Kevin Hochman: The biggest opportunity is with innovation. So that could be either primatizing the core four or just creating bigger benefit spaces that consumers are willing to pay more for. So Fajita is really the next big one where I can see us doing like a Crisper type innovation. So innovation on the protein, both the quality of the protein as well as the volume of protein that you can get. Innovation on different proteins that we have today that could drive more premiumization, similar to what you might see in other Mexican concepts that you guys track. That can provide a source of mix as well as just overall driving fajitas, because once we have a new thing to talk about with Fajitas and we’re going to go on air with that, that is going to drive more mix in the Fajitas than other parts of the business.
And that’s a considerably higher both sales and profit driver for the business than call it Crispers or burgers. So that’s the big obvious one. There’s some other things that we can do with menu merchandising as we bring new benefit spaces into apps, desserts, drinks. Right? So for example, if you looked at our menu today and compared it to a year ago, the first page of our menu today, the cover is all premium margaritas like Casamigos and Teremana Blanco. And that’s why we’re seeing alcohol PPA continue to grow simply because we’re just driving that from a merchandising standpoint. So I think that’s going to be a thing that we’re going to continue to do going forward. It’s not really a tool that we looked at in the past, but as an obvious thing, especially if you’re innovating, it’s going to be a lot easier to potentially drive to move that mixed needle than if you weren’t innovating and to give customers things that they actually want to buy right, so and trade up for.
So to me, that’s probably the biggest couple of things. There’s probably some literal things like as we get the CRM program up and running, do we have to do the level of discounting that we’re doing today? We’ve already removed some of it. What we removed actually air [ph] traffic, which we talked about in the previous 12 months. But going forward, as we get really smarter and know more about our guest and tokenize the guest likelihood of the level of discounting that we do is probably be able to pull back some of that and that would show up in mix also not price. So hope that answers your question?
Chris Carril: Yes, no, that was very helpful. And then I guess for my follow up, you mentioned gaining wallet share across income, cohorts, I think with the fastest growth with higher income households, can you expand maybe a bit more on this and specifically what you’re seeing with middle and lower income guests?
Kevin Hochman: Yes, we see continued spending across all the households. So all households we’ve grown wallet share in, the higher income household, we certainly have grown faster. And the way I explain it to my team and one of the really good things about getting out of like kind of the deep discount game is that over time your guest becomes a little bit more affluent and a little bit less elastic to price. Right? So you look at the brands that have kind of reversed some of that discounting trend and really went to more of an everyday low price strategy or an everyday value strategy. You typically tend to see the guests move to more middle income and higher income, and over time, you become a little bit less reliant on deep discounting.
Because those guests, that doesn’t matter as much to them, right? So it should, over time, make us a stronger brand and be able to whether if we have to take pricing, because of wage rates or COGS inflation in the future. To have a more affluent customer base is always going to give you a little bit more insurance than one that’s not and I think we’re seeing that a little bit now. We’re a year into removing a lot of the big needles out of the business, the discount needles, and some of those guests are leaving. And that’s why you saw that traffic headwind that we talked about. But what’s you end up having at the end of that is a stronger guest base that is a little bit less price elastic that can handle some of these things.
Chris Carril: Great. Thanks so much.
Operator: Your next question for today is coming from Catherine Griffin with Bank of America.
Catherine Griffin: Hi. Thank you. I was wondering if you could help just frame how much the restaurant margin was helped by the de-emphasis of the virtual brands, the lower packaging and delivery costs?
Joe Taylor: There was some benefit, it wasn’t an oversized benefit to the overall ROM expense. I don’t have a dollar figure for you. The off-premise savings coming from less packaging costs, less is our bad debt, things of that nature was real. So it was a contributory factor. I think it’s one of those areas that will continue to contribute as we kind of go forward. Again, it wasn’t as oversized as you would have seen from the price mix dynamics, the improvement in food and beverage and things of that nature. So it’s down the pecking order, but it was there.
Kevin Hochman: You just have to remember, Catherine, it’s a very small amount of mix to begin with. So even though there is improvements in margin versus we see improvements when we drive the dine-in business at Chili’s versus, like, Maggiano’s virtual brand, if you’re starting at such a low mix, it’s not going to have a huge impact on the overall restaurant operating margin.
Catherine Griffin: Okay, thank you. And I’m also just curious if you’re seeing anything at Maggiano’s that would suggest any pullback among higher income consumers, whether that’s, like check management through alcohol mix.
Kevin Hochman: No. I mean, maybe just a tad. The bigger – there’s two big, not big challenges, but the two challenges that we saw in Maggiano’s this quarter, one was we removed IJW out of its business, too, which was about 40% of what you saw in the numbers versus, I think, what the street was expecting on traffic. And then the Delta was we reduced the focus of the $6 Pasta To Go, it’s try to focus more on the experience. And that’s had a little bit of an impact on the business that I know the team is working on right now to figure out. So but there was no like gigantic macro thing that we were at is concerned us, at least at this point, that would say there’s some big pullback.
Catherine Griffin: Okay. Thanks, Kevin.
Mika Ware: All right. So that concludes our call for the day. We appreciate everyone’s questions. Goodbye.
Kevin Hochman: Thanks, everybody.
Operator: Thank you. This concludes today’s conference call; you may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
