Chili's 2008 Annual Report Download - page 16

having significant experience as restaurant operators and proven financial ability to support and develop
multi-unit operations. In some instances we have and may enter into development agreements for multiple
brands with the same franchisee.
During the year ended June 25, 2008, not including any restaurants we sold to our franchisees, our
domestic franchisees opened 33 Chili’s restaurants, four On The Border restaurants, and six Macaroni
Grill restaurants. In addition, we sold 76 company-owned Chili’s restaurants to an existing franchisee.
During fiscal 2008, we also entered into new or renewed development agreements with three
franchisees for the development of 65 Chili’s restaurants, five On The Border restaurants, and seven
Macaroni Grill restaurants. The areas of development for these franchise locations include all or portions
of the States of Alaska, Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin, as well as various
airports and toll plazas in portions of the United States. We also completed the acquisition of two Chili’s
restaurants in the Pacific Northwest from our franchisee.
International Operations
Our strategy also includes the development of our brands internationally. We continue our
international growth through development agreements with new and existing franchisees introducing our
brands into new countries, as well as expanding them in existing countries. At June 25, 2008, we had 44
total development arrangements. During the fiscal year 2008, our international franchisees opened 25
Chili’s restaurants and three On The Border restaurants. In the same year, we entered into new or
renewed development agreements with 10 franchisees for the development of 94 Chili’s restaurants and 12
Maggiano’s restaurants. The areas of development for these locations include all or portions of the
countries of Canada, Egypt, El Salvador, India, Mexico, Morocco, Peru, Saudi Arabia, Singapore, and the
United Arab Emirates. We also continued our presence in the United Kingdom through a company-owned
affiliate, with the opening of one Chili’s restaurant.
Notably, we entered into an agreement with one of our franchisees in Mexico, CMR, S.A.B. de C.V.,
to jointly invest in a new company to develop Chili’s and Maggiano’s in portions of Mexico. The new
company anticipates developing approximately 50 restaurants over the next four years. In fiscal 2008, eight
new Chili’s restaurants were opened by this company.
As we develop our brands internationally, we will selectively pursue expansion through various means,
including franchising, joint ventures and company-owned development. Similar to our domestic franchise
agreements, a typical international franchise development agreement provides for payment of
development fees and franchise fees in addition to subsequent royalty fees based on the gross sales of each
restaurant. We expect future development agreements to remain limited to enterprises having significant
experience as restaurant operators and proven financial ability to support and develop multi-unit, as well
as, in some instances multi-brand, operations.
Company Development
While our near-term focus will be less on new company-operated restaurants than we have historically
done, our restaurant site selection process remains basically the same. We devote significant effort to the
investigation of new locations utilizing a variety of sophisticated analytical techniques. We evaluate a
variety of factors, including: trade area demographics, such as target population density and household
income levels; physical site characteristics, such as visibility, accessibility and traffic volume; relative
proximity to activity centers, such as shopping centers, hotel and entertainment complexes and office
buildings; supply and demand trends, such as proposed infrastructure improvements, new developments,
and existing and potential competition. Members of each brand’s executive team inspect, review and
approve each restaurant site prior to its acquisition for that brand.
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