Chili's 2008 Annual Report Download - page 37

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
delighting our guests, differentiating our brands from competitors throughout the industry, reducing costs
associated with managing our restaurants and establishing a strong presence in key markets around the
world.
During fiscal 2008, these strategies resulted in the following highlights:
• Introduced successful menu items across our brands as a result of our focus on food and beverage
excellence, including Honey Chipotle Chicken Crispers and updates on the classic Big Mouth
Burger at Chili’s, Border Smart selections at On the Border, and award-winning Little Italy
favorites at Maggiano’s;
• Innovated ToGo at Chili’s through developments in technology and processes with positive results
and plans to expand into fiscal year 2009;
• Re-imaged 73 Chili’s restaurants, resulting in mid-single digit increases in sales, with plans to
continue our re-image program in fiscal year 2009 at a lower level of investment per restaurant;
• Experienced significant growth in favorable guest feedback across the brands as a result of the
company’s focus on both hospitality and food and beverage excellence;
• Sold 76 Chili’s restaurants to our franchisee, ERJ Dining IV, LLC, with a commitment to develop
an additional 49 new Chili’s restaurants;
• Increased royalty revenues from franchisees by approximately 60% percent;
• Internationally, opened one company-owned restaurant and 31 franchised restaurants, including
eight under the company’s joint investment with CMR, S.A.B. de C.V. to develop approximately 50
Chili’s and Maggiano’s restaurants in Mexico, and entered into 10 additional development
agreements with franchisees with commitments to build 56 restaurants;
• Domestically, opened 70 company-owned restaurants (26 net of closures) and 43 franchised
restaurants and entered into three development agreements with franchisees, with commitments to
build 77 restaurants;
• Increased quarterly dividend by 22 percent to $0.11 per share and paid out $42.9 million in
dividends; and
• Repurchased 9.1 million shares of our common stock for $240.3 million.
During fiscal 2008 we also made some decisions that negatively impacted our financial results in order
to lay the foundation for achieving profitable long-term growth in fiscal 2009 and beyond. As mentioned
above, we committed to a plan to sell the Macaroni Grill brand due to its declining performance. As a
result, we incurred impairment charges of $152.7 million to write down the assets of Macaroni Grill to fair
value less costs to sell during fiscal 2008. In addition, we evaluated our portfolio of assets and supporting
infrastructure as well as refined our projected domestic company-owned restaurant development schedule
for fiscal 2009 and 2010. These decisions resulted in $82.1 million of special charges during the year
primarily related to restaurant closures, the adjustment of our development strategy and corporate
restructuring.
With our areas of focus clearly defined and our team members aligned and united behind common
goals, we are committed to driving growth inside the four walls of our existing restaurants. We will restrict
future development to a limited number of new restaurants that meet or exceed our internal hurdle rates
to ensure appropriate returns and shift a greater proportion of new restaurant development to our
expanding franchise network in the United States and internationally. We expect to open approximately 15
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