin, who stayed open late Sunday night for Carson and the Spire team to celebrate their victory with a lot of Triple Dippers and a few presidentes. To close, Chili’s delivered another strong quarter, rolling big numbers from prior year. The quarter got stronger as we moved out of January, and we accelerated our market share growth as the quarter closed, and now into April, driven by the chicken sandwich launch. Yes, there are macro headwinds the industry is experiencing, but Chili’s is well positioned to continue winning in this environment given the improvements in food service and atmosphere and our industry-leading everyday value. That formula has proven quarter after quarter to be resilient in driving traffic and outperforming the industry.

Now I’ll hand the call over to Mika to walk you through fiscal 2026 third quarter numbers. Go ahead, Mika.

Andrew Strelzik, Analyst, BMO3: Thank you, Kevin, and good morning, everyone. This quarter marks our twentieth consecutive quarter of same-store sales growth and our second year of traffic gains, evidence of the durability of our results and the sustainability of our strategy. With the end of FY 2026 in sight, we expect average annual unit volumes for the year to approach $5 million. These higher sales levels and strong unit economics continue to support our invest to grow strategy. We maintained strong business momentum this quarter, achieving positive same-store sales despite last year’s positive 31% comparison, including 4% growth at Chili’s. While Winter Storm Blair affected Chili’s January sales, growth returned to mid-single digits after weather conditions improved.

In both February and March, Chili’s comparable restaurant sales increased 5.9% with positive traffic, reflecting the underlying strength and momentum in our business, which we expect to continue throughout the rest of fiscal 2026. Turning to our financial results, in the third quarter, Brinker reported total revenues of $1.47 billion, an increase of 3.2% over the prior year, with consolidated comp sales of positive 3.3%. Our adjusted diluted EPS for the quarter was $2.90, up from $2.66 last year. Chili’s top-line sales growth was driven by price of 4.6% and positive mix of 0.6%, offset by negative traffic of 1.2%. Weather and a holiday shift negatively impacted sales and traffic at Chili’s by approximately 2.1% during the quarter.

For Maggiano’s, the brand reported comp sales for the quarter of -4.6%, with -10.4% traffic, partially offset by positive mix of 0.6% and price of 5.2%. Weather and a holiday shift negatively impacted sales and traffic at Maggiano’s by approximately 2.1% during the quarter. At the Brinker level, restaurant operating margins were 18.4% for the quarter compared to 18.9% in the prior year due to higher food and beverage costs and higher restaurant expenses, partially offset by sales leverage. At Chili’s, we continue to make investments in food by upgrading the quality of ingredients and making recipe improvements for items such as ribs, frozen margaritas, queso, nachos, and our bacon cheeseburger to improve the guest experience and ensure value across our entire menu.

In addition, we prioritize actively repairing and maintaining our facilities to provide a comfortable and fun atmosphere. At Maggiano’s, we continue to execute the Back to Maggiano’s strategy, which is designed to improve our value proposition, optimize our service model, and ensure our atmosphere is clean and well-maintained by making the investments needed to improve the business. Food and beverage costs for the quarter were unfavorable by 60 basis points year-over-year due to unfavorable menu mix, with 4.6% commodity inflation, mainly due to beef offset by price. Labor for the quarter was favorable 60 basis points year-over-year. Top-line sales growth offset wage rate inflation of approximately 3.4%, additional investments in labor, and higher health insurance costs.

Restaurant expense for the quarter were unfavorable 50 basis points year-over-year due to higher repair and maintenance costs and general inflation impacting expenses such as utilities, rent, to-go supplies, and delivery fees offset, partially offset by sales leverage. Advertising expenses for the quarter were lower than expected and flat to the prior year at 2.9% of sales due to a portion of spend that shifted from the third quarter to the fourth quarter of this fiscal year. G&A for the quarter came in at 4.0% of total revenues, 10 basis points favorable to prior year due to sales leverage and lower performance bonus accruals, partially offset by an increase in restaurant center support resources to support our growth.

Depreciation and amortization for the quarter came in at 3.7% of total revenues and decreased 10 basis points year-over-year due to sales leverage and lapping accelerated depreciation from the prior year due to the retirement of the CTX and Impinger ovens. This was partially offset by an increase in our asset base from new equipment purchases. Third quarter adjusted EBITDA was $223.7 million, a 1.4% increase from the prior year. Our adjusted tax rate declined year-over-year to 18.7% compared to 19.3% in the prior year, largely due to the impact of a prior year tax catch-up associated with stronger than expected performance. Capital expenditures for the quarter were $51.2 million, driven by capital maintenance spend.

At the end of the second quarter, we completed our first 4 re-images at Chili’s, and the learnings were used to inform our long-term re-image and new unit growth strategy. As we shared last quarter, we plan to complete another 8-10 re-images during the remainder of this fiscal year and another 60-80 during FY 2027 before getting to a planned cadence of 10% of the fleet every year starting in 2028. Regarding new unit growth plans, our goal is to continue to ramp up to a new run rate by FY 2029, and we expect to share more details on our strategy and plans at our investor day later this year.

At Maggiano’s, our main focus areas will continue to be guest-facing repairs and maintenance, supplemented by a smaller reimage program. Our strong free cash flow provides sufficient liquidity to maintain our disciplined capital allocation strategy, allowing us to invest in restaurants, keep debt levels low, and return excess cash to shareholders. We continue to support this approach by repurchasing $108 million of common stock under our share purchase program in the third quarter. In addition, we are planning to call our $350 million, 8.25% bonds early in fiscal 2027 using the liquidity of our $1 billion revolver, which would provide interest expense savings in fiscal 2027 and the flexibility to continue reducing leverage if we choose.

In terms of our expectations for the balance of the year, as noted in this morning’s press release, we’re updating our guidance for fiscal 2026 to include the following: Annual revenues in the range of $5.78 billion-$5.82 billion. Adjusted diluted EPS in the range of $10.60-$10.85. Capital expenditures in the range of $240 million-$250 million. Weighted average shares in the range of 44.7 million-45 million. Our guidance assumes wage and commodity inflation in the low single digits and a tax rate of approximately 19%. April started the quarter on a strong note with continued mid-single-digit sales growth and positive traffic.

