Why Brinker International’s unit growth matters to its investors
Must-know: Brinker International's 4Q14 earnings (Part 5 of 11)
Unit growth and penetration
Opening a new location is another revenue growth source for a restaurant chain. We discussed this in the Tim Hortons (THI) series. In this part of the series, we’ll see if unit penetration is helping Brinker International’s (EAT) revenue growth.
At the end of the fourth quarter—June 25, 2014—the company had a total of 1,615 restaurants system-wide. It added 46 new system restaurants over the year. From the above chart you can see that the company is growing Chili’s international locations. Chili’s unit growth in the U.S. seems to have flatlined.
Many restaurants chains are turning towards international markets— especially emerging restaurant chains. In the Yum! Brands (YUM) series, we discussed that China is one of its biggest markets. You can read the article “Why China’s market is so important to Yum! Brands.”
System restaurants include company-owned and franchised restaurants. A company records only a portion of the sales from franchised restaurants through royalties, rents, and fees. To learn more click on this link.
Retail distribution
We saw that companies like Starbucks (SBUX) and Tim Hortons are expanding their revenue sources. They’re introducing products that will be sold in grocery stores. Brinker International earns revenues from a similar grocery line. It has Chili’s at Home frozen entrées. The company has a presence in over 13,000 retail stores—including Walmart.
If you want to invest in a diversified restaurant portfolio, you should consider an exchange-traded fund (or ETF) like the Vanguard Total Stock Market (VTI).
In the next part of the series, we’ll discuss how effective these strategies have been at generating Brinker International’s revenues.
Browse this series on Market Realist:
