Chili's 2010 Annual Report Download - page 12

As part of our strategy to expand through our franchisees, our overall percentage of franchise operations
(domestically and internationally) increased in fiscal 2010. The following table illustrates the percentages of
franchise operations (versus total restaurants) as of June 30, 2010 for the Company and by restaurant brand:
Percentage of Franchise
Operated Restaurants
Domestic International
Brinker ....................................................... 30% 14%
Chili’s ...................................................... 31% 14%
Maggiano’s .................................................. — 2%
International
We continue our international growth through development agreements with new and existing franchisees
and joint venture partners introducing our brands into new countries, as well as expanding them in existing
countries. At June 30, 2010, we had 43 total development arrangements. During the fiscal year 2010, our
international franchisees and joint venture partners opened 22 Chili’s restaurants and one Maggiano’s restaurant.
In the same year, we entered into new or renewed development agreements with four franchisees for the
development of 17 Chili’s restaurants. The areas of development for these locations include all or portions of the
following countries: Egypt, Peru, Philippines, Qatar and Syria. With over 200 franchised restaurant locations
internationally, we are making solid progress toward our goal of 425 Chili’s restaurants by the end of 2014.
As we develop our brands internationally, we will selectively pursue expansion through various means,
including franchising and joint ventures. 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.
Domestic
Domestic expansion is focused primarily through growth in our number of franchised restaurants. We are
accomplishing this part of our growth through existing, new or renewed development obligations with new or
existing franchisees. In addition, we have also sold and may sell company-owned restaurants to our franchisees
(new or existing). At June 30, 2010, 14 total domestic development arrangements existed. Similar to our
international franchise agreements, 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. In some instances, we have and may enter into development agreements for
multiple brands with the same franchisee.
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 30, 2010, not including any restaurants we sold to our franchisees, our domestic
franchisees opened 13 Chili’s restaurants. We also entered into a new development agreement with an existing
franchisee for the development of five Chili’s restaurants. The areas of development for these franchise locations
include all or portions of the States of Iowa, Kansas, Missouri and Nebraska. In connection with this
development agreement, we sold 21 Company-owned Chili’s restaurants to this franchisee.
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