In addition, our outperformance versus the industry is accelerating, and we remain confident we will lap the fourth quarter with mid-single-digit sales and positive traffic at Chili’s. Looking ahead, our results show that our strategy is sustainable and that we’re positioned for continued growth. At Chili’s, we will build on our momentum by continuing to bring in new guests and drive loyalty through relevant and innovative marketing, menu innovation, and strong operations in our industry-leading everyday value. We’re confident these strategies will support our ability to drive growth, invest strategically in the business, and deliver value to shareholders. I look forward to providing further details at our upcoming Investor Day, scheduled in Dallas for Thursday, September 17th. With our comments now complete, I will turn the call back to Holly to moderate questions.

Andrew Strelzik, Analyst, BMO5: Certainly. Your first question for today is from David Palmer with Evercore ISI.

David Palmer, Analyst, Evercore ISI: Thanks. Good morning. Two questions, if I could. I know you said some stats on the chicken sandwich and, you know. If you wouldn’t mind, forgive me if I’m making you repeat yourself, but, you know, any stats on that would be helpful. The mix of the product, the perceived lift to same store sales when you exclude any of the noise that might be out there, new guests, repeat, customer stat scores associated with it, you know? Then is your experience that the lift from that, a product like that, will rise over time with the TV campaign consumer trial for a product like that? Then just a big picture question.

You know, as Chili’s approaches $5 million AUV, you know, and I’m not asking to front run your analyst day out in September, but how are you thinking about the big levers from here and how they’ll be different to get the next $1 million or $2 million? You know, how should we be thinking about, you know, your big, hairy goals here from here and how you get there? Thanks very much.

Andrew Strelzik, Analyst, BMO3: Two big pack questions. I’ll start with the chicken sandwich first, and then I’ll address the second one about sustainable growth in a second. From a chicken sandwich standpoint, you know, we don’t have really much more to share because it’s only been 2 weeks of launch. We’ve had 1 week of merchandising only and then 1 week of TV. We’re seeing a, you know, 161% more chicken sandwiches today than we did pre the launch, which is significantly higher than what we saw in the merchandising-only test market. In fact, that first week where we were merchandising only, we did see higher lifts than we saw in the test market. That’s all good.

As far as, like, what’s the feedback been, you know, anecdotally, we’ve heard mostly very, very positive, both in the reviews that we see online as well as in talking to our team members. You know, the first thing that people tend to say when they see it is, "Oh my goodness, this is a really big sandwich," which is exactly what we’re going for. We went through the fact patterns with industry inflation is how we position the sandwich and the price point and the size, especially when we compare to our fast food foe. That’s all working. You know, over time, we’re gonna see whether it continues to maintain. We’ll be able to answer your questions about, you know, repeat rates, and we have all that tokenized data, but that’s gonna take, you know, a few quarters to really understand that.

Right now, we feel very bullish about it. You know, typically, when things mix a lot, they tend to be generally overall more incremental from a magnitude standpoint. You know, the fact that we’re beating the test market is very encouraging. Then we obviously saw some acceleration in traffic driven by the sandwich over the past two weeks, which feels good too. You know, it’s too early to declare, "Hey, this thing’s successful." So far, we’re really encouraged by the data that we’re seeing. On the second question, David, on what are the next drivers of sales over the next three years. You know, we’re kind of a repeat record on this. There’ll be new initiatives behind this, it’s still gonna be focused on food service and atmosphere.

From a food standpoint, we talk about the other menu categories that still need renovation. Plus, we’ll have some innovations on the core categories that we’ve already renovated. That will continue. From a service standpoint, you know, I think the big unlock of North of Six that we’re understanding over the past.

Andrew Strelzik, Analyst, BMO1: 3 months is this idea of cycle time. The idea of how do we take the throughput that we’re seeing in the North of Six restaurants and expand that throughout the system? They do a lot of things differently to get higher throughput. Like the example I gave in the prepared script was at the host stand, right? Typically in a North of Six restaurant, they either have more staffing at the host stand than what the labor card says, and/or they have more senior level of staffing, either paying a more senior host or sometimes having a manager man the door during busy peak times, right? In addition to that, there’s software behind that when we use the seating system that we need to make sure the teams are trained on.

They’re using consistently so that when we quote wait times, they’re more accurate because we need to use that all the time. There’s a bunch of work that we need to do for the host rollout that we’re learning from the North of Six restaurants. That will go in Q2 of next fiscal, that’s like one example of reducing cycle time, which I think is gonna improve throughput, not just for North of Six restaurants, but more importantly, the entire system. Then on atmosphere, the big thing is the reimage, and you’re gonna be able to see that when you’re here for the investor day. We’re gonna take you out to the restaurant so you can see them for yourselves of what we’re doing.

The next 8 to 10 that we’re doing in these three months is really gonna be finalizing what are the things that we want to invest in and what are the things that we don’t want to invest in, so that when we start with 60 to 80 next fiscal and obviously get to the 10% run rate in fiscal 2028, you know, we’re off and running with the best possible package with the best possible payback. We’re very bullish about the growth levers in front of us. Obviously, I haven’t even talked about our world-class marketing, which continues to get stronger and stronger and bring new guests in. We’re very, very bullish about the continued sustained growth of this business.

Chris O’Cull, Analyst, Stifel: Thank you very much.

Andrew Strelzik, Analyst, BMO5: Your next question is from Chris O’Cull with Stifel.

Chris O’Cull, Analyst, Stifel: Thanks. Good morning, guys. Kevin, just given the recent volatility in consumer sentiment, have you observed any canary in the coal mine type behaviors such as check management or softness in lower income spending?

Andrew Strelzik, Analyst, BMO1: The answer is we’re seeing a little bit of check management. As we’ve seen traffic accelerate behind Chicken Sando launch, we’ve seen a little bit of check management in desserts and in alcohol. You know, our alcohol sales are still way up with the growth that we’ve had with the business, we are seeing some incidents start to slow. You know, here’s what I would tell the team is let’s control what we can control. You know, we can continue to win market share with the best food service and atmosphere in the industry with industry-leading value, we need to stay focused on that. You know, whatever happens to gas prices and the macro, that’s out of our control. What we can control is staffing our restaurants for peak.

We can control serving great food and with wonderful service, in a clean, inviting environment. If we continue to do that, we’ll continue to grow market share. We’ll be able to, you know, hang on to our business, and then obviously, if the macro gets any better, we’ll be able to grow even faster behind that. You know, I’m kinda like a broken record on it. It doesn’t matter what happens with the macro. It doesn’t matter what happens with external factors. Our indicated action for this team is improve food service and atmosphere and good things will happen, and we’re just gonna stay focused on that.

Chris O’Cull, Analyst, Stifel: Makes sense. Mika, I know margin flow-through was impacted, I think, by R&M expense this quarter. Can you help us walk us through how to think about flow-through in the fourth quarter? Were there any significant headwinds on any line items that we should be aware of? Maybe whether the new sandwiches to the platform are margin accretive or margin neutral, any color would be helpful.

Andrew Strelzik, Analyst, BMO3: Okay, great. Yes. You know, I know the flow-through, you know, we continue to invest back in the business with this invest to grow strategy. You know, that’s part of it, is that we don’t flow it all through, and we put it back in. You know, we saw that food and beverage was up a little bit year-over-year. We continue to invest in labor. Then our restaurant expense, like I said, the R&M, you know, we caught up with a lot of the deferred maintenance. Now we’re shifting to preventative maintenance, which takes a little bit of time for that to start really coming through, that you can see some opportunities or some reduction in future expenses. We, we are seeing, you know, a lot of give and take in there.

If you look at our R&M, just over the first 3 quarters, you can really see that we’ve kind of established a run rate. It’s pretty steady. I think some of the volatility is really lapping the prior year, and we’ll continue to look at that and get more efficient in our spend. That’s kind of one of, one of the drivers there. Looking forward on margins, I think in the fourth quarter, you’re gonna see probably similar margins. Maybe food and beverage are gonna creep up a little bit. We have a beef contract that came due, a state contract that’s gonna be a little bit more. I think we’ll continue to leverage the labor. That’ll probably offset any of that increase. Then you’ll see very similar, I think, to restaurant expense this quarter as a % of company sales.

I think you’ll see something there. I expect margins to be similar from Q3 to Q4, and I expect margin growth to happen, you know, return to margin growth in Q4. I’m very confident in what I stated at the beginning of the year, is that, you know, taking a step back, we’re gonna grow our margins year-over-year, that 30 to 40 basis points. I’m very confident about that moving forward.

Chris O’Cull, Analyst, Stifel: Okay, great. Thanks, guys.

Andrew Strelzik, Analyst, BMO5: Your next question for today is from Dennis Geiger with UBS.

Andrew Strelzik, Analyst, BMO1: Great. Thanks, guys. With all the focus on the chicken sandwich, all 6 varieties of which are delicious, as you know, you put up great results in April, even with just a couple weeks of the sandwich seemingly, even as you talk about that acceleration in traffic with the sandwich. I’m curious if you could talk a little more about sort of ex the sandwich, some of the key drivers of that momentum that you’ve been seeing, especially as we kind of go into 2027. Said differently, you know, even if, let’s say, the sandwich incrementality is not a significant step change in trend, you know, do you think that sort of the mid-single-digit type of comp trajectory is still within view?

Thank you. Well, the answer to your last part of the question is yes.

Andrew Strelzik, Analyst, BMO3: Absolutely.

Andrew Strelzik, Analyst, BMO1: We still think that mid-single comp is still within purview. The, you know, the recipe for success for us is just to continue to improve the fundamentals, so food service and atmosphere. That’s why every earnings call I talk about the improvement on Guest With A Problem and GWAP and food grade and intents to return because, you know, what I tell my team is if it’s not better than the previous year, what belief do we have that we’re going to continue to grow? We have to continue to improve those things because we’re not going to like LTO our way to growth that we see others do. If we believe in that, those metrics have to continue to improve.

That’s why when we budget the year, you know, we have some food news that has to do with upgrading the permanent menu. Most of our initiatives have to do with improving food service and atmosphere on the kind of the core thing. Like the thing, Q2, you know, host stand, what we’re gonna launch for next fiscal. That’s all about throughput and driving traffic. That’s not a new piece of food that’s, you know, definitely gonna drive traffic. It’s gonna drive traffic through taking the demand that we’re already having come to the restaurant to making sure they don’t leave, right? You know, the recipe for success right now is continue to improve food service and atmosphere, continue to improve the fundamental metrics, right?

Let the world-class marketing team create excitement so that people come into the restaurant and try us for the first time. That’s why we also share the token data because the idea is, hey, we are putting new guests into the funnel every quarter. When we look back over the next, you know, 6-12 months, they start looking like existing guests. That’s the key. If the fundamentals continue to improve, the new guests that come in will start looking like existing guests, and we’ve just got to keep that flywheel going. That traffic growth obviously drives sales growth. Sales growth drives profit growth. We’re able to reinvest some of that back into the business to continue the flywheel and drive traffic growth, right?

That’s the recipe that’s worked the last couple of years, and that’s the plan for the next three years.

Andrew Strelzik, Analyst, BMO3: Great. Thanks very much.

Andrew Strelzik, Analyst, BMO5: Your next question is from Jeff Farmer with Gordon Haskett.

Jeff Farmer, Analyst, Gordon Haskett: Thank you, Mika Ware. I think you just said that there’s an expectation that you can grow margins by 30 to 40 basis points, sort of on a go-forward basis, or at least in 2027. Beyond continued same-store sales momentum, what dynamics do you see contributing to that level of margin expansion? Hopefully I got that 30 to 40% or 30 to 40 basis point number correct in the question.

