Brinker International (EAT) Q2 2026: Chili’s Comp Outpaces Industry by 680bps, Reimage and Menu Upgrades Set Multi-Year Growth Path
Chili’s posted its 19th straight quarter of comp growth, widening its lead in value and guest experience metrics while accelerating operational improvements and capital deployment for sustained outperformance. Strategic menu upgrades, a robust reimage pipeline, and disciplined capital returns signal a business increasingly positioned for long-term share gains, even as Maggiano’s remains a work in progress. Management’s raised guidance and clear-eyed commentary on cost and growth levers reinforce conviction in the durability of the turnaround.
Summary
- Chili’s Value Leadership Widens: Sustained investment in menu and guest experience is driving share gains and operational leverage.
- Reimage and Unit Growth Ramping: Multi-year capital plan accelerates in 2027, targeting refreshed assets and new locations.
- Margin and Mix Discipline Holds: Strategic cost management and menu tiering support durable earnings even as input costs rise.
Performance Analysis
Chili’s delivered outsized comp sales growth, outperforming the casual dining industry by 680 basis points and marking its 19th consecutive quarter of same-store sales gains. Revenue rose on a blend of stable pricing, positive traffic, and favorable mix, with world-class marketing and core menu upgrades driving both new and repeat visits. The “Margarita of the Month” and upgraded appetizers boosted mix, while operational improvements reduced guest complaints to record lows and advanced Chili’s to top-three status across all syndicated guest perception metrics.
Operating margin at Chili’s expanded by 40 basis points year-over-year, offsetting Maggiano’s margin drag as that brand continues its turnaround. Margin improvement was driven by sales leverage, even as investments in labor, advertising, and food quality increased. Commodity cost inflation was managed through targeted price actions and value engineering, with cost of goods impacted by purposeful upgrades in bacon and ribs. Free cash flow remained robust, supporting $100 million in share repurchases and ongoing investment in asset refresh and new unit development. Maggiano’s, now a smaller contributor, showed early signs of stabilization but remains a drag on consolidated performance.
- Menu Upgrades Drive Mix and Margin: Enhanced nachos and bacon burger lines delivered double-digit sales lifts, while streamlined offerings improved execution.
- Operational Metrics Hit New Highs: Guest problem rates (GWAP) fell to 2.1%, and intent-to-return reached 78%, reflecting sustained improvement in food, service, and atmosphere.
- Marketing Investments Pay Off: Incremental advertising spend (2.9% of sales) yielded outsized returns, especially with the “Wicked Margaritas” campaign outperforming expectations.
Chili’s continues to set the pace for value and guest experience in casual dining, with strategic investments reinforcing a sustainable growth trajectory. The business is now positioned to lap high comps while maintaining positive traffic and margin discipline, even as Maggiano’s remains a margin headwind.
Executive Commentary
"The Chili's turnaround is real, it is sustaining, and we have no intentions of taking our foot off the gas, which means we will continue to be focused on improving our food, service, and atmosphere as well as continue making Chili's more fun, easier, and more rewarding for our team members."
Kevin Hochman, President & CEO
"We have grown our customer base by leaning into our everyday industry-leading value, core menu improvements, and marketing initiatives to position us well in a competitive and challenging environment. Our continued momentum and plans for the remainder of this fiscal year give me confidence in our ability to deliver on expectations, and our strong financial position will allow us to continue to invest in the business and return cash to shareholders, unlocking future growth potential."
Kim Sanders, Senior Vice President, Investor Relations (on behalf of CFO Micah)
Strategic Positioning
1. Menu Innovation and Tiered Pricing
Chili’s barbell menu strategy, which offers “good, better, best” price tiers, has allowed the brand to capture new guests without sacrificing margin or training customers to expect only low prices. Recent upgrades to nachos, queso, and burgers have driven sustainable sales layers, while the upcoming super-premium chicken sandwich launch is positioned to tap into the large and growing chicken category. By avoiding limited-time offers and focusing on core menu improvements, Chili’s has built operational simplicity and consistent guest satisfaction.
2. Asset Reimage and New Unit Growth
The company is accelerating its asset refresh, with four Chili’s reimages completed and 8-10 more slated for FY26. The learnings from initial remodels are informing a cost-effective, high-impact rollout, with a full ramp to 60-80 reimages in FY27 and over 100 in FY28, representing about 10% of the system. New unit development is set to move from flat to low-single-digit growth by FY28, supported by a strengthened balance sheet and improved site economics.
3. Operational Discipline and Labor Model Evolution
Chili’s is embedding “extreme ownership” principles at the restaurant level, with new P&L tools and training for managers. While a shift to a more variable, ownership-driven compensation model is under consideration, management is pacing changes to ensure alignment and capability building. This operational rigor has translated into industry-leading guest scores and lower problem rates, supporting both traffic and margin resilience.
4. Maggiano’s Turnaround Progress
Maggiano’s, now just 8% of sales and 3% of profit, is executing on food and value upgrades—such as increased pasta portions and the return of guest favorites—but remains a margin drag. Management is focused on stabilizing four-wall economics and sees eventual white-space growth potential, but near-term expectations remain muted with negative comps and ongoing investments.
5. Capital Allocation and Shareholder Returns
Strong free cash flow is enabling Brinker to fund both growth investments and shareholder returns, with $100 million in share repurchases this quarter. CapEx guidance was tightened, reflecting fewer equipment rollouts and a focus on high-ROI reimages. The balance sheet remains healthy, with refinancing opportunities under review but not yet actioned.
Key Considerations
Brinker’s Q2 showcased a business leveraging operational discipline and brand relevance to outgrow peers, while methodically investing in long-term levers:
Key Considerations:
- Sustained Comp Momentum: Chili’s is lapping industry-leading comps with continued positive traffic and mix, defying typical casual dining cyclicality.
- Menu and Marketing Synergy: Core menu upgrades and high-ROI marketing are compounding, with new product launches (e.g., chicken sandwich) poised to drive further traffic.
- Asset Refresh Impact: Early reimage results are promising, with guest and team feedback favoring lower-cost, high-impact remodel elements that will scale across the system.
- Margin Management Amid Cost Pressures: Strategic price/mix actions and disciplined cost control are offsetting commodity and wage inflation, supporting EPS guidance raises.
- Maggiano’s Remains a Drag: While stabilizing, Maggiano’s negative comps and margin headwinds are expected to persist through the back half, limiting consolidated upside.
Risks
Key risks include commodity cost volatility, particularly in beef and proteins, which could pressure cost of goods despite value engineering. The pace and ROI of asset reimages remain unproven at scale, and Maggiano’s turnaround is not yet delivering material profit improvement. Macroeconomic headwinds or a consumer pullback could challenge traffic gains, especially if QSR price gaps widen or industry value perception shifts. Execution risk exists in scaling new unit development and evolving the labor model without disrupting operational consistency.
Forward Outlook
For Q3, Brinker guided to:
- Chili’s comps in the mid-single-digit range post-storm recovery
- Margin profile similar to Q2, with slight cost of sales uptick from commodity inflation and menu investments
For full-year 2026, management raised guidance:
- Annual revenues of $5.76–$5.83 billion
- Adjusted diluted EPS of $10.45–$10.85
- CapEx of $250–$260 million
Management highlighted several factors that will shape results:
- Storm-related headwinds ($20 million revenue, $0.15 EPS impact) are largely contained to Q3
- Commodity inflation is expected to run mid-single digits in the back half, with some offset from tariff relief and favorable poultry/dairy trends
Takeaways
Brinker’s Chili’s brand is executing a rare combination of sustained comp growth, margin expansion, and operational improvement, while deploying capital for multi-year asset and unit growth. Menu innovation and value leadership are resonating with guests and driving market share gains, even as Maggiano’s remains a near-term drag. Investors should watch the scaling of the reimage program, the rollout of the new chicken sandwich lineup, and progress on the manager ownership model as leading indicators of future trajectory.
- Chili’s Outperformance: Sustained comp growth and guest metric gains reinforce the durability of the turnaround and support a premium valuation relative to casual dining peers.
- Strategic Capital Deployment: Asset refresh and new unit growth will define the next leg of expansion, with early reimage feedback supporting a scalable and cost-effective approach.
- Execution Watchpoints: Monitor Maggiano’s margin drag, commodity cost trends, and the ramp of new unit development as key variables for the next 12–24 months.
Conclusion
Brinker’s Q2 results confirm Chili’s is now a structurally advantaged brand in casual dining, with operational discipline, menu innovation, and capital allocation all aligned for continued share gains. The business is now positioned to deliver both near-term outperformance and long-term growth, though Maggiano’s remains a drag and execution risk persists in scaling asset and labor initiatives.
Industry Read-Through
Chili’s sustained comp outperformance and guest metric gains signal that value leadership and disciplined menu innovation are winning strategies in a challenged casual dining landscape. The success of core menu upgrades and high-ROI marketing campaigns may prompt peers to double down on operational basics and targeted product launches, rather than chasing limited-time offers or deep discounting. The ramp in reimage and new unit growth, if successful, could reset expectations for capital deployment across the sector, while the evolving labor ownership model may foreshadow broader shifts in restaurant management incentives. Maggiano’s continued drag highlights the challenges of turning around legacy brands lacking scale or clear differentiation.