CEO tries crisp ideas to add zest to Brinker

08:54 AM CST on Sunday, December 2, 2007

We hesitate to say this to 750,000 of you, but the chairman, chief executive and president of publicly traded Brinker International Inc. answers his own phone. At least he did until now.

As the parent company of Chili's, On the Border Mexican Grill and Cantina, Maggiano's Little Italy and Romano's Macaroni Grill, Brinker trades under the hopeful NYSE ticker symbol "EAT." The company serves more than 1.25 million guests daily. It owns or franchises 1,844 restaurants in 25 countries and territories, and employs more than 120,000 people. Its annual revenue is $4 billion.

Chili's Bar and Grill, founded by Larry Levine in 1975 in a converted postal station at the corner of Greenville Avenue and Meadow Road, took a fast-food mainstay - the hamburger - and cooked it like a steak. This casual dining concept was intended to fill the gaping hole between fast food and formal dining, a concept that proved to be - like its hamburgers - both rare and well done.

Norman Brinker, who had initiated his own original dining concept in 1966 - Steak & Ale - bought Chili's in 1983 and rechristened the chain Brinker International in 1991.

Macaroni Grill had been added in 1989 (after getting started in a San Antonio suburb); On the Border joined in 1994 (launched on Dallas' Knox Street, which, we might add, does not actually rest on any known border); and Maggiano's was added to the portfolio in 1995.

Chief executive Doug Brooks is the company's longest-tenured employee. He joined the organization in 1978 as a manager trainee, when the company had two stores.

Mr. Brooks was president of Brinker through most of the 1990s, became chief operating officer in 1998, chief executive in early 2004 and the big quesadilla - board chair - in 2005.

Unfortunately, the casual dining sector has spoiled somewhat with age.

As the fast-food segment evolves in quality and variety, Chili's and friends are feeling the heat.

When Mr. Brooks started, there were 1,000 people per restaurant in the U.S.; today there is one restaurant for every 526 people.

Worse yet, the distinctions between casual and fast-food dining are blurring, with fast food muscling into casual dining's territory. This has contributed to Brinker's rather flat stock performance over the last five years.

Mr. Brooks recognizes his challenge: He's the steward for one of the most successful brands in restaurant world history, so it's up to him to ensure that the venerable brand doesn't lose its relevance.

Here's how he plans to do that:

Spiced-up product delivery. Realizing that convenience is a key ingredient to battling fast-food chains, Mr. Brooks is determined to subtract at least 10 minutes from the 50-minute average time it takes to eat in his restaurants. Brinker is testing a system that arms wait staff with handheld computers that instantly send orders to the kitchen and swipe credit cards at the table.

Chili's Too and kiosks in airports have also earned Mr. Brooks' attention and zeal. Chili's now has 50 such locations. With almost endless traffic, little competition and minuscule square footage, their sales per square foot are off the charts - twice that of a normal Chili's.

Recognizing that 77 percent of all U.S. meals are bought from grocery stores and eaten at home, Mr. Brooks and Brinker are playing into this reality. Relying on its strong brand identification, Chili's now sells many of its products at grocery stores, and On the Border has become the second-largest seller of chips in the U.S.

Hospitality DNA. The casual dining industry used to be about service and quarterly profit, or vice versa. Such emphasis led to a fine dining experience but little customer loyalty amid the jillions of restaurant choices and 100 percent annual employee turnover.

Mr. Brooks is spearheading several initiatives to cement patronage and slice and dice employee turnover. He aims to transform the wait staff's relationship with customers from transaction-based to relationship-based.

To hire the right people for the job, the company uses a hiring tool that tests the hospitality gene in each prospective employee.

It helps determine how much they enjoy being with people and taking care of others, and only those who test well in the hospitality quotient are hired.

"People quit managers, not companies," Mr. Brooks said. "Managers who motivate positively have the best employees with best restaurant results." In the past, managers were judged by revenue only, with the single message being hit your numbers.

Today, employee-nurturing is given equal status with financial results. Bonuses used to be based on sales and profit only. Now employee turnover and customer survey results play a role, and all four are given equal weight.

Over the last 12 months, customer loyalty survey scores are up and turnover is down 37 percent, Mr. Brooks said.

International appetite. The cost of building a restaurant in the U.S. is up 35 percent over the last three years. Understandably, Brinker does best where labor and real estate are cheap and competition is undeveloped - overseas.

Brinker has 155 locations outside the U.S. and will open 45 more this fiscal year. Mr. Brooks says there's a strong international appetite for Western products. The Chili's restaurant in Baghdad, for instance, is prospering.

Sizzle for stockholders. Wall Street remains bearish on the restaurant industry. Not one to accept defeat, Mr. Brooks initiated a repurchase of stock and a 3-for-2 stock split in fiscal year 2007.

Brinker is also cutting costs by consolidating technology systems and sharing recruiting among the four brands. Recruiting costs are down 30 percent.

By emphasizing hospitality, low employee turnover and relationship-building with customers, Mr. Brooks is changing Brinker from a food company that serves people to a people company that happens to serve food.

Try as they might, fast-food chains cannot duplicate this strategic shift.

Pauline Graivier is president of Dallas-based Verbal Communications Inc. Rob Hoffman is a partner with Gardere Wynne Sewell LLP. (Gardere took Chili's public in 1984 and still represents Brinker. Brinker has also been a Verbal Communications client.)