Andrew Strelzik, Analyst, BMO3: Yes. Well, the 30 to 40 basis points was referencing this fiscal year, what we guided, very confident in that. I do think that we will be able to grow margins over time, and it will primarily be from sales leverage because that’s our strategy, is to grow the top line. We do think there can be opportunities, you know, now that we have gotten through the turnaround. You know, we’ve stabilized the teams, we’ve attracted better talent. This does give you an opportunity to just be more efficient in your spend, and I think we’ll look for ways, you know, as we move forward to do that as well. Even with the sales growth, I do think that we can continue to leverage margins.

Jeff Farmer, Analyst, Gordon Haskett: Okay. Just one quick follow-up. As it relates to menu pricing, moving into FY 2027, I think you guys have been back-to-back mid 4%, 2025 and 2026. How are you thinking about menu pricing as you move into FY 2027?

Andrew Strelzik, Analyst, BMO3: Yep. you know, the very first thing, most important thing for us is to protect our value proposition. We’re gonna protect that $10.99 industry-leading value, have it there for those that need it. We also wanna make sure we have value across the entire menu, for everyone. With that being said, moving forward, I do think that we’ll continue to invest in food service and atmosphere, but we will probably be on the lower end of our stated pricing range. Moving forward, you know, We’re always gonna make sure that we can price for inflation, but we’re gonna make sure we balance that with making sure value is there for our guests.

Jeff Farmer, Analyst, Gordon Haskett: Okay. Thank you.

Andrew Strelzik, Analyst, BMO5: Your next question for today is from Andrew Strelzik with BMO.

Andrew Strelzik, Analyst, BMO: Hey, good morning. Thanks for taking the questions. I know there’s a lot of focus on the food initiatives and the menu initiatives that you guys have planned, but I was hoping you could talk a little bit more about the operational and service improvements, you know, and those kind of legs of the stool there. How much more room for improvement is there? What are kinda some of the bigger opportunities that you see kind of going forward to drive that?

Andrew Strelzik, Analyst, BMO1: It’s, you know, it’s frustrating, but it’s also really exciting how much more opportunity we have. Like, we didn’t even touch on the technology initiatives that are happening from an operational standpoint. You know, we continue to improve our KDS system. We’re just kicking off now an entire back office redo, basically taking all these antiquated systems and getting to, it’s not an ERP system, but the idea that all the back office systems could be connected. It’s gonna be way more usable for the team members, hopefully help for throughput as well as retention. That’s the big one. You know, we still are working on, we’re rolling out right now our team member handheld initiative, which is a complete upgrade to the interface.

That’s gone a little slower as we rolled it out, just as we’ve seen some glitches. We paused it to get it fixed, and it’s rolling back out now, which should be done by next quarter, which is a huge one. That’s all the technology initiatives, and there’s a lot more than that. We have what we call Supermarket Simple. That’s gonna be rolling out in the next quarter, which is all about removing the friction that happens at the end payment with the Ziosk, where either a discount didn’t come off that the guest expected or they accidentally left a different type of tip, and we need to get that reversed. These are all things that hold up tables, you know. I give 1 example.

Just 1 simple example that happens about 7 times a day where we’ve got to reverse something out on the Ziosk. We added it up, it was like over 20 years where the table’s tied up for the guests waiting for that to get reversed by a manager. That’s an example where we can fix that very quickly with an update from Zia. There’s a huge amount of technology initiatives. From an operational standpoint, really the big push now has been the North of Six. We’re moving from kind of defense of just removing a bunch of stuff and making it much easier for our team members to operate. We’re now moving to offense on accelerating cycle time. Whether that’s the host stand, whether that’s ticket times.

You know, a great example we’ll see in very busy restaurants is their ticket times will be a little bit inflated. We’ll go to the labor card to understand are they scheduling enough cooks? The answer is no. It’s like, that’s a clear indicated action that we can continue to take on more traffic and get those ticket times down. Ticket times, even the checkout time that we talked about earlier, there’s a ton of initiatives that are coming. We’ll be giving a lot more detail at Investor Day on the new things that we haven’t talked about before. I remain very, very bullish about our ability to improve the operations, continue to get GWAP and intent to return scores better and better, as well as the most important thing right now is to get throughput going.

Andrew Strelzik, Analyst, BMO: Great. Okay. Then, wanted to ask also on the remodels, and I know it’s very early days, but can you just remind us kind of spend levels? How should we think about the types of lifts that we might be able to expect there as that continues to build? Or maybe, you know, kind of are there different levels that you’re testing? How should we think about that? Thank you.

Andrew Strelzik, Analyst, BMO3: Hi, Andrew. Yes. It’s really early with only four restaurants that we’ve done so far. We are optimizing the spend. The good news is we did four different levels of spend, and the lowest level of spend is getting the same sales lift. We are getting a sales lift in these restaurants. We are optimizing the spend. We’ll have more of that to share once we have a bigger test group with the 8-10 and then the 60-80. You know, more of that, again, will come in September when we just have a little bit more time to read the test. Very encouraged, you know, with the spend and the sales lift that we’re getting in the early four.

Andrew Strelzik, Analyst, BMO: Great. Thank you.

Andrew Strelzik, Analyst, BMO3: Thank you.

Andrew Strelzik, Analyst, BMO5: Your next question is from Jeffrey Bernstein with Barclays.

Jeffrey Bernstein, Analyst, Barclays: Great. Thank you very much. The first question is just on the new unit opportunity. Clearly, new unit growth is more of a stable driver of top line than comps. Can you talk maybe a little about the changes in the new units you anticipate versus existing, maybe the cost to build and return requirements? I know the Investor Day will offer more color, just how you think about the U.S.’s, you know, total adjustable market for a brand that most people view as fairly mature. I had one follow-up.

