Chili's 2014 Annual Report Download - page 38

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations
(“MD&A”) is intended to help you understand our company, our operations, and our current operating
environment. For an understanding of the significant factors that influenced our performance during the past
three fiscal years, the MD&A should be read in conjunction with the consolidated financial statements and
related notes included in this annual report. Our MD&A consists of the following sections:
•Overview—a general description of our business and the casual dining segment of the restaurant
industry
•Results of Operations—an analysis of our consolidated statements of comprehensive income for the
three years presented in our consolidated financial statements
•Liquidity and Capital Resources—an analysis of cash flows, including capital expenditures,
aggregate contractual obligations, share repurchase activity, known trends that may impact liquidity,
and the impact of inflation
•Critical Accounting Estimates—a discussion of accounting policies that require critical judgments
and estimates
OVERVIEW
We are principally engaged in the ownership, operation, development, and franchising of the Chili’s Grill &
Bar (“Chili’s”) and Maggiano’s Little Italy (“Maggiano’s”) restaurant brands. At June 25, 2014, we owned,
operated, or franchised 1,615 restaurants.
We are committed to strategies and initiatives that are centered on long-term sales and profit growth,
enhancing the guest experience and team member engagement. These strategies are intended to differentiate our
brands from the competition, reduce the costs associated with managing our restaurants and establish a strong
presence for our brands in key markets around the world.
Key economic indicators such as total employment, spending levels and consumer confidence continued to
improve steadily this fiscal year; however, the casual dining industry has continued to experience soft sales and
traffic. Historically low interest rates have diverted consumer discretionary spending to bigger ticket items and
housing. U.S. economic growth subsequent to the recession has been steady; however, wage growth has been
slow. This slow recovery has challenged the restaurant industry and consumers since 2009 and as a result, our
strategies and initiatives have been developed to provide a solid foundation for earnings growth going forward
and are appropriate for all operating conditions.
Our current initiatives are designed to drive profitable sales and traffic growth and improve the customer
experience in our restaurants. We have invested in upgraded kitchen equipment, operations software and reimage
initiatives as components of our strategy. The upgraded kitchen equipment has enabled us to provide a higher
quality product at a faster pace, enhancing both profitability and customer satisfaction. We believe the usability
and efficiency of the equipment will result in substantial labor savings over time. Also, the flexibility of our
equipment allows for the development of new menu categories that we believe will provide opportunities for
sales and customer traffic growth.
All company-owned Chili’s and Maggiano’s restaurants are now operating with an integrated point of sale
and back office software system that was designed to enhance the efficiency of our restaurant operations and
reporting capabilities. Timely and more detailed reporting in our restaurants has improved inventory and labor
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