BRINKER INTERNATIONAL INC

Previous wording

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 thirteen and twenty-six week periods ended December 27, 2023 and December 28, 2022, the MD&A should be read in conjunction with the Consolidated Financial Statements (Unaudited) and related Notes to Consolidated Financial Statements (Unaudited) included in this quarterly report. All amounts within the MD&A are presented in millions unless otherwise specified.

Current wording

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 thirteen and thirty-nine week periods ended March 27, 2024 and March 29, 2023, the MD&A should be read in conjunction with the Consolidated Financial Statements (Unaudited) and related Notes to Consolidated Financial Statements (Unaudited) included in this quarterly report. All amounts within the MD&A are presented in millions unless otherwise specified.

Previous wording

The Company is 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. As of December 27, 2023, we owned, operated or franchised 1,658 restaurants, consisting of 1,184 Company-owned restaurants and 474 franchised restaurants, located in the United States, 29 other countries and two United States territories. Our restaurant brands, Chili’s and Maggiano’s, are both operating segments and reporting units.

Current wording

The Company is 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. As of March 27, 2024, we owned, operated or franchised 1,618 restaurants, consisting of 1,176 Company-owned restaurants and 442 franchised restaurants, located in the United States, 27 other countries and two United States territories. Our restaurant brands, Chili’s and Maggiano’s, are both operating segments and reporting units.

Previous wording

Our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and food and beverage costs during fiscal 2023 and to a lesser extent during the first and second quarters of fiscal 2024.

Current wording

Our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and food and beverage costs during fiscal 2023 and to a lesser extent during fiscal 2024.

Previous wording

We have a flexible platform of value offerings at both lunch and dinner that we believe is compelling to our guests. Our “3 for Me” platform, a flexible value bundle provides our guests an unbeatable everyday value, while allowing us to be more flexible in terms of pricing, in light of the inflationary challenges. Additionally, we have continued our Margarita of the Month promotion that features a premium-liquor margarita every month at an every-day value price. Most of our value propositions are available for guests to enjoy in our dining rooms or off-premise.

Current wording

We have a flexible platform of value offerings at both lunch and dinner that we believe is compelling to our guests. Our “3 for Me” platform, a flexible value bundle, provides our guests an unbeatable everyday value. Additionally, we have continued our Margarita of the Month promotion that features a premium-liquor margarita every month at an every-day value price. Most of our value propositions are available for guests to enjoy in our dining rooms or off-premise.

Previous wording

In dining rooms, we use tabletop devices to engage our guests at the table. These devices provide functionality for guests to pay at the table, order or re-order, engage in digital entertainment, to provide guest feedback and interact with our My Chili’s Rewards program. Our My Chili’s Rewards loyalty program offers free chips and salsa or a non-alcoholic beverage to members based on their visit frequency. We customize offerings for these guests based on their purchase behavior. Our servers use handheld tablets to place orders for our guests, increasing the efficiency of our team members and allowing orders to reach our kitchen quicker for better service to our guests. Third-party delivery orders for our restaurants are sent directly into our point of sale system, creating efficiencies and a system that allows us to better serve our guests. The operating results for our virtual brand, It’s Just Wings®, are included in the results of our Chili’s brand, based on the restaurants that prepared and processed the food orders.

Current wording

In dining rooms, we use tabletop devices to engage our guests at the table. These devices provide functionality for guests to pay at the table, order or re-order, engage in digital entertainment, to provide guest feedback and interact with our My Chili’s Rewards program. Our My Chili’s Rewards loyalty program offers free chips and salsa or a non-alcoholic beverage to members based on their visit frequency. We customize offerings for these guests based on their purchase behavior. Our servers use handheld tablets to place orders for our guests, increasing the efficiency of our team members and allowing orders to reach our kitchen quicker for better service to our guests. Third-party delivery orders for our restaurants are sent directly into our point of sale system, creating efficiencies and a system that allows us to better serve our guests. The operating results for our virtual brand, It’s Just Wings®, are included in the results of our Chili’s brand.