Andrew Strelzik, Analyst, BMO3: Okay. Thank you, Jeff. Yes. We’re really excited about our new unit growth strategy. Our first step was to really build up the team. We have a great leader with Richard Ingram. We have a lot more insights, a lot more analytics. Just the whole team is phenomenal. We’ve really started gearing that up. You know, primarily in the past, we’ve really stuck to some of the states, our biggest states that we always have done a great job in, California, Texas, Florida. We continue to build there. We’ve been very successful, we’ll still build there. There’s a lot more opportunity, you know, across the U.S. for us to build in different markets. It seems like Chili’s is everywhere, Chili’s is not everywhere.

Again, we’ll kind of spell that out and give more detail on how and why we think we have a much larger addressable market. We are gonna be able to ramp up our unit growth. Next year-- You won’t see it next year just because there’s usually about a 18-24-month cycle. We can already see the teams are ramping up for F 2028, and we expect to get to our new growth rate, run rate in F 2029. As far as the units go, we’re making sure, you know, we’re using a lot of the fun elements from the reimage.

We’re working with the operators and all the insights we have, again, with the North of Six restaurants, just to make sure that we have these restaurants exactly how we want them, especially with the new unit volumes that we’re experiencing, to make sure that they are designed for optimal throughput. A lot of exciting things to come. We have a very strong team. We’re ramping up the growth, and that’s gonna be, you know, a great lever for us as we move forward.

Jeffrey Bernstein, Analyst, Barclays: Understood. The follow-up, Kevin, I think you noted that Maggiano’s was, I think it was high single-digit % of sales, low single-digit % of operating profits. I know the turnaround’s on track, seemingly take time. Just wondering whether there’s any incremental interest in adding a second brand of greater scale, maybe something more meaningful in terms of sales and profit contribution. Clearly, you have the credibility, you have the playbook to strengthen maybe more of a national brand now that Chili’s is seemingly in a much more stable and consistent growth position. Just wondering whether there’s any incremental interest or what it would take to maybe get you to think about a potential brand of more scale to add to the portfolio. Thank you.

Andrew Strelzik, Analyst, BMO1: Good morning, Jeff. We get asked that question a lot. You know, what I tell my team is we need to be able to turn around a smaller brand first before we take on more risk of a bigger brand. You know, it’s just because we have the playbook on Chili’s doesn’t necessarily mean that the same leadership team can do the same thing on other brands. I’d rather prove it on a pretty risk-free opportunity like Maggiano’s versus take the big swing, you know, for the first time on something a lot bigger that could, you know, put undue risk on the business that we don’t really need to do right now. We’re very bullish in continuing to be able to grow Chili’s and do that profitably.

We can get and prove out our beliefs about our ability to turn around other brands with Maggiano’s. Right now, part of the Maggiano’s turnaround is also just unifying the system so that we could be ready for a third brand should we be able to turn around Maggiano’s. For example, one of the big issues in Maggiano’s is kitchen throughput. It has a very antiquated kitchen display system. We’re now in process of putting them on the Chili’s kitchen display system. If we’re able to do that successfully, which we should be, it’s pretty easy, then as we do updates, as we learn more about the Maggiano’s, but it’s much easier because we can use the same team. It’s much easier than having them to have to learn a completely different system, right?

Part of the Maggiano’s turnaround is not just the financial improvements of Maggiano’s, which is we all want, right? It’s also proving to ourselves that we could have a model like some of our, you know, our biggest competitor in casual dining does an exceptional job being structured to be able to plug in new brands. That’s a big part of the Maggiano’s turnaround, not just the financials, but actually structuring the company to be able to do that. You know, I will tell you, until we are able to do that, you know, I would caution us from trying to get a third brand. You know, we have no business doing that until we can prove that we can handle our second brand.

Andrew Strelzik, Analyst, BMO5: Understood. Thank you. Your next question is from Jon Tower with Citi.

Andrew Strelzik, Analyst, BMO0: Great. Thanks for taking the question. You know, on this, the North of Six initiative that you’re going after, I’m just curious. It sounds like there’s a need to invest in some labor, I’m curious if you could speak to where you see and think labor needs to go over time across the system. I’ve got a follow-up.

Andrew Strelzik, Analyst, BMO1: Right now, when we look at the North of Six restaurants, they don’t all invest labor in the same places. I mean, generally a trend for the high volume restaurants, they do invest more labor than what the model tells them. The typical positions are either in busser or server assistant. Sometimes it’s servers, sometimes it’s host. Once in a while, it’s cooks too, to get throughput there. It really depends on the restaurant and what they need and the types of experience of people that are in the restaurant. It’s not a one-size-fits-all.

you know, as we think about, you know, the budgets that we’re setting for our fiscal 2027, there are some North of Six investments baked into the numbers that we’ll be sharing as part of our guidance when we come out with that a quarter from now. just to be very clear, there will be some investments that they will be baked into the guidance that we provide. beyond that, there’s a lot of other things that we’re working on. Some of them don’t really have to do with investors, just deploying different types of labor deployment or construction. we’ll make sure that all of that is clear for you guys and that nothing is surprising.

Andrew Strelzik, Analyst, BMO3: I’d like to add on to that. Also remember, with our labor model and especially the North of Six, as we have more guests in the restaurant, it naturally scales up. I don’t know that it’s a true, you know, It’s not gonna be like I’m not anticipating it to be a really big investment. Also, when Kevin talks about some people are, you know, already spending more than our labor card, that’s not just the North of Six. We have scaled that back to, you know, a lot of the restaurants were saying, "Staff for the traffic you want." A lot of that is built in our current run rate. We’re gonna formalize it next year. It will be an investment.

There will be some investment, but it’s not gonna be as material as it has been the last few years when we really had to staff up to just get that base model right. I feel now it’s more of a lot of fine-tuning on the investment side.

Andrew Strelzik, Analyst, BMO0: Got it. Thank you. I appreciate all that color. Maybe just flip into the remodels. I know it’s early in the process, but I’m just curious. As you’re going through with the first four stores and now the plan to, I believe, eight to ten more coming, are you seeing opportunity to maybe do anything different in the back of the house as well with respect to either equipment or any of the processes that you’ve got or the build, hence the processes get better in the back of the house?

Andrew Strelzik, Analyst, BMO3: Yes. It may not necessarily be tied directly to the reimage program, but we’re always looking at the Heart of House. We have a whole cross-functional team that is dedicated to looking at the equipment. Again, North of Six, part of that is to optimize the Heart of House equipment packages. You know, do we need to add an extra fryer? Where do we need? You know, at what levels do we add a separate combi oven? We’re looking at all that. We’re also thinking about that as we design the new prototypes on making sure that we have the space laid out just right and that we have, you know, the model built for those higher volumes and the equipment that we’ll need moving forward.

It’s absolutely a focus that we continue to look at different pieces of equipment, how we improve either the quality of the food or the speed of our service. We have a whole team just working on that at all times, you know, that we could deploy.

Andrew Strelzik, Analyst, BMO0: Great. Thanks for taking the questions.

Andrew Strelzik, Analyst, BMO3: Thanks, Jon.

Andrew Strelzik, Analyst, BMO5: Your next question for today is from Brian Harbour with Morgan Stanley.

Brian Harbour, Analyst, Morgan Stanley: Yeah, thanks. Good morning, guys. With the reimages, are there elements of that that sort of help with throughput, or is that more of, you know, just like an aesthetic thing? Could you talk about that a little bit?

Andrew Strelzik, Analyst, BMO3: Right now, it’s more of, you know, the exterior. The inside is paint and just the look and the feel of the restaurant. We’re always looking at our tables where, for example, in one of the previous reimages, we put in some big community tables in the bar. We realized a lot of people don’t like sitting at the community table. As we go through, we make sure that those community tables are gone. Those are separate tables. Any time we have the opportunity to update the tables or optimize the tables, we’re doing that. We’re making sure we look at that really not necessarily in the reimages but in the new units as well, that we have the optimized tables, and we have, you know, the most tables to help with throughput.

Andrew Strelzik, Analyst, BMO1: Yeah. You know, other than the tables, it’s mostly cosmetic.

Andrew Strelzik, Analyst, BMO3: Yeah

Andrew Strelzik, Analyst, BMO1: ... it would help the throughput. The, you know, our 2030 Heart of House restaurant team is focused on, you know, what’s the equipment that can improve throughput. Like, you know, an example that we’re looking at right now is a new type of grill.

Flat top that, all the spaces usable. It’s really consistent in terms of heat across the grill, so you can put more burgers and they cook more evenly. That’s an example that would have improved throughput. In addition, they have a manual clamshell attachment that would be able to cook on both sides. We tested computer clamshells a few years ago and thought they were not as reliable as they need to be, but this one likely would be more reliable. That’s an example where the equipment would give us more throughput and lower ticket times on burgers, which is obviously a huge part of our business. I would consider that kind of separate from the reimage program.

Andrew Strelzik, Analyst, BMO3: Yeah.

Brian Harbour, Analyst, Morgan Stanley: Okay. Got it. Makes sense. Mika, how are you feeling about food inflation? This I guess more as we think about like fiscal 2027, do you expect that to sort of reset higher? You know, is it something you’ll sort of address with price when the time comes? Could you talk about that?

Andrew Strelzik, Analyst, BMO3: Yeah. I mean, we’ll probably give you more details in next quarter when we set guidance for next year. You know, there’s always puts and takes, but there is gonna be pressure with beef. I mean, that’s clearly out there. Luckily, that’s, you know, not the total basket for us. We’re a varied menu, we have different opportunities. You know, obviously we sell a lot of chicken as well. Yeah, we’re gonna continue to see pressure in commodities as we move forward. It’ll probably be similar levels that you’ve seen us in the past or, you know, this last half of the year we’ve had that mid-single digit inflation. I’m anticipating that will be something similar as we move forward into F 2027.

Brian Harbour, Analyst, Morgan Stanley: Okay, thanks.

Andrew Strelzik, Analyst, BMO5: Your next question is from Brian Vaccaro with Raymond James.

Brian Vaccaro, Analyst, Raymond James: Hi. Thanks and good morning, and congrats on the continued strong momentum. Mika, just following up on that last question on commodity inflation. Did I hear correctly that you do expect low single digit inflation in the fourth quarter? maybe just any clarity on what’s breaking a little bit more favorably for you even in the near term compared to the mid-fours you did in the last quarter?

Andrew Strelzik, Analyst, BMO3: No. It’s mid-single digits in the fourth quarter, and that’s what I expect to continue into next year, Brian. You know, beef will continue to be a pressure for us. You know, I was just saying there could be some gives and takes out there on different contracts. In general.

Brian Vaccaro, Analyst, Raymond James: Okay

Andrew Strelzik, Analyst, BMO3: we’re gonna have inflation, it’ll probably be in the mid-single digits next year as well, is what I’m anticipating now. More specific details to come as I give guidance next year. I’m just kinda giving a, you know, a guideline now. We’ll give more information on that next quarter.

Brian Vaccaro, Analyst, Raymond James: Okay. Sorry, I thought I misheard the lows, so that’s helpful clarity.

Andrew Strelzik, Analyst, BMO3: No.

Brian Vaccaro, Analyst, Raymond James: Advertising. Yeah, that’s great. On the advertising front, I think you said it was flattish year-on-year as a % of sales in Q3. Just ballpark, how much do you expect ad spend to be up year-on-year in the fourth quarter?

Andrew Strelzik, Analyst, BMO3: In the fourth quarter, it’ll probably be in the, you know, $5 million-$6 million range for the fourth quarter.

Brian Vaccaro, Analyst, Raymond James: Okay. All right. That’s, that’s helpful. Just a bookkeeping one for me. Can you share the sales mix of 3 for Me? Kinda how that splits between $10.99 and the higher tiers, and also on Triple Dipper. Thanks again.

Andrew Strelzik, Analyst, BMO3: Absolutely. We continue to have about 20% of our guests eat on the 3 for Me platform. You know, approximately 40% or a little bit less are eating on the $10.99. You know, that converts to, you know, total 3 for Me is about 12% or almost 13% of our guests. On the $10.99 version, you know, less than 5% are actually eating, of our total sales, is $10.99. That’s been pretty steady for us, I would say, as we move through. What was the second piece of your question, Brian?

Andrew Strelzik, Analyst, BMO5: Triple Dipper.

Andrew Strelzik, Analyst, BMO3: Oh, Triple Dipper.

Brian Vaccaro, Analyst, Raymond James: Triple Dipper.

Andrew Strelzik, Analyst, BMO3: Triple sales. Yep, they’re hanging in there. Last quarter it was right at 16%, and that’s where it is now. Hanging in there with the Triple Dipper.

Brian Vaccaro, Analyst, Raymond James: Excellent. Thank you.

Andrew Strelzik, Analyst, BMO3: Thank you.

Andrew Strelzik, Analyst, BMO5: Your next question for today is from Nick Setyan with Mizuho Securities.

Andrew Strelzik, Analyst, BMO4: Thank you. I think I heard you guys say ad spending went a little bit into Q4 from Q3. Can you just remind us what the year-over-year growth was in Q3, what it will be in Q4? How are you thinking about, you know, ad spend in fiscal 2027? Can that grow as a percentage of sales? Is it going to be flattish? In terms of just spending, you know, by quarter, that would be great, or at least directionally. Any, any color there, that would be very helpful.

Andrew Strelzik, Analyst, BMO3: All right. Sure. Advertising in the third quarter ended up being fairly flat year-over-year on a $ basis and a percent of sales basis. It will pop up a little bit. We had to move some things into the fourth quarter, just some timing of some things, how they happened. In the fourth quarter, you know, I expect that to be a little bit higher as a percent of sales and probably, like I said, $5 million-$6 million up year-over-year. Next year, again, more color when I give guidance for next year, but I would expect it to be as similar as a percent of sales, a similar amount there.

There’s always inflation on ad spend, you know, we will be spending some more dollars, but probably a similar % of sales as we move forward. I don’t have the cadence yet, Nick Setyan, to share on quarter to quarter in FY 2027. Again, we’ll get into more of that at the end of this fiscal year as we kind of guide for next fiscal year.

Andrew Strelzik, Analyst, BMO4: Thank you very much.

Andrew Strelzik, Analyst, BMO3: You’re welcome.

Andrew Strelzik, Analyst, BMO5: Your next question is from Andrew Charles with TD Cowen.

Andrew Charles, Analyst, TD Cowen: Great

Mika, you talked about the likely mid-single digit inflation in 2027 led by beef and, you know, plans to roll off price as you’re prioritizing value. I know we’re gonna get the specific guidance, you know, next quarter, but I’m just thinking qualitatively, what are the opportunities to drive margins just beyond sales leverage while you’ve studied that you’re not immune from the industry’s contracting alcohol mix as well?

Andrew Strelzik, Analyst, BMO3: Right. You know, moving forward, again, we feel like our strategy is a top line strategy. We will get margin leverage from that. We will look into ways, I think, as the, as the brand, if we’ve kind of been in this turnaround mode. We’re getting more into the stabilized mode where we have, again, a lot more talent, stabilized teams. What we’ve seen over time is as turnover goes down, you have better talent. You always get more efficient in whatever you do. That could be labor, that could be how we spend the dollars. For example, you know, R&M is one that we spent a ton of money in over time. We do think, like I said, we had a lot of deferred maintenance. Now we’re moving into preventative maintenance.

We also think there’s gonna be opportunity now to just find ways to have more efficient spend as we move forward. We have a lot of initiatives kind of behind the scenes working on that. There’ll be just different areas of the business. Again, labor. I think labor is one that as the teams continue, turnover goes down, productivity goes up. Like we said, we may have to invest in some pockets, but at the same time, we’re having teams that just get better and better at what they do, and you have some natural opportunities there. We’ll continue to look across the whole brand. We’ve had a lot of growth the last three years. There’s probably a lot of opportunity to optimize some of those expenses as we move forward.

That’ll again, will be more things that we look at in the future, but I think there could be opportunity there. Even excluding any margin initiative, I still think we can expand margins and grow the top line. We feel really great about our, you know, mid-single digit same store sales and mid-single digit growth, you know, over time as we move forward.

Andrew Charles, Analyst, TD Cowen: That’s helpful. You know, as you think about the ramp in new stores, you know, and you talked about how, you know, 2029 more of a steady rate, and again, we’ll hear more about this at Investor Day on the specifics. Kind of curious, I mean, are you piloting opportunities to lower the cost of the box, you know, as we get ahead of this to better understand kind of what the, you know, Chili’s of the future really looks like?

Andrew Strelzik, Analyst, BMO3: Yes. I mean, absolutely, we always look at, you know, how can we optimize costs in the box. I mean, I will say just over time, especially post COVID, there has been inflation in how you build the restaurants. You know, the great news is we took our AUVs from around $3 million to we talked about approaching $5 million. That gives us a lot more opportunity. You know, with our improving AUVs, that doesn’t give us a lot of opportunity to necessarily shrink the box because we’re trying to accommodate more guests, but we are always looking at that. What I will tell you is the returns we’ve seen even on the restaurants we’ve been growing over the last few years have been great.

We feel really confident in that, and we’re really set up, you know, to build some restaurants with some great returns as we move forward. We’re always looking to see if there’s opportunities, you know, to optimize the box and our spend.

Andrew Charles, Analyst, TD Cowen: That’s great. Thank you. Very helpful.

Andrew Strelzik, Analyst, BMO3: Thank you.

Andrew Strelzik, Analyst, BMO5: Your next question for today is from Christopher Carril with KeyBanc Capital Markets.

Christopher Carril, Analyst, KeyBanc Capital Markets: Hi. Good morning. Thanks for the question. I guess just following up on earlier questions about the check, can you update us more specifically on how you’re thinking about the mix component of check moving forward here over the near to medium term? Kevin, I believe you mentioned the $3-$4 check gap to the competition. Any additional thoughts on the long term check opportunity would be helpful.

Andrew Strelzik, Analyst, BMO3: Chris, do you mean on the check? We’re always looking for opportunities to grow mix, you know. Right now, like Kevin said, just recently, we’ve seen some softness at mix. Though it was very interesting that as soon as we saw softness in mix, we saw our traffic start to accelerate. Again, that’s why we feel very confident about mid-single digits and positive traffic, you know, as we finish up this fiscal year. Now moving forward, we’re always looking for opportunities to grow check. We’ve done a great job of it over the last 3 years. We’ll look to continue to optimize. But you know, if I’m thinking longer term, you know, we know what that pricing strategy is with the same store sales, and we talked about that range.

I think we’re, you know, we’re really gonna be focused on growing traffic on top of that.

Andrew Strelzik, Analyst, BMO1: Yeah. As far as like the, you know, what guidance we give the teams on $3-$4 below category, but we don’t think about it that way. That’s more of an output that we report out to everybody about, you know, it’s a very foyerized demo that, you know, we’re lower priced than our competitors. The way we think about value is, and we need this across the entire menu, is how do we create abundant value everywhere in our menu so that when people leave Chili’s, they’re like, "Wow, that was an incredible value." You know, we’ve been slowly renovating our menu to get to that value across the entire menu. You know, we started with, you know, burgers and fries and fajitas and, you know, we have it in margaritas.

Now we’re, you know, we did obviously did it in Chicken Crispers. Now we’re doing chicken sandwiches. You know, the next to go will be salads and steaks. We did it with ribs actually last year, where it’s a much more abundant value. Even if the price is a little higher, you get 50% more ribs and they’re meatier and it’s a bigger plate. That’s the way we think about it. It’s like when we’re in the test kitchen with our operators, we’re like, "Hey, is this something that’s gonna be wow value? And if it’s not, we gotta continue to work on it." The outcome is, you know, the things that we report to you on price and how we’re lower than the competitor.

The important thing is when I get a plate of Chili’s, do I feel like that was wow value that I wanna come back for?

Christopher Carril, Analyst, KeyBanc Capital Markets: Got it. Thank you. That’s helpful. Then just, turning to Maggiano’s, now that George is overseeing marketing for Maggiano’s in addition to Chili’s, can you maybe speak to how you’re thinking about marketing for the brand and what that could look like, you know, when you do begin to see signs of traffic stability and growth?

Andrew Strelzik, Analyst, BMO1: Yeah, you know, it’s, you know, we’re less than 50 restaurants, so it’s never gonna be this, you know, big national TV thing that like Chili’s has. You know, but George, the lens that George is bringing to the business right now is empathy for the guest experience. Because at the end of the day, we’ve got to improve food service and atmosphere at Maggiano’s if we wanna grow traffic over time. You know, he’s looking at things like menu presentation, family style, the entire guest experience from the time you get into the lobby to when you sit down to when you check out. These are all things that we need to bring a guest empathy lens to, and that’s primarily what he’s focused on right now. You know, should we get that into a place that we’re really excited about?

You know, will we do some demand creation? Probably. Given that it’s, you know, we’re not a national brand, we don’t have Maggiano’s everywhere, it’s never gonna be like what you see at Chili’s.

Christopher Carril, Analyst, KeyBanc Capital Markets: Got it. Thank you.

Andrew Strelzik, Analyst, BMO5: Your next question for today is from Christine Cho with Goldman Sachs.

Christine Cho, Analyst, Goldman Sachs: Thank you for taking the question. Could you give us a quick update on the off-premise trends and whether that channel has proven more resilient, in the increased kind of check management standpoint? I know there has been a clearly, a stronger emphasis on elevating the in-restaurant experience, but do you see an opportunity to lean further into the off-premise channel going forward? Thank you.

Andrew Strelzik, Analyst, BMO3: Yeah. Our off-premise, you know, it’s been hanging in there. It’s usually been about, what, 23, 24-

Andrew Strelzik, Analyst, BMO1: Twenty-three.

Andrew Strelzik, Analyst, BMO3: 23%, 24% of, you know, total sales. It’s been pretty steady. You know, it did have the same negative traffic that the dine-in did or the overall brand did this last period. With that being said, we do think there’s opportunity. We’ve really been focused on the dine-in experience, and we think there is opportunity to, again, take friction out of that whole guest experience with off-premise. You know, we think that we can improve that experience, get better throughput. It will be a focus as we move forward.

Andrew Strelzik, Analyst, BMO1: Yeah. I mean, the big opportunity is just the overall experience of picking up. It’s not, you know, the improvement that we’ve made from the dine-in, we still have opportunity to do on-to-go. You know, our quote time calculator hasn’t been updated in a while. Since our ticket times are so much faster, a lot of times we quote times that are way longer than when the food is actually made. We’ve gotta get that thing updated. We’ve gotta make the experience to pick up a lot more seamless, you know, ideally with some order boards so you would know, you know, whether where your order is and whether it’s ready to be picked up.

We just made some investments in packaging that are already in all the numbers that you guys have to make the actual experience getting the food home a whole lot better. To me, you know, the important thing is let’s get the fundamentals right before we go try to put any kind of gas on it, and we’ve got some work to do there.

Christine Cho, Analyst, Goldman Sachs: Thank you.

Andrew Strelzik, Analyst, BMO5: We have reached the end of the question and answer session, and I will now turn the call back over to Kim Sanders for closing remarks.

Andrew Strelzik, Analyst, BMO2: Thank you, Holly. That concludes our call for today. We appreciate everyone joining us and look forward to updating you on our fourth quarter and fiscal year 2026 results in August. Have a wonderful day.

Andrew Strelzik, Analyst, BMO1: Thank you.

Andrew Strelzik, Analyst, BMO3: Thanks, everyone.

Andrew Strelzik, Analyst, BMO5: Thank you. This concludes today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.