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Why Unit Growth is Critical for Brinker International

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Apr. 7 2015, Updated 3:06 p.m. ET

Unit growth

A restaurant can grow more revenue by simply adding more restaurant units. Besides same-store sales, unit growth is one of the most important drivers for restaurant revenue.

Underpenetrated companies, or young and growing companies, can quickly capitalize on their popularity by adding units. For a company that uses the franchise model, unit growth can come at an even faster rate because of the low requirement of capital.

Brinker International’s unit growth in 2014 included opening ten Chill’s restaurant units in the United States. Two were opened by franchise. Internationally, the company opened three restaurants that were company-owned but added 29 franchise restaurants.

As for Maggiano’s, Brinker International (EAT) added two restaurants in the United States.

In all, Brinker’s added 46 new restaurants, as you can see in the above chart.

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In the coming year, Brinker International plans to open eight to ten company-owned Chili’s, four Maggiano’s restaurants domestically, and one Chili’s internationally. It plans to add five franchise Chili’s restaurants in the domestic market and about 34 to 38 franchise restaurants in its international markets.

Other restaurants are also growing units

Olive Garden under Darden (DRI) added nine restaurants, and Longhorn added 34. Texas Roadhouse (TXRH) added 23 restaurants, and Bloomin’ Brands (BLMN) opened two net new restaurants in its system. Bloomin’ Brands plans to open more than 300 new Bonefish Grill restaurants in the next five years.

The Consumer Discretionary Select Sector SPDR (XLY) holds about 0.3% of DRI stocks.

So far, we’ve looked at Brinker International’s same-store sales, average check, and unit growth. We’ve also compared it to its peers. Next, we’ll see how all these factors tie in to revenue growth for the company.

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