We do a double burger. It’s harder to execute for the teams. It’s another SKU that we have got to manage a beef in the heart of the house. We’re going to eliminate that and just go to our single patty which is 7.5 ounces. The net of it is — it gives the guests actually a little bit more beef in that lunch burger. It actually costs us a penny less. And then from an efficiency standpoint, it is much easier to manage one SKU than all these different SKUs. So, that’s an example where we think the customer’s going to get a better experience, but we’re also going to save a little bit of money, but most importantly, make it easier and more efficient for the team members to execute. We’re also looking at removing some other equipment in terms of slicers that require a lot of cleaning and extra time and just going to more consolidated onion SKUs. So there’s probably about five other things that we’re working on in that area that will have, will help margins over time.
Maybe not as much as the deflationary environment that we’re seeing, but certainly things that will help in an environment where things are a little tighter. The other thing I would tell you is I think that barbell strategy, we’re going to continue to lean in on it. So we’re seeing time and time again where having opening price points that drive traffic, but then allowing the guest that comes in that doesn’t really care about the opening price point to be able to trade up is working. So, for example, our Crisper launch you can still get an opening price point on Crisper that’s incredibly attractive, but we’re now transacting a decent portion of our Crisper mix at over $16 with the six count. So that’s an example — I think we tend to think of the consumer as one person, and they’re not really one person.
There’s a price sensitive guest that we’re winning with exceptional value, and then there’s a guest that comes in and they’re going to get what they want. And at the end of the day, if you can deliver on consumer needs whether it’s on a low price point or whether it’s on premium products or larger bundles, you’re going to win over time. And I think that’s what’s happening with this barbell strategy.
Joe Taylor: And David, the only thing I would add to that from a pricing standpoint is I don’t think the story is totally over yet as it relates to price. First, there will be carry over some of the pricing actions we’ve taken this year as you move into the first part of FY ‘25. We clearly are going to price at much lower levels, and we have priced in the past. But I think we’re getting to be more educated around how we price and have a more specific ability to price where that is available to us without having an impact. On the traffic side of the equation, we spent a lot of time in the fall working with Deloitte’s consulting group on really building the revenue growth management muscles, understanding elasticity at a better level as part of that equation.
We have a team now that is formed here to look on an ongoing basis at where those opportunities lie, how you use the platforms in a better level where the regionalities and how price and opportunity can be applied at a restaurant level. So I think we’re just going to be a lot smarter about it as we kind of move into to FY ‘25 and still have some benefit of higher levels of price relative to what we typically carried in that one and a half, it’ll come way down and we’ll be back down into that first into the mid-single-digits and then start to move down towards that 2% to 3% as you move through ‘25. But we still have opportunity there and while maintaining price points kind of across that entire barbell that are very appealing to the guests.
So, I think that story still has another chapter or two to go there. We’ll just do it in a more at a lower level and a in a more specific basis.
Operator: Your next question is coming from Andrew Strelzik with BMO.
Andrew Strelzik : My first one in the prepared remarks, you spent a bunch of time on kind of managerial trends, turnover, et cetera, and sentiment. You touched briefly on the hourly side. What else can you share in terms of what you are seeing from an hourly employee perspective, whether it’s the improvement in turnover, can you quantify that? Any other benefits you’re seeing from an operational or kind of otherwise sentiment perspective would be great to hear.
Kevin Hochman: Yes. Managerial, we feel amazing about and it continues to extend our lead versus the industry. We are at the very top tier of restaurants right now. Hourly, we are still behind the industry, although that gap is clearly starting to close, like we are starting to see that line come down faster than the industry’s line. We are still about 12 points different versus the industry, so there is opportunity. Our Vice President of Operations recently got together actually last week and talked about what are more specific things that we can do to accelerate that improvement. Some of it’s going to improve faster than the industry just because that managerial level continues to be more and more stable, which is going to help with hourly turnover.
But then some of it is, what additional things do we need to do in order to improve that total employee proposition. There is a couple of things. One is we are going position-by-position to understand, what are the ones that are driving the highest turnover. For example, in the front of house, the number one driver of turnover is actually folks that don’t make it out of training. And so when we double click on why that is, we have put a lot of virtual training in during COVID and the reality is, the team members that come to work for us, they want to get started either serving guests or whatever the role is. And so we are moving more towards side-by-side training, less virtual training. We think that more of our hourlies that come work for us will stay with Chili’s past that 30, 60, 90 day mark because we are going to get them off to a faster.
The second thing I think is going to help with hourly is the continued tweaking of the labor model to make sure that, each hourly employee understand specifically what’s their areas of responsibility. That’s the other big thing that we did with the Vice President of Operations, which literally walked through everything that a team member experiences, both in the front of house and the heart of house, talk about what are the friction points for them and how do we get more clarity on what their roles and responsibilities are. We will have more to share on that in the coming quarters on specific initiatives, but I think we have a pretty good beat on like what are the opportunities, and now we’ve got our leadership working on what those initiatives are that will accelerate beyond just stabilizing managerial turnover, which I think will continue to have a tailwind on hourly.
Andrew Strelzik: And I wanted to also ask on commodity inflation and particularly with chicken prices turning inflationary here kind of on an underlying basis. I know that’s been a big source of margin favorability for you guys. How should we expect that to flow through the food basket and kind of what are your expectations for food inflation over the balance of the year, the puts and takes across the basket of chicken and otherwise?
Mika Ware: Hi, Andrew. It’s Mika. That’s a great question. Previously, as we have talked about, we were on the 45 day rolling with the market. We have recently locked in some poultry pricing. We always expected poultry to be inflationary in the back half. It’s actually more favorable, still inflationary, but less inflationary than we originally anticipated. That’s actually been a good guide for us in the back half. We have had a few other contracts and things. Dairy has been positive. We have some positivity in the ground beef. We actually have had some positive news on that front. We are still going to be slightly inflationary in the back half, but for the full year, it’s now going to be slightly deflationary. We made up some ground there in those markets.
Operator: Your next question is coming from Brian Mullan with Piper Sandler.
