Brinker Suspends New Restaurant Construction, Cuts Executive Salaries
To survive virus-related traffic drop-offs, Dallas-based Brinker International is halting all new restaurant construction and slashing executive pay by at least 50%.
It has also transformed its Chili's and Maggiano's locations into off-premises dining hubs driven primarily by mobile apps, curbside pickup and third-party delivery services.
With these rapid changes in place, the firm's off-premises sales doubled year-over-year, according to Brinker's latest business update.
Most of Brinker's 1,600-plus restaurants remain open for to-go and delivery services, with deliveries now making up 20% of total sales.
With all of these changes in place, Brinker said it expects to burn less than $10M in cash per week. The restaurant operator has $237M in total liquidity and access to a line of credit with an $800M borrowing limit.
"We believe we have ample liquidity with our current capital position and will continue to evaluate all financing alternatives, including funds available under the CARES Act, as we navigate through this evolving situation," Brinker said in a public statement.
Brinker’s new reliance on off-premises sales and cash flow preservation is not necessarily new, given the firm’s discussion of some of these issues during the second-quarter 2020 earnings call in January.
Brinker executives said off-premises sales in the quarter grew 31% year-over-year, with delivery and to-go representing 17% of total sales.
The firm also showed some concern about growing labor expenditures, noting hourly wage rates, at the time, were up in the mid-3% range, prompting operators to focus on offsetting some of these inflationary pressures.
At the time, Brinker noted in its earnings call transcript that “growing cash flow is an important part of our strategy and our operating performance so far this year has set us on a path to achieving our growth targets for the year.”