Dive Brief:

• Brinker International opened an off-premise-only kitchen in Manhattan to deliver menu items from Chili's Grill & Bar and It's Just Wings, a virtual concept Brinker launched in 2020, according to the company's Q2 2022 earnings call. The kitchen has been operating for a month, and is housed in a third-party facility.
• The casual chain is pleased with the kitchen's early performance, and will open two more off-premise-focused units in areas near college campuses in the near future. These units will likely be 1,500-1,800 square feet, which is a larger footprint than the Manhattan kitchen.
• Brinker CEO Wyman Roberts said on Wednesday that Brinker's off-premise-focused models will be meaningful growth vehicles near universities and in dense urban areas in the future.

Dive Insight:

Brinker's customers have shown there is a market for off-premise access to its brands. The company's takeout and delivery channels have increased by double digits over pre-COVID-19 numbers and remain in the 30% range even as dine-in traffic returns to normal, Roberts said. The chain's delivery mix is about 15% and should grow as Brinker expands its third-party delivery network and puts its virtual brands in front of more consumers. 

Both of Brinker's virtual brands, It's Just Wings and Maggiano's Italian Classics, have performed well for the chain. In its first year, It's Just Wings surpassed its target of $150 million in annualized sales, hitting $170 million. Maggiano's Italian Classics, introduced in August 2021 and now operating in over 700 restaurants, has the potential to reach at least $100 million in sales, Roberts said on the company's Q4 2021 earnings call.

During Brinker's Q2 earnings call, Roberts said the virtual brands have been highly incremental to systemwide sales and that the company expects them to continue contributing moving forward. For Q2, Brinker's systemwide same-store sales rose 3.5% over fiscal year 2020. It's Just Wings and Maggiano's Italian Classics allow the company to enter expensive urban markets without steep real estate costs, since these off-premise-only concepts don't require traditional brick-and-mortar space. 

"We think there's a number of different markets — be they urban [or] be they college campuses — that respond extremely well to off-premise, both to-go and delivery," CFO Joe Taylor said on the Q2 earnings call. "It's opening up a fairly addressable market by thinking a little bit differently … That's one of the [COVID-19] takeaways, is that off-premise is a bigger component of what we will do going forward."

At this point, Brinker may be having more success with virtual brands than some of its peers. In July, Bloomin' Brands' CEO David Deno said its virtual brand, Tender Shack, was underperforming, while Applebee's had to postpone its Cosmic Wings expansion to DoorDash due to supply chain issues. But as brands from Wingstop to Chick-fil-A and Cracker Barrel to Dickey's push into virtual brands, the market is getting more crowded and competitive.