Burger King Worldwide Inc (BKW), The Wendy’s Co (WEN), Brinker International, Inc. (EAT): Will Restaurant “Re-imaging” Increase Revenue?

Shifting towards company-owned business, rather than franchisees

To enhance the customer experience, Brinker International, Inc. (NYSE:EAT) has re-imaged 375 company-owned restaurants in the last two years under the brand Chili’s Grill & Bar. Further, it plans to re-image the remaining 445 restaurants by the end of 2014. For this, it will remodel approximately 70 restaurants per quarter. Brinker International, Inc. (NYSE:EAT) will invest approximately $200 million in this remodeling process. By doing this, it is expecting to increase customer footfall in its restaurants, which could increase remodeled restaurants’ sales by 3%.

Over the past 20 years, Canadian customers developed preference towards Brinker International, Inc. (NYSE:EAT)’s Chili’s Grill & Bar. These restaurants are franchised restaurants. Now, the company is moving from franchisees to company-owned restaurants. In June 2013, it acquired 11 franchised restaurants in Alberta, Canada, from its franchising partner Speedy Creek. With Speedy Creek’s proven positive results, Brinker International, Inc. (NYSE:EAT) will continue to operate the restaurants in a similar fashion. These franchised restaurants generate approximately $35 million of revenue annually. Instead of receiving only royalty fees, this whole amount will now contribute to the company’s revenue.

Brinker International, Inc. (NYSE:EAT)’s 97% of the restaurants operate under the brand name Chili’s Grill & Bar. Adopting various strategies under this brand will enhance the total revenue of the company to a large extent. Its total revenue is expected to increase from $2.8 billion in 2012 to $2.9 billion in 2014.

Conclusion

Restaurant remodeling leads to enhanced customer experience, which in turn increases the company’s revenue. All the above companies are adopting image activation strategies for increasing their revenue. Each company will look different in the coming years, which should enhance long-term growth. In addition, each company is expanding to enlarge its footprint. Looking at their strategies, I recommend a buy for all three stocks.

The article Will Restaurant “Re-imaging” Increase Revenue? originally appeared on Fool.com and is written by Shweta Dubey.

Shweta Dubey has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide. Shweta is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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