Catering Could Take Chuy's to New Heights
Chuy’s off-premise business accounted for about 12.25 percent of sales in the fourth quarter. As far as chief financial officer Jon Howie could recall, the number represented the largest mix in the chain’s 36-year history. And Chuy’s is enjoying double-digit growth in the area as well.
A key driver here is something executives believe will position Chuy’s not just for record quarters like this one, but also for long-term success and a base on which to continue aggressively expanding across the country. Mainly, catering.
In the fourth quarter, Chuy’s expanded its catering pilot from Nashville, Tennessee, to Dallas and Houston.
“Catering gives us an opportunity to utilize a new avenue of revenue growth, while simultaneously improving awareness of the Chuy’s brand. Well it’s still early; we are pleased with the initial results and will consider adding additional markets where appropriate as the year progresses,” CEO Steve Hislop said in a conference call.
While too early to share exact figures, it is clear Chuy’s saw something it likes in catering and off-premise potential. The brand plans to invest about $1.5 million from tax reform into off-premise initiatives, including to-go packaging, online ordering, and catering, as well as marketing.
As Hislop noted, the catering conversation isn’t just a dollars one. As Chuy’s looks to propel growth, the platform will help spread brand awareness through a very effective medium.
Chuy’s opened 11 restaurants in fiscal 2017, which increased its store base by 14 percent to 91 restaurants. In 2018, the company said it expects to open 8–12 addition units, which would represent a significant two-year lift.
Hislop said Denver and Chicago are areas the company would like to further penetrate, as well as continue its strategy of targeting emerging markets.
The company is outlining growth from a fourth quarter where revenue increased 21.5 percent to $96 million, from $79.1 million in Q4 2016. Comparable same-store sales increased 1.3 percent, year-over-year, and The Tax Cuts and Jobs Act positively impacted GAAP net income by $11.7 million, or 69 cents per diluted share for the revaluation of the company’s net deferred tax balance. Four restaurants opened in Q4 (Pasadena, Texas; Schaumburg, Illinois; Chicagoland area; Annapolis Maryland; and Alpharetta, Georgia), and a Humble, Texas, unit reopened that was temporarily closed due to Hurricane Harvey.
For fiscal 2017, revenue rose 11.8 percent to $369.6 million from $330.6 million in the prior-year period. Same-store sales fell 0.7 percent for the year compared to 2016.
Marketing is an arena Chuy’s sees possibility in. Hislop said Chuy’s is looking to boost awareness via local store marketing and social media campaigns, and is currently in the process of engaging a full-time marketing firm to elevate the company’s “marketing efforts to a new level.”
“We have now our options and are expecting to complete our search by the end of the second quarter,” Hislop added.
On the technology front, Chuy’s recently completed system-wide implementation of a new point-of-sale software and is working with Olo to launch an online ordering app and backend system to streamline the ordering process for guests. Next up: a loyalty program. Hislop said Chuy’s is in a testing phase with a plan to rollout the platform by the third quarter.
The company also, thanks to the POS implementation, said it’s ready to integrate a labor scheduling module “that should enhance our sales projections and further assist us in optimizing our labor productivity,” Hislop said. That’s on target for the second quarter.
It should help, seeing as labor cost as a percentage of revenue increased about 110 basis points to 36.4 percent for Chuys’, an increase attributable to hourly labor rate inflation, new store labor and efficiencies related to two additional store openings in the quarter as compared to last year, entering new markets with higher tip wage, and manager training due to delayed store openings, Howie said. The company expects labor inflation to be about 3 percent in 2018.
With all the changes in place, Hislop said Chuy’s is primed for a positive year.
“We remain confident in the long-term prospects of our business, of the broad appeal of Chuy’s concepts, our focus on core fundamentals, discipline, a disciplined development strategy and store level initiatives … We believe we have a long runway of opportunity ahead to grow the Chuy’s brand and bring our authentic, freshly prepared Tex-Mex inspired food to both new and returning guests,” he said.