Chili's 2012 Annual Report Download - page 14

our franchisees (new or existing). At June 27, 2012, 12 total domestic development arrangements existed. A
typical domestic franchise development agreement provides for payment of development and initial franchise
fees in addition to subsequent royalty and advertising fees based on the gross sales of each restaurant. We expect
future domestic franchise development agreements to remain limited to enterprises having significant experience
as restaurant operators and proven financial ability to support and develop multi-unit operations.
Domestic expansion efforts continue to focus not only on major metropolitan areas in the United States but
also on smaller market areas and non-traditional locations (such as airports, college campuses, toll plazas and
food courts) that can adequately support our restaurant brands.
During the year ended June 27, 2012, our domestic franchisees opened 6 Chili’s restaurants. Additionally,
we purchased two Chili’s restaurants from one of our franchisees in the Miami, Florida metropolitan area.
International
We continue our international growth through development agreements with new and existing franchisees
and joint venture partners introducing the Chili’s brand into new countries, as well as expanding them in existing
countries. At June 27, 2012, we had 25 total development arrangements. During the fiscal year 2012, our
international franchisees and joint venture partners opened 29 Chili’s restaurants. In the same year, we entered
into new or renewed development agreements with one franchisee for the development of 7 Chili’s restaurants.
The areas of development for these locations include all or portions of Costa Rica.
As we develop Chili’s internationally, we will selectively pursue expansion through various means,
including franchising and joint ventures. 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.
Restaurant Management
Our Chili’s and Maggiano’s brands have separate designated teams that support each brand for operations,
finance, franchise, marketing, peopleworks and culinary. We believe these strategic, brand-focused teams foster
the identities of the individual and uniquely positioned brands. To maximize efficiencies, brands continue to
utilize common and shared infrastructure, including, among other services, accounting, information technology,
purchasing, legal and restaurant development.
At the restaurant level, management structure varies by brand. A typical restaurant is led by a management
team including a general manager, two to six additional managers, and for Maggiano’s, an additional three to
four chefs. The level of restaurant supervision depends upon the operating complexity and sales volume of
individual locations.
We believe that there is a high correlation between the quality of restaurant management and the long-term
success of a brand. In that regard, we encourage increased experience at all management positions through
various short and long-term incentive programs, which may include equity ownership. These programs, coupled
with a general management philosophy emphasizing quality of life, have enabled us to attract and retain key team
members.
We ensure consistent quality standards in all brands through the issuance of operations manuals covering all
elements of operations and food and beverage manuals, which provide guidance for preparation of brand-
formulated recipes. Routine visitation to the restaurants by all levels of supervision enforces strict adherence to
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