Chili's 2013 Annual Report Download - page 38

(1) Revenues generated by franchisees are not included in revenues on the consolidated
statements of income; however, we generate royalty revenue and advertising fees based on
franchisee revenues, where applicable. We believe including franchisee comparable
restaurants revenues provides investors information regarding brand performance that is
relevant to current operations and may impact future restaurant development.
(2) Domestic comparable restaurant sales percentages are derived from sales generated by
company-owned and franchise operated Chili’s restaurants in the United States.
(3) System-wide comparable restaurant sales are derived from sales generated by company-
owned Chili’s and Maggiano’s restaurants in addition to the sales generated at franchisee
operated restaurants.
Chili’s company sales increased to $2,376.4 million in fiscal 2012, a 2.2% increase from $2,324.4 million in
fiscal 2011. The increase was primarily driven by an increase in comparable restaurant sales of 2.5% resulting
from improved guest traffic and favorable menu pricing. Company sales were negatively impacted by a decrease
in capacity of 0.4% for fiscal 2012 (as measured by average-weighted sales weeks) primarily due to three net
restaurant closures during fiscal 2012.
Maggiano’s company sales increased to $372.0 million in fiscal 2012, a 3.0% increase from $361.0 million
in fiscal 2011 driven primarily by favorable menu pricing and improved guest traffic.
Franchise and other revenues decreased to $72.3 million in fiscal 2012 compared to $75.9 million in fiscal
2011. The decrease was driven primarily by a $5.2 million reduction in revenues due to a change in the estimate
of gift card breakage in fiscal 2012. The decrease was partially offset by an increase in royalty revenues related
to the net addition of five franchised restaurants during fiscal 2012. Our franchisees generated approximately
$1,610 million in sales in fiscal 2012.
COSTS AND EXPENSES
Cost of sales, as a percent of company sales, decreased 0.6% in fiscal 2013. Cost of sales was positively
impacted by favorable commodity usage for proteins, decreased commodity usage by Maggiano’s resulting from
efforts to reduce waste and increased menu pricing, partially offset by unfavorable commodity pricing for beef
and pork. Cost of sales, as a percent of company sales, increased 0.4% in fiscal 2012. Cost of sales was
negatively impacted by unfavorable commodity pricing for pork, beef, oils and dairy, partially offset by
favorable commodity pricing for chicken and favorable menu pricing.
Restaurant labor, as a percent of company sales, decreased 0.2% in fiscal 2013 primarily driven by reduced
hourly labor costs resulting from the installation of new kitchen equipment and lower manager bonuses, partially
offset by increased employee health insurance expenses. Restaurant labor, as a percent of company sales,
decreased 0.5% in fiscal 2012 primarily driven by decreased hourly labor costs resulting from the installation of
new kitchen equipment, changes in the vacation policy and sales leverage related to higher revenue, partially
offset by higher salaries and payroll taxes.
Restaurant expenses, as a percent of company sales, increased 0.1% in fiscal 2013 primarily driven by
higher worker’s compensation insurance expenses and advertising, partially offset by lower repair and
maintenance expenses resulting from cost control initiatives and limitations on discretionary spending, lower
utilities expense and sales leverage on fixed costs related to higher revenue. Restaurant expenses, as a percent of
company sales, decreased 0.8% in fiscal 2012 primarily driven by sales leverage on fixed costs related to higher
revenue and lower repair and maintenance expenses. The decrease was also due to reduced credit card fees as a
result of the Durbin Amendment, lower worker’s compensation insurance expenses due to favorable claims
development and decreased utilities expenses due to lower rates and milder winter weather.
Depreciation and amortization increased $6.4 million in fiscal 2013 primarily due to Chili’s reimage,
kitchen equipment and software investments in existing restaurants, partially offset by an increase in fully
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