Brinker International, Inc. History

Company Perspectives:

To be the very best in the business. Our game plan is status go ... we are constantly looking ahead, building on our strengths, and reaching for new goals. In our quest of these goals, we look at the three stars of the Brinker logo and are reminded of the basic values that are the strength of this company ... People, Quality and Profitability. Everything we do at Brinker must support these core values. We also look at the eight golden flames depicted in our logo, and are reminded of the fire that ignites our mission and makes up the heart and soul of this incredible company. These flames are: Customers, Food, Team, Concepts, Culture, Partners, Community and Shareholders. As keeper of these flames, we will continue to build on our strengths and work together to be the best in the business. Key Dates:

Key Dates:

1975:

Larry Levine opens first Chili's Grill & Bar in Dallas, Texas.

1983:

Norman Brinker takes over Chili's restaurant chain.

1988:

First Romano's Macaroni Grill opens in San Antonio, Texas.

1991:

Chili's is renamed Brinker International, Inc.

1992:

Brinker reaches an agreement with Pac-Am Food Concepts to expand Chili's franchise to the Far East.

1995:

Brinker establishes a strategic partnership with Lettuce Entertain You Enterprises.

2000:

Norman Brinker steps down as company chairman.

Company History:

Brinker International, Inc. operates several popular American restaurant chains: Chili's Grill & Bar, Romano's Macaroni Grill, Cozymel's Coastal Mexican Grill, On the Border Mexican Grill & Cantina, Maggiano's Little Italy, Big Bowl, Wildfire, Corner Bakery Cafe, and Eatzi's Market and Bakery. The mainstay of the company is Chili's, a chain of more than 1,000 eateries featuring Southwest decor and inexpensive meals. Under the direction of Norman E. Brinker, for whom the company is named, Brinker has expanded the Chili's chain and opened similar restaurants with different themes.

1975: The Birth of the Chili's Concept

Brinker traces its origins to the first Chili's Grill & Bar, opened on Greenville Street in Dallas in March 1975. Chili's was established by Dallas restaurateur Larry Levine, who sought to provide an informal full-service dining atmosphere with a menu that focused on different varieties of hamburgers offered at reasonable prices. Levine's concept proved successful, and 22 more Chili's restaurants, featuring similar Southwest decor, were opened in the late 1970s and early 1980s. In 1983, Levine's restaurant chain was taken over by Norman E. Brinker.

Brinker had a long and illustrious history in the restaurant business. He had begun his career in 1957 working for the Jack-in-the-Box fast-food chain, which then had just seven outlets. Nine years later, Brinker left the greatly expanded Jack-in-the-Box operation to found Steak & Ale, an informal, full-service restaurant chain with a menu that emphasized inexpensive steak dinners and friendly service. Responsible for introducing the salad bar, an innovation that soon swept the restaurant industry, this new, casual dining concept became a favorite among the baby boomer generation.

By the 1970s, Brinker's nearly 200 restaurants, including the Steak & Ale and Bennigan's chains, were overseen by his S & A Restaurant Corporation. When S & A was sold to the Pillsbury Company in 1976, Brinker became an executive at Pillsbury, in charge of that company's restaurant group, which now had four chains, including Burger King and Pillsbury's Poppin' Fresh Restaurants. Together, the operations of this group represented the second largest restaurant company in the world.

By 1983, however, Brinker had decided to leave Pillsbury to strike out again on his own. 'I wanted to see if I could take a very small company and develop it against the big chains,' Brinker recalled in a 1992 article in Food & Service magazine. Toward this end, Brinker purchased a significant share in the Chili's chain, becoming its chairperson and chief executive officer. At this time, Chili's had less than $1 million in equity, was $8.5 million in debt, and was earning less than $1 million a year. Planning to expand, Brinker took Chili's public in 1984, selling stock under the ticker symbol EAT. On the basis of Brinker's strong reputation in the restaurant industry, Chili's stock offering received strong support from the investment community.

Franchise Expansion in the 1980s

In 1984, Chili's 23 restaurants were generating $40 million in sales from their menu of gourmet burgers, french fries, and margaritas. To improve the chain's profitability and thereby allow for expansion, Brinker began the process of fine-tuning Chili's operations. Seeking input from Chili's customers, as well as from customers of competing restaurants, Brinker made a practice of strolling around the parking lots of eating establishments, informally asking customers how they liked their meals and what changes they would like made. On the basis of this feedback, he began to shift the focus of Chili's menu away from burgers to include a broader array of salads and chicken and fish entrees.

Throughout the mid-1980s, Brinker and his associates expanded Chili's steadily, opening new restaurants across the country and further adapting the eatery's offerings. By the end of the decade, burgers accounted for just ten percent of the company's sales, as new items, such as ribs and fajitas, proved more popular. The company counted on its loyal customers, dubbed 'chiliheads,' to keep revenues high, while also striving to maintain its rapid rate of customer turnover; the average length of time a customer spent in a Chili's restaurant was just 35 minutes, which allowed for more profitable and efficient use of space and wait staff.

By the late 1980s, the company was ready to branch out into new restaurants and began to consider several different acquisitions. A plan to attempt regaining control of Brinker's former S & A Restaurant Corporation was vetoed, as was an idea to take on several fast-food chains, such as Taco Cabana and Flyer's Island Express. Chili's eventually decided to focus on the casual, low-priced restaurant niche, in which it was already a strong player. In February 1989, the company purchased Grady's Goodtimes, a Knoxville, Tennessee-based restaurant chain owned by a family named Regas, who had been in the restaurant business in Tennessee since 1919. In 1982, the Regas family had opened the first of its Grady's Goodtimes outlets, which served primarily beef, seafood, salads, and sandwiches.

Since the Dallas restaurant market already had a chain called Grady's, Chili's executives decided to call their new chain 'Regas.' This new name eventually proved unsuccessful, however, as some customers expressed confusion over its pronunciation and others associated it with 'regal,' leading them to suspect that it was an expensive restaurant. Moreover, Regas faced tough competition from established steakhouse chains in Texas. As a result, Chili's faced unexpected difficulties in expanding the acquisition.

Nine months after purchasing Regas, Chili's acquired another restaurant concept, which it also planned to expand into a chain. With $41 million in capital obtained through a stock sale, Chili's purchased the rights to the Romano's Macaroni Grill concept. Texas restaurateur Phil Romano had opened the prototype restaurant in 1988 in a location north of San Antonio, Texas. He based the eatery's atmosphere and menu on the communal style of dining that he remembered from growing up in an Italian family. Just as his grandfather had always kept a four-liter jug of wine on the dinner table, patrons in Romano's restaurant were provided with casks of house red wine. Customers were invited to serve themselves throughout the meal and then to inform their waiter of how much they had consumed; the waiter would then charge them accordingly. This 'honor system' for wine was modified in areas where liquor laws forbid patrons to serve themselves, but on the whole, it helped to keep sales high at Romano's.

Other innovations at Romano's restaurants included glass walls through which patrons could see kitchen workers creating the evening's meals. The unique interior design of Romano's created a cavernous effect, with strings of bare light bulbs illuminating high, wooden, vaulted ceilings and tables placed between fieldstone arches. Daily specials were displayed in deli cases near the restaurant's front door, and crates of wine and canned tomato products were hung on the walls, serving as decoration and storage space.

Chili's planned for Romano's to compete with the extremely successful Olive Garden chain of Italian restaurants owned by General Mills. Rapid expansion of Romano's and Regas was anticipated, and Brinker set a goal for the Chili's company to earn annual revenues of $1 billion by 1995. Brinker planned to pattern the growth of the new acquisitions after the Chili's chain expansion. In just seven years under Brinker's leadership, Chili's had grown to include 215 restaurants; although a large percentage of these were directly owned by the company, a franchising program also had proved useful in opening new restaurants.

The Early 1990s: New Challenges

To help Romano's and Regas achieve similar growth, Brinker decided to keep the identities and priorities, even the administration, of its three restaurant chains distinct. Each restaurant was designed to appeal to a middle-class customer, between the ages of 25 and 55, and prices were kept reasonable: the average bill for a Chili's customer was $7.50; the average for a Regas customer was $9.50; and at Romano's, a slightly more upscale property, average bills per customer were $13.50. By the end of 1990, Chili's was operating 240 Chili's outlets, 14 Regas Grill restaurants, and three Romano's Macaroni Grill eateries. Together, these operations reported $438 million in revenues.

In May 1991, Chili's announced that it was changing its corporate name, to better reflect the newly diversified nature of its operations. The company's name became Brinker International, Inc., and Brinker told the Dallas Morning News that 'this new name is a way to bridge our past with our future as a multi-concept corporation in the midst of international expansion.' The first foreign countries targeted for Chili's operations were Canada and Mexico, where the company planned for restaurants to open in 1992.

Again, Brinker undertook extensive market research to adapt restaurant offerings to suit customer preferences. As U.S. demographic studies and customer feedback began to suggest that the average age of a Chili's customer had increased, the restaurant took steps to make itself more appealing to this segment of the public. The volume of music played over restaurant loudspeakers was lowered, the size of the print on Chili's menus was enlarged, sizes of some portions were reduced, and more low-fat entrees were added. At the same time, the company promoted Chili's as a friendly place for younger couples with children, providing fast and efficient service and low prices. 'You have to stay in the energetic group of customers, but you try to tone it down enough so that you don't turn off the older group,' Brinker explained to Food & Service magazine.

To keep the company's operations as efficient and cost-effective as possible, Brinker also invested in an elaborate computer system. Computers were used to schedule workers' shifts and to help company headquarters determine the amount of supplies each restaurant needed. In addition, Brinker invested in extensive kitchen staff training programs, which were designed to minimize waste in company operations.

By the end of 1991, Brinker's had sales totaling $426.8 million and earnings of $26.1 million, a 44 percent increase over the previous year. Already operating a total of 271 restaurants by the spring of 1992, Brinker was opening one new restaurant a week, as the company chalked up a 23 percent rate of growth in sales, despite a general recession in the restaurant industry. Many of the Chili's restaurants opened in early 1992 showed a higher rate of sales than older properties, reflecting the company's growing expertise in the industry. Moreover, Brinker established Chili's restaurants in less populous areas, reflecting the widespread popularity of the Chili's concept.

Despite these strong signs of continuing financial health, Brinker executives estimated that the market for its Chili's chains would mature by the late 1990s. To take the pressure off the Chili's concept, and lessen the number of new restaurant openings needed to maintain brisk growth in corporate profits, Brinker looked for expansion in its newer properties.

By mid-1992, Brinker had opened 17 Regas restaurants, and, in response to the problems surrounding the chain's name, he had rechristened all of these outlets as Grady's American Grill. The company continued to experiment with different formats for the eatery, redesigning its interiors as more casual and being careful to distinguish Grady's from Chili's. As part of this effort, Grady's menu was centered on beef, seafood, and pasta, rather than the Mexican-based entrees that had become popular at Chili's.

Brinker also looked to Romano's to bolster corporate earnings. By May 1992, eight of these restaurants were in operation, contributing about $3 million a year in sales each, up from $2.4 million the year before. A Romano's restaurant cost no more to build than a Chili's and brought in revenues that were twice as high, since its menu featured higher-priced items, and Brinker planned to nearly triple the number of Romano eateries over the next 12 months. The company's strategy was to enter as many markets as soon as possible, reap the rewards of novelty in areas without moderately priced Italian eateries, and then decide on which markets could support two or more Romano's outlets.

The success of Romano's prompted Brinker to test a second, less expensive Italian eatery concept, also developed by restaurateur Phil Romano. In July 1992, Spageddie's, a low-priced, casual pasta restaurant, was opened at a test location in Plano, Texas. The prototype restaurant seated 216 patrons, had a decor featuring bright colors, decorative canned goods, and colorful billboards, and included two bocce ball courts to keep customers amused while they waited for seats. As in Romano's restaurants, exhibition kitchens at Spageddie's allowed patrons to watch their food being prepared. With the two chains, Brinker hoped to flank its competitor Olive Garden, with Spageddies engaging a slightly less expensive niche and Romano's occupying a more costly segment of the market.

At the end of June 1992, Brinker posted annual revenues of $519.3 million, with earnings of $26.1 million; 300 Chili's Bar & Grills, 20 Grady's American Grills, and 17 Romano's outlets were in operation. Later that year, Brinker announced plans for further foreign expansion, signing an agreement with Pac-Am Food Concepts, based in Hong Kong, to franchise 25 Chili's restaurants in the Far East over the next 15 years. Pac-Am planned to duplicate the Chili's decor and menu in locations such as Jakarta, Indonesia, and Seoul, South Korea, with some changes to satisfy local tastes.

Brinker also began to test another theme restaurant, Kona Ranch Steakhouse, in Oklahoma City. A small Tex-Mex restaurant in San Antonio, called Nacho Mama's, also was considered a possible avenue for expansion, although Brinker's executives vowed to change that restaurant's name in the event of an acquisition. In the midst of its aggressive plans to expand all four of its principal restaurant chains, the company encountered an unexpected obstacle on January 21, 1993, when Norman Brinker suffered a serious head injury while playing polo. Brinker was comatose for two weeks, during which time he was temporarily replaced at the company by his second in command. Despite an initially unfavorable prognosis, Brinker made a rapid recovery and returned to resume his positions of chairperson and CEO in May 1993.

Shortly thereafter, Brinker International moved to expand its Spageddies property, buying out the interest of its partner Romano in the prototype Spageddie's restaurant and announcing that two more Texas locations, in Tyler and Mesquite, would be opened. To provide a corporate structure that would enhance growth in all areas of the company, Brinker reorganized its headquarters staff into concept teams, which were designed to act as small companies within the framework of the larger corporation. As Brinker approached the mid-1990s, it appeared well positioned for strong growth, enhanced by an experienced management team and a track record of success with a variety of different restaurant concepts.

Restaurant Concepts for the Millennium

The year 1995 was pivotal for Brinker. By mid-decade it had become clear that the traditional casual dining concept was losing momentum, while other, more specialized niches, in particular Italian and Mexican cuisine, promised a much larger potential for growth. Observing the success of The Olive Garden, which remained the only major chain of Italian restaurants in the United States, Brinker recognized the need to retool its own Italian concept. In July 1995 the company announced a strategic partnership with Lettuce Entertain You Enterprises, a restaurant developer in the Chicago area. The joint venture enabled Brinker to acquire three of Lettuce's Maggiano's Little Italy restaurants and five of its Corner Bakeries, in addition to establishing a creative development deal between the two companies. Dubbed the 'Dream Team' by executives from both sides, this arrangement brought together two men who were widely considered to be the best creative talents in the restaurant industry: Brinker's Phil Romano, 'an oracle' in the restaurant business, according to the Dallas Morning News, with Lettuce's Rich Melman, whom Business Week had called the 'Andrew Lloyd Weber of the Industry.' The two companies agreed to come up with at least one new concept within the first year, over which Lettuce would retain control. The company also created an Italian Concepts Division in 1996, naming Gerard Centioli as president.

In the meantime, Brinker also made some strategic changes in its holdings. In December 1995 the company sold Grady's and Spageddie's to Quality Dining Inc.; then, in January 1996 it opened its first Eatzi's in Dallas. Catering to the public's demand for restaurants that also featured prepared foods and groceries, Eatzi's was an immediate success, earning $12 million in the first year, more than double its predicted sales. By November 1997 a second location had opened in Houston, and a third opened in Atlanta the following February. During this same period, the company set out to modify its Romano's Macaroni Grill concept, with the aim of transforming it into a more casual, less expensive restaurant in order to attract a broader clientele. The new Romano's opened in November 1998 and promptly showed increased sales. In March 1999 Romano's debuted in the United Kingdom, the first of a projected 20 restaurants to be established in England through a joint venture with Queensborough Holdings PLC of London.

Brinker was equally determined in carving out its niche in the Mexican cuisine market. In February 1994 it acquired the On the Border restaurant chain, comprised of 21 units, and in May it opened the first Cozymel's Coastal Mexican Grill. The success of Cozymel's in Texas led to the announcement in May 1995 of the opening of an additional 12 locations nationwide. The following March the company embarked on an aggressive marketing campaign to promote the franchising of On the Border, and by early 1997 it announced the opening of two new On the Border locations in Columbus, Ohio.

By the end of the decade Brinker had nearly doubled its sales over a five-year period, from $1.2 billion in 1996 to nearly $2.2 billion in 2000, and increased its restaurant total to more than 1,000. Although economic indicators suggested a decline in the casual restaurant market in the future, the prognosis for the industry in general remained encouraging, and Brinker's proven talent for adaptation and innovation promised that the company would be able to confront its future challenges head on.

Principal Competitors: Carlson Restaurants Worldwide Inc.; Darden Restaurants, Inc.; Outback Steakhouse, Inc.

Further Reading:

• Bell, Sally, 'Norm!,' Food & Service, January, 1992.
• Bernstein, Charles, 'Brinker's Three-Way Combination: A Bid for Full-Service Dominance,' Nation's Restaurant News, October 29, 1990.
• Chaudhry, Rajan, 'Ron McDougall's Winning Ways,' Restaurants & Institutions, July 1, 1993.
• Fairbank, Katie, 'Eating Profits: Home-style Restaurants Losing Out in the Battle for Dining Dollars,' Dallas Morning News, November 5, 2000.
• Fox, Valerie, and Taylor, Lisa Y., 'Chili's Makes 1,000,' Dallas Business Journal, February 11, 2000.
• Gutner, Toddi, 'Norman Brinker Scores Again,' Forbes, January 6, 1992.
• Hall, Cheryl, 'Brinker International Runs on Good Game Plan,' Dallas Morning News, February 21, 1993.
• ------, 'The Brinker Touch,' Dallas Morning News, May 10, 1992.
• Oppel, Richard A., Jr., 'A Return Performance,' Dallas Morning News, May 5, 1993.
• Rigsby, G.G., 'Analysts Predict Slowdown in Casual-Dining Earnings,' Tampa Bay Business Journal, August 4, 2000.
• Ruggless, Ron, 'Brinker Inks Deal for Chili's Units in Asia,' Nation's Restaurant News, November 16, 1992.
• ------, 'Norman Brinker Hits the Comeback Trail,' Nation's Restaurant News, March 29, 1993.
• Sherbert, Felicia M., 'Beyond Chili's,' Market Watch, July/August, 1992.

Source: International Directory of Company Histories, Vol. 38. St. James Press, 2001.

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