4Q Same Store Sales


Chili's Bar & Grill

Chili's has finally decided on a repositioning that makes it simple to understand what the brand is all about. This refined brand positioning centers around getting friends & family together over improved burgers, ribs & sizzling fajitas and includes a 40% reduction in low-mixing menu items along with quality improvements across signature items (burgers, ribs & fajitas). A 10/17 ad says it best: "We're focused on 1 thing burgers, ribs & fajitas. We're reeling in our menu cuz it got out of hand. We had a moment of self actualization." Noticeable signature menu improvements include: fajitas with 48% more meat; Texas Size Ribs with 30% more meat offered at same price; and Bigger Big Mouth Burgers (half-pound with handcrafted smashed patties). Also, Chicken Crispers (another core category) was upgraded with the use of all-natural chicken and the custom combo section was replaced with Smokehouse combos (bone-in chicken, ribs & jalapeno sausage). An added benefit is that menu simplification is driving faster & hotter food with a 50% reduction in frequency of problematic 15+ minute tickets. Impressively, preference has increased +40% across these signature entrees. The brand is also executing around its goal of offering more compelling price points with value LTO platforms that include: popular $22 Dinner for 2 (pricing increased by 10% to help pay for food investments); Oldtimer Burger With Cheese for $6.99; Bigger Fajitas for $10.99; and 3 Course Meal for $10. Lunch benefits from 10 lunches for $7 offer and innovation around burgers, ribs & fajitas which track dinner menu improvements. We like the catchy "Oh Chili's is back. Baby back, baby back." jingle which provides an effective platform to message about core signature items. With that being said, it remains to be seen whether this repositioning will drive sufficient traffic and sales growth to cover this very substantial investment in food costs. It is possible that a shift to higher quality positioning will ultimately provide the brand permission to increase pricing and check in-line with the segment average which we think is necessary to justify this new strategy. In conclusion, while the chain's new course is quite sensible, there is still the fundamental issue of whether it will improve the brand's overall value/quality equation sufficiently in the eyes of today's consumers to ignite long-term traffic/comp growth. 


Jack in the Box

Jack in the Box's brand positioning benefits from: flavorful, unique & craveable foods; product innovation; breakfast & late night strength; and penetration in fast-growing Hispanic demo. Although this regional system has 70% of its stores located in California and Texas, the brand enjoys the 2nd largest QSR hamburger share in 8 of its top 10 markets. While the chain's cooling comps reflect difficulty in keeping-up with price competition given an elevated West Coast cost structure, its ability to offer a new tiered low-priced value platform as a primary media message when needed will help the chain better compete with a plethora of single items priced under $5 in the market. The brand's popular 2 for $1.19 tacos & Monster Tacos also represent good value, are unique to QSR burger chains and work well with Hispanic customers. Menu positioning further benefits from: better burger positioning reinforced by Buttery Jack burger platform and Double Jack; all day full menu availability; and +75% outperformance of new product intros, reflecting the brand's commitment to innovation. However, this regional chain's small scale (8th largest marketing budget & use of less efficient local ad channels) and exposure to higher West Coast labor and real estate costs means that competing around price is neither easy nor desirable. For this reason, the brand's pivot to value defined by sub $5 prices (as opposed to historic use of bundled value offers) can only be used as a temporary traffic boosting strategy. In conclusion, while Jack in the Box has made progress improving its menu and operations while also playing catch-up on mobile and with a new remodel, the key issue will be how the chain deals with value over the long-term given an unfair cost disadvantage on the West Coast.





Church’s specializes in Southern-style, hand-battered, double-breaded fried bone-in chicken (available in Original & Spicy) which is freshly prepared throughout the day in small batches. This 60+ year old brand is very well established as a key chicken segment player (especially within core markets) although it faces: stiff internal competition from KFC and Popeyes; increased external competition from QSR sandwich discounting to go with this segment's strong incursion into chicken products; increased competition from supermarkets; and a secular trend towards healthier foods & boneless chicken. Also, a brand orientation towards a lower income, inner-city demo (big users of fried bone-in chicken) means that value remains a critical aspect of their business which requires Church's to offer sufficient discounts during this extended period of consumer weakness. Notably, brand management is not sitting still and the system has progressed in improving operations (increased system consistency & freshness driven by cooking smaller batches of chicken, more frequently with an operational focus on friendliness & service speed) that opens the door for a new marketing team that is implementing the following new tactics for 2018: stronger dual-language messaging; more compelling traffic-driving LTOs; focus on developing menu product segments with high growth potential (including portable boneless); and the development of creative ways to maximize share for core menu items (specifically bone-in chicken). While we like this focus, it is notable that the chain's relatively small marketing budget translates into less media efficiency and a general lack of access to national programming which complicates the task. In conclusion, while Church's is executing around a solid strategy, sales continue to be challenged by a difficult operating environment which impedes unit level profitability and development, thus requiring more patience for stake holders.



Panera is well positioned as an industry leader which has proven adept at implementing innovations designed to make the chain a better competitive alternative. The brand's well-conceived "Concept Essence" positioning (food that tastes good and is good for you to go with an elevated experience) is built around: a cafe-bakery image, clean foods, quality artisan products and a warm community gathering spot that provides a "3rd place" oasis (beyond home & work place) with the comfort of a living room and the spirit of a village coffee shop. Further, Panera well addresses the growing demand for “craveable wellness” and "food as medicine" as the first and only national restaurant chain with a 100% clean menu. Strong brand positioning is also based on: (1) 30% digital sales mix; (2) industry's largest loyalty program (27MM members) which drives 50% of all transactions; and (3) omni-channel approach with delivery available in 50%+ of the system and catering sales growing double-digits each year. Progress is fueled by the system's innovative 2.0 roll-out which includes ordering kiosks, advanced ordering with app for Rapid Pickup and web-based catering & delivery which are all helping to drive a higher average retail check. Having said this, it is notable that Panera's sales have been muted by: a difficult consumer environment; rapid growth from new fast casual entrants; and growing external competition from QSR+ and casual players providing greater value and faster service speeds at lunch. Also, Chipotle's well publicized struggles may have negatively impacted the "healthy" halo that has been so important to Panera. Despite all this progress, the chain continues to be challenged as an upscale brand fighting for market share in an operating environment marked by heavy discounting and store-level margin pressure reflects that the chain is still waiting for its brand investments to gain traction. In conclusion, it is our opinion that Panera's recent transition to a private ownership structure was very strategic in that it provides the chain with a longer runway to generate returns on its brand investments that offer so much promise for the future.