Chili’s Franchises: $3.7M Turnover and a 32% Profit Margin

Chili’s is a one-of-a-kind franchise at the crossroad of US Southwestern food (like Moe’s Southwest Grill) and Mexican food chains (QDOBA, Del Taco, etc.).

Yet, Chili’s is not really the most affordable franchise either: you would need to invest on average $3.2 million to open a new Chili’s restaurant, far more than the average of US restaurant franchises ($1.6 million).

So should you really invest in a Chili’s franchised restaurant? Are the profits worth the cost?

In this article we’ll tell you everything you should know about Chili’s restaurants and their financials from the perspective of its Franchise Disclosure Document. How much profits can you really make with a Chili’s restaurant? Let’s find out!

Chili’s franchise key figures

Franchise fee	$50,000
Royalty fee	1.3%
Marketing fee	7.8%
Investment (mid-point)	$3,197,000
Average sales	$3,795,000
Sales to investment ratio	1.2x
Payback period*	6 years
Minimum net worth	$3,750,000
Minimum liquid capital	$500,000

Chili’s: a brief introduction

Chili’s is an American casual dining restaurant chain owned and operated by Brinker International.

The chain was founded in 1975 by Larry Lavine in Dallas, Texas, where it is headquartered.

It offers a variety of appetizers, chicken, beef, and seafood entrees, hamburgers and other sandwiches, salads, barbecue ribs, and other southwestern and Mexican-style cuisine, flatbreads, shrimp tacos, quesadillas, fajitas, desserts, and beverages.

Chili’s franchising journey started in 1984, and today the brand has over 1,600 stores in the US and around the world.

Chili’s franchises pros and cons

Pros

• Quality Training: The brand provides its franchisees with sufficient training to help establish and operate their restaurants successfully. Franchisees undergo a 15-week initial training on how to make the products, handle customers, manage staff, and carry out a successful grand opening.
• Leading-edge digital technology: The brand utilizes digital technology to boost sales and franchisee productivity. Franchise owners can monitor and analyze trends using app-enabled data on their phones. Also, franchisees can offer excellent service to customers using an online ordering app and boost their sales.
• Site selection and construction: The brand helps its franchisees identify a convenient restaurant location, considering vehicle traffic and geographic trends. Also, it assists them in the design, restaurant construction, and lease negotiations necessary to reduce the cost of developing their restaurants.
• Multiple income channels: The franchisor provides its franchisees with various flexible channels such as carryout, pick-up, delivery, and catering options. The franchisees can stand out from the competition with multiple earning streams and boost their sales.
• Franchise support: The brand facilitates its franchisees with the resources, advice, and tools they need to establish, operate, and grow their businesses. This is done through field operations, ongoing consultations, meetings and conventions, safety and security procedures, data-driven analytics, and franchise intranet software.
• Flexible franchise models: Chili’s franchise utilizes different business models, including traditional and non-traditional restaurants with a full or limited menu. Franchisees can make the most of the available real estate opportunities and establish a restaurant of their choice.

Cons

• No exclusive territory protection: The brand does not provide its franchisees with an exclusive development market. Franchisees may face competition from other franchises licensed by the franchisor or from competitive channels and brands it controls.
• No financing: Chili’s franchise does not directly or indirectly finance its franchisees for start-up or ongoing costs. Also, it does not guarantee any grant, lease, or note on behalf of its franchisees.
• No absentee ownership: The brand does not provide a passive investment opportunity. Franchisees must be actively involved in the day-to-day operations of the business.

How much does a Chili’s franchise cost?

You would have to invest on average $3,876,195 to open a new Chili’s franchise restaurant.

Note that that’s the investment for a Chili’s Grill & Bar. Indeed, there are 2 kinds of restaurant formats you can choose from:

• Chili’s Grill & Bar: $3,876,195
• Chili’s Special Venue: $2,518,695

The investment amount is an average; indeed, it varies based on many factors, such as the location of your restaurant, its size, etc.

Here’s the full breakdown of costs per restaurant format:

Here’s the full breakdown of costs per restaurant format:

Chili’s Grill & Bar – Startup costs

Type of cost	Amount
Franchise fee	$40,000 – $60,000
Construction costs	$1,500,000 – $2,000,000
Furniture, and fixtures	$100,000 – $120,000
Equipment	$350,000 – $400,000
Additional Funds 3 Months	$425,000 – $625,000
Other	$566,695 – $1,565695
Total	$2,981,695 – $4,770,695

Chili’s Special Venue – Startup costs

Type of cost	Amount
Franchise fee	$40,000 – $60,000
Construction costs	$500,000 – $1,300,000
Furniture, and fixtures	$55,000 – $100,000
Equipment	$190,000 – $350,000
Additional Funds 3 Months	$250,000 – $550,000
Other	$382,695 – $1,259,695
Total	$1,417,695 – $3,619,695

How much sales does a Chili’s franchise make?

On average, a Chili’s franchise made $3,795,360 in sales per year in 2021.

This is a decline of 18.7% year-on-year vs. 2020 ($4,668,747, 174 units).

Unfortunately, like many franchises, Chili’s doesn’t provide much information about its restaurants’ financial performance in its Franchise Disclosure Document.

Instead, we obtained this number by dividing the total revenue of all the franchises ($649 million) by the number of franchise-owned restaurants (171 as of 2021).

How profitable is a Chili’s franchise?

On average, a Chili’s franchise makes $1,213,006 profits per year. This corresponds to a 32% profit margin (adjusted EBITDA margin).

Chili’s is a profitable franchise: indeed, we found that the 32% profit margin is much higher than the average for similar restaurant franchises (25-27%), mostly due to lower than average rent costs.

We calculated this number using the information available in the Franchise Disclosure Document 2021. Unfortunately, Chili’s has not provided detailed information on the cost of goods sold (COGS), and labor costs. Therefore, we used 25% and 29% of sales respectively, as per industry benchmarks.

Profit and loss	Amount	% sales
Sales	$3,795,360	100%
COGS	($948,840)	25.0%*
Labor	($1,100,655)	29.0%*
Rent	($189,000)	5.0%
Royalty + marketing fees	($343,860)	9.0%
Adjusted EBITDA	$1,213,006	~32.0%

Should you invest in a Chili’s franchise?

With a payback period of 5.6 years on average, Chili’s is a profitable investment.

In other words, a franchisee would be able to reimburse investors and any loan she/he invested within 5.6 years by using the profits from the business. This is a good payback, and as such a good investment.

To estimate this number we had to use a net profit margin of 15% of sales, a conservative assumption given adjusted EBITDA is at 32% (see above).

Do you want to buy a Chili’s franchise? Prepare a solