Chili’s general managers may soon get more ownership of their restaurants.
The high-flying casual-dining chain is planning to shift to a new incentive model in the next couple of years that will compensate general managers based on their restaurant’s performance, in addition to their regular salary.
It would be an unusual model for a company-operated chain, but one that is not unheard of in the industry. The most notable example is Texas Roadhouse, whose locations are operated by “managing partners” who invest $25,000 in exchange for 10% of profits, plus an annual salary.
The arrangement has helped make Roadhouse one of the best-performing chains in the industry, because operators have a direct stake in their restaurant’s results. That success has inspired Chili’s to take a look at the idea.
“We look at the best-in-class competitor, and they are masters at ownership at the general manager level, and part of that is their incentive structure,” said Kevin Hochman, CEO of Chili’s parent Brinker International, during an earnings call Wednesday.
Red Robin, a Chili's competitor, instituted monthly manager bonuses as part of a turnaround plan unveiled in 2023.
Chili’s is in the midst of a revival under Hochman, who has overseen an incredible run of sales, traffic and profit growth at the chain over the past three years. Naturally, Chili’s managers would like a piece of that success. And the company sees an opportunity there to incentivize better operations.
“We believe that it would be a good thing for them to have more ownership over the results, both in terms of their personal compensation, as well as just how they run the restaurant,” Hochman said.
He did not go into detail about how the incentives would be structured.
And there are some other things to be sorted out first. Hochman said managers need more training before they can act as true owners of the business. Over the years, the company has taken over more of the financial work from managers, and it is now in the process of putting that back into their hands.
“We've got to unravel some of that so that they actually understand the P&L, understand the areas that they can improve their bottom line and their top line, and then start rewarding them once they're trained and have the tools to do that,” Hochman said.
Chili’s recently launched a new P&L tool for managers. It is also teaching the principles of “extreme ownership,” a leadership philosophy developed by former Navy SEALs. It plans to do that for a year or two before making any changes to its incentive structure.
The other issue is that owner-operators typically get a lower base salary that is complemented by the incentives. But Chili’s can’t just start paying its managers less. “That's not going to be received very well,” Hochman said.
At the same time, Chili’s needs to protect its own economic model, especially given that it is a publicly traded company with shareholders to consider.
“We've got to figure out a way that wins for everybody and not just on one or two items,” Hochman said.
Chili’s employees have played a major role in its turnaround. When Hochman joined the company in 2022, one of his first moves was to visit restaurants and get feedback from workers on what they’d do differently. That led to changes that have smoothed operations and made customers and employees happier.
The Dallas-based chain has more than 1,200 U.S. restaurants.
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