Chili's 2015 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 24, 2015, we owned,
operated, or franchised 1,629 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 and consumer confidence continued to improve steadily
this year and have driven slight improvements in the casual dining industry; however, growing sales and traffic
has been a challenge over the last five years with steadily increasing competition. U.S. economic growth has
been steady but wage growth has been slow and this wage pressure has challenged both restaurant operators and
consumers as discretionary income available for restaurant visits has been limited. In response to these economic
factors, we have developed strategies that we believe are appropriate for all operating conditions and will provide
a solid foundation for earnings growth going forward.
We have completed a number of significant initiatives in recent years that have helped us drive profitable
sales and traffic growth and to improve the guest experience in our restaurants. Investments in restaurant
reimages, new kitchen equipment and operations software have improved the relevance of the Chili’s brand and
the efficiency of our restaurants. Our new kitchen equipment enables us to provide a higher quality product at a
faster pace, enhancing both profitability and guest satisfaction. Our Chili’s reimage program is complete and the
design is intended to revitalize Chili’s in a way which enhances the relevance of the brand while staying true to
Chili’s brand heritage. 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 improve the efficiency of our
restaurant operations and reporting capabilities. We believe that these initiatives will positively impact the
customer perception of our restaurants in both the dining room and bar areas and provide us with a great
foundation for continued success.
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