A Little Off The Plate: Brinker Trims Portions, Prices

Brinker International Inc. (EAT) is shedding more than just sales and customers during the recession, offering both lower prices and smaller portions that the casual-dining chain hopes will resonate with thrifty consumers.

As a debt-fueled consumer-spending binge spurred restaurant sales earlier this decade, casual-dining chains grew accustomed to offering generous portions to guests. As those same consumers shrank their spending in the economic meltdown, many began to think they were paying too much money for too much food.

Brinker is bowing to diners who don't want to spend as much and are willing to give up some of the gut-busting portions by taking some of menu favorites and offering smaller portions. Chili's Grill & Bar recently started selling a mini-burger dish with just two "Big Mouth Bites" and fries for $5.99, $2.50 cheaper than the regular portion with four mini-burgers.

"When you marry the 'I want to spend less' with 'I don't want as much,' it gives us the chance to serve the same great food, just in portions that are more reasonable and at a more reasonable price," Brinker Chief Executive and Chairman Doug Brooks said on an earnings call.

The lower-priced and -sized additions are happening up and down the menu across all three of Brinker's casual-dining brands, including appetizers and drinks.

Investors worry that such moves will have a negative impact on profits and sales, since consumers are spending less money and restaurants have a bevy of fixed costs like real estate and labor. Some are also concerned that it will cheapen the brand and customers will grow accustomed to paying less when going out to eat.

But casual-dining chains have seen falling traffic and sales for more than two years amid a consumer spending slump. They are taking drastic measures to win back customers, offering lower price, free items and two-for-one deals. That has helped stabilize sales declines, with same-store sales down 4.9% in March, according to Knapp-Track data, similar to declines in the prior two months.

With expectations for slower sales, restaurants have taken the knife to costs, helping some to post upside surprises in recent earnings reports.

Cost savings helped Brinker top third-quarter earnings estimates, which the company disclosed details of Tuesday after pre-releasing per-share earnings earlier this month.

The chain saw lower labor costs for employee turnover, reducing hiring and training expenses. The company is also delaying opening new company-owned restaurants for at least 18 months, which eliminates costs related to finding and developing sites, and it closed several underperforming stores.

Other changes are coming out of the kitchen, helping Brinker lower both food costs and cut back on waste.

Employees now slice onions for its "onion strings" in the restaurant, and bartenders use a new tequila brand that allows it to sell a lower-priced margarita. Dishes also come with smaller dollops of dipping sauces, but servers will bring more if customers ask.

"Seemingly small changes like these add up to a large savings on cost of sales without compromising the guest experience," Finance Chief Charles Sonsteby said.

Brinker shares were down 9 cents in recent trading at $18.20. Shares have rallied more than 70% so far this year, as investors have seized on less dour commentary from Brinker and other casual dining chains.

Shares of Darden Restaurants Inc. (DRI), Brinker's fellow casual-dining giant, fell 15 cents to $38.83. Darden shares are up more than 37% year-to-date.

The broader market indexes, meanwhile, were up. The S&P 500 was up 1.2% while the Dow Jones Industrial Average rose 0.9%.

-By Paul Ziobro, Dow Jones Newswires; 201-938-2046; [e-mail]