Previous wording

Maggiano’s - At Maggiano’s, we are focused on making our guests feel special. This warm and generous hospitality creates an environment where guests come together to celebrate birthdays, weddings and many more special occasions. While our dining rooms support the majority of our business, we have focused on increasing our carry-out and delivery business in recent years, including through partnerships with delivery service providers that have made our restaurants more accessible to guests and helped create an additional significant revenue channel. Our restaurants also have banquet rooms to host large party events and we have begun to renovate these banquet rooms in certain restaurants to provide a better experience for this profitable revenue channel, particularly during the holiday season in the second and third quarters of the fiscal year.

Current wording

Maggiano’s - At Maggiano’s, we are focused on making our guests feel special. This warm and generous hospitality creates an environment where guests come together to celebrate birthdays, weddings and many more special occasions. We have focused on increasing our carry-out and delivery business in recent years by creating partnerships with delivery service providers that have made our restaurants more accessible to guests and helped create an additional significant revenue channel. Our restaurants also have banquet rooms to host large party events and we have begun to renovate these banquet rooms in certain restaurants to provide a better experience for this profitable revenue channel, particularly during the holiday season in the second and third quarters of the fiscal year.

Previous wording

Franchise Partnerships -Our franchisees continue to grow our brands around the world, opening 14 restaurants and two new development agreements for the twenty-six week period ended December 27, 2023. We plan to strategically pursue expansion of Chili’s internationally through development agreements with new and existing franchise partners.

Current wording

Franchise Partnerships -Our franchisees continue to grow our brands around the world, with 16 new restaurant openings and two new development agreements during the thirty-nine week period ended March 27, 2024. We plan to strategically pursue expansion of Chili’s internationally through development agreements with new and existing franchise partners.

Previous wording

Company Development - The following table details the number of restaurant openings during the thirteen and twenty-six week periods ended December 27, 2023 and December 28, 2022, respectively, total full year projected openings in fiscal 2024 and the total restaurants open at each period end:

Current wording

Company Development - The following table details the number of restaurant openings during the thirteen and thirty-nine week periods ended March 27, 2024 and March 29, 2023, respectively, total full year projected openings in fiscal 2024 and the total restaurants open at each period end:

Previous wording

At December 27, 2023, we own property for 50 of the 1,184 Company-owned restaurants and one closed restaurant. The net book values associated with these restaurants included land of $42.5 million and buildings of $11.7 million.

Current wording

At March 27, 2024, we own property for 50 of the 1,176 Company-owned restaurants and one closed restaurant. The net book values associated with these restaurants included land of $42.4 million and buildings of $12.8 million.

Previous wording

Revenues are presented in two separate captions in the Consolidated Statements of Comprehensive Income (Loss) (Unaudited) to provide more clarity around Company-owned restaurant revenues and operating expenses trends:

Current wording

Revenues are presented in two separate captions in the Consolidated Statements of Comprehensive Income (Unaudited) to provide more clarity around Company-owned restaurant revenues and operating expenses trends:

Previous wording

•Company sales include revenues generated by the operation of Company-owned restaurants including food and beverage sales, net of discounts, Maggiano’s banquet service charge income, gift card breakage, delivery, digital entertainment revenues, merchandise income and are net of gift card discounts from third-party gift card sales.

Current wording

•Company sales include revenues generated by the operation of Company-owned restaurants including food and beverage sales, net of discounts, gift card breakage, Maggiano’s banquet service charge income, delivery, digital entertainment revenues, merchandise income and are net of gift card discounts from third-party gift card sales.

Previous wording

(1)Franchise revenues increased in the thirteen and twenty-six week periods ended December 27, 2023 compared to December 28, 2022 primarily because of higher franchise advertising fees. Our Chili’s and Maggiano’s franchisees generated sales of approximately $216.9 million and $2.8 million and $426.2 million and $5.6 million, respectively, for the thirteen and twenty-six week periods ended December 27, 2023 compared to $213.4 million and $2.6 million and $419.0 million and $5.0 million, respectively, in for the thirteen and twenty-six week periods ended December 28, 2022.

Current wording

(1)Franchise revenues increased in the thirteen and thirty-nine week periods ended March 27, 2024 compared to March 29, 2023 primarily due to higher franchise advertising fees. Our Chili’s and Maggiano’s franchisees generated sales of approximately $216.2 million and $2.9 million and $644.3 million and $8.5 million, respectively, for the thirteen and thirty-nine week periods ended March 27, 2024 compared to $213.6 million and $2.5 million and $639.9 million and $7.5 million, respectively, in for the thirteen and thirty-nine week periods ended March 29, 2023.

Previous wording

The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen and twenty-six week periods ended December 27, 2023 compared to December 28, 2022:

Current wording

The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen and thirty-nine week periods ended March 27, 2024 compared to March 29, 2023:

Previous wording

(4)Franchise sales generated by franchisees are not included in Total revenues in the Consolidated Statements of Comprehensive Income (Loss) (Unaudited); however, we generate royalty revenues and advertising fees based on franchisee revenues, where applicable. We believe presenting Franchise Comparable Restaurant Sales provides investors relevant information regarding total brand performance.

Current wording

(4)Franchise sales generated by franchisees are not included in Total revenues in the Consolidated Statements of Comprehensive Income (Unaudited); however, we generate royalty revenues and advertising fees based on franchisee revenues, where applicable. We believe presenting Franchise Comparable Restaurant Sales provides investors relevant information regarding total brand performance.

Previous wording

•Chili’s Restaurant labor was unfavorable 0.1%, due to 1.3% of higher hourly labor expenses driven by increased wage rates and staffing levels, 0.6% of increased manager salaries, and 0.1% of higher other labor expenses, partially offset by 1.9% of sales leverage.

Current wording

•Restaurant labor was favorable 0.2% due to 1.0% of sales leverage, partially offset by 0.4% of higher hourly labor expenses driven by wage rates, 0.3% of higher manager salaries, and 0.1% of higher other labor expenses.

Previous wording

•Maggiano’s Restaurant expenses were unfavorable 0.3%, due to 0.5% of higher rent, 0.4% higher supervision, 0.4% of higher repairs and maintenance, and 0.3% of higher supplies, partially offset by 0.7% of sales leverage, 0.5% of lower delivery fees and to-go supplies, and 0.1% of lower other restaurant expenses.

Current wording

•Restaurant expenses were unfavorable 1.2% due to 1.5% of higher advertising, 0.4% of higher repairs and maintenance, and 0.3% of higher other restaurant expenses, partially offset by 0.5% of sales leverage and 0.5% of lower delivery fees and to-go supplies.

Previous wording

General and administrative expenses increased $7.6 million as follows:

Current wording

General and administrative expenses increased $5.5 million as follows:

Previous wording

Interest expenses increased $7.5 million due to higher interest rates on the 8.250% notes, slightly offset by lower long-term debt outstanding.

Current wording

Interest expenses increased $2.0 million due to higher interest rates on the 8.250% notes, offset by lower average revolver balance during the current year.

Previous wording

•Chili’s Food and beverage costs were favorable 3.1%, due to 2.0% from increased menu pricing, 0.9% of favorable commodity costs driven primarily by lower poultry and produce costs, partially offset by higher beverage costs, and 0.2% of favorable menu item mix.

Current wording

•Food and beverage costs were favorable 3.1% due to 2.0% from increased menu pricing, 0.6% of favorable commodity costs driven primarily by lower poultry costs, partially offset by higher beverage costs, and 0.5% of favorable menu item mix.

Previous wording

•Restaurant labor was unfavorable 0.4%, due to 1.4% of higher hourly labor expenses driven by increased wage rates and staffing levels, and 0.6% of higher manager salaries, partially offset by 1.6% of sales leverage.

Current wording

•Restaurant labor was flat due to 1.4% of sales leverage, offset by 1.0% of higher hourly labor expenses driven by both wage rates and staffing levels, and 0.4% of higher manager salaries.

Previous wording

•Chili’s Restaurant expenses were unfavorable 0.9%, due to 2.4% of higher advertising, 0.5% of higher repairs and maintenance expenses, and 0.3% of higher other restaurant expenses, partially offset by 1.2% of lower delivery fees and to-go supplies and 1.1% of sales leverage.

Current wording

•Restaurant expenses were unfavorable 1.0% due to 1.9% of higher advertising, 0.4% of higher repairs and maintenance expenses, and 0.5% of higher other restaurant expenses, partially offset by 0.9% of sales leverage and 0.9% of lower delivery fees and to-go supplies.

Previous wording

General and administrative expenses increased $10.5 million as follows:

Current wording

General and administrative expenses increased $16.0 million as follows:

Previous wording

Interest expenses increased $2.8 million due to higher interest rates on the 8.250% notes, offset slightly by lower long-term debt outstanding.

Current wording

Interest expenses increased $9.5 million due to higher interest rates on the 8.250% notes, slightly offset by lower average revolver balance during the current year.

Previous wording

The federal statutory tax rate was 21.0% for the thirteen and twenty-six week periods ended December 27, 2023 and December 28, 2022.

Current wording

The federal statutory tax rate was 21.0% for the thirteen and thirty-nine week periods ended March 27, 2024 and March 29, 2023.

Previous wording

The change in the effective income tax rate in the thirteen and twenty-six week periods ended December 27, 2023 to the thirteen and twenty-six week periods ended December 28, 2022 is primarily due to a less favorable impact from the FICA tip tax credit against higher Income before income taxes.

Current wording

The change in the effective income tax rate in the thirteen and thirty-nine week periods ended March 27, 2024 to the thirteen and thirty-nine week periods ended March 29, 2023 is primarily due to higher Income before income taxes and the resulting deleverage of the FICA tip tax credit.

Previous wording

Chili’s Total revenues increased by 5.5% primarily due to favorable comparable restaurant sales driven by menu price increases, partially offset by unfavorable menu item mix and lower traffic. Refer to “Revenues” section above for further details about Chili’s revenues changes.

Current wording

Chili’s Total revenues increased by 3.8% primarily due to favorable comparable restaurant sales driven by menu price increases, partially offset by lower traffic and unfavorable menu item mix. Refer to “Revenues” section above for further details about Chili’s revenues changes.

Previous wording

Chili’s General and administrative increased $1.7 million as follows:

Current wording

Chili’s General and administrative increased $2.0 million as follows:

Previous wording

Chili’s Total revenues increased 6.2% primarily due to favorable comparable restaurant sales driven by menu price increases and favorable menu item mix, partially offset by lower traffic. Refer to “Revenues” section above for further details about Chili’s revenues changes.

Current wording

Chili’s Total revenues increased 5.3% primarily due to favorable comparable restaurant sales driven by menu price increases partially offset by lower traffic. Refer to “Revenues” section above for further details about Chili’s revenues changes.

Previous wording

•Chili’s Food and beverage costs were favorable 4.1%, due to 2.4% from increased menu pricing, 0.9% of favorable commodity costs driven primarily by lower poultry costs, partially offset by higher beverage costs, and 0.8% of favorable menu item mix.

Current wording

•Chili’s Food and beverage costs were favorable 3.3% due to 2.1% from increased menu pricing, 0.6% of favorable menu item mix, and 0.6% of favorable commodity costs driven primarily by lower poultry costs, partially offset by higher beverage costs.

Previous wording

•Chili’s Restaurant labor was unfavorable 0.5%, due to 1.5% of higher hourly labor driven by increased wage rates and staffing levels, and 0.7% of increased manager salary, partially offset by 1.7% of sales leverage.

Current wording

•Chili’s Restaurant labor was flat due to 1.5% of sales leverage, offset by 1.0% of higher hourly labor expenses driven by both wage rates and staffing levels and 0.5% of increased manager salaries.

Previous wording

•Restaurant expenses were unfavorable 1.1%, due to 2.2% of higher advertising, 0.5% of higher repairs and maintenance, 0.2% of higher rent, and 0.2% of higher other restaurant expenses, partially offset by 1.0% of sales leverage and 1.0% of lower delivery fees and to-go supplies.

Current wording

•Chili’s Restaurant expenses were unfavorable 1.0% due to 2.1% of higher advertising, 0.4% of higher repairs and maintenance expenses, and 0.5% of higher other restaurant expenses, partially offset by 1.0% of sales leverage and 1.0% of lower delivery fees and to-go supplies.

Previous wording

Chili’s General and administrative increased $2.2 million as follows:

Current wording

Chili’s General and administrative increased $4.2 million as follows:

Previous wording

Maggiano’s Total revenues increased 4.7% primarily due to favorable comparable restaurant sales driven by increased menu pricing, partially offset by lower traffic. Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

Current wording

Maggiano’s Total revenues increased 0.8% primarily due to favorable comparable restaurant sales driven by increased menu pricing, partially offset by lower traffic. Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

Previous wording

Maggiano’s Total revenues increased 2.2% primarily due to favorable comparable restaurant sales driven by increased menu pricing, partially offset by lower traffic. Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

Current wording

Maggiano’s Total revenues increased 1.7% primarily due to favorable comparable restaurant sales driven by increased menu pricing, partially offset by lower traffic. Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

Previous wording

•Maggiano’s Food and beverage costs were favorable 2.5%, due to 1.7% from increased menu pricing and 0.8% of favorable commodity costs driven by lower poultry costs.

Current wording

•Maggiano’s Food and beverage costs were favorable 2.0% due to 1.7% from increased menu pricing and 0.4% of favorable commodity costs driven primarily by lower poultry costs, and 0.1% of unfavorable menu item mix.

Previous wording

•Maggiano’s Restaurant labor was flat 0.0%, due to 0.6% of sales leverage, partially offset by 0.5% of higher hourly labor costs and 0.1% of higher other labor costs.

Current wording

•Maggiano’s Restaurant labor was flat due to 0.5% of sales leverage offset by 0.2% of higher hourly labor costs, 0.2% of increased manager salaries and 0.1% of higher other labor costs.

Previous wording

•Restaurant expenses were unfavorable 0.8%, due to 2.1% of higher advertising, 0.4% of higher repairs and maintenance expenses, 0.2% of higher higher workers’ compensation and general liability insurance, 0.4% of higher other restaurant expenses, partially offset by 1.2% of sales leverage and 1.1% of lower delivery fees and to-go supplies.

Current wording

•Maggiano’s Restaurant expenses were unfavorable 0.6% due to 0.6% of higher repairs and maintenance, 0.2% of higher worker’s compensation and general liability insurance, 0.2% of higher supervision, 0.2% of higher rent, and 0.2% of higher supplies, partially offset by 0.4% of sales leverage and 0.4% of lower delivery fees and to-go supplies.

Previous wording

Net cash provided by operating activities increased due to an increase in operating income, the timing of accrued interest payments on our 8.25% notes and the timing of other operational receipts and payments, partially offset by increases in payments of performance-based compensation and income taxes in the current year.

Current wording

Net cash provided by operating activities increased due to an increase in operating income and the timing of other operational receipts and payments, partially offset by an increase in the payment of income taxes in the current year.

Previous wording

Net cash used in investing activities decreased compared to the prior year. Decreased spend on Chili’s remodels and new restaurant construction were partially offset by increased Chili’s capital maintenance and spend on Maggiano’s remodels.

Current wording

Net cash used in investing activities increased compared to the prior year. Increased spend on Chili’s capital maintenance, equipment and Maggiano’s remodels were partially offset by decreased spend on Chili’s remodels and new restaurant construction.

Previous wording

Net cash (used in) provided by financing activities increased primarily due to $25.0 million of net repayment activity in fiscal 2024 compared to $40.0 million of net borrowing activity in fiscal 2023 on the revolving credit facility and an increase in share repurchases in fiscal 2024 of $23.0 million.

Current wording

Net cash used in financing activities increased primarily due to $110.0 million of net repayment activity in fiscal 2024 compared to $50.0 million of net payment activity in fiscal 2023 on the revolving credit facility and an increase in share repurchases in fiscal 2024 of $23.4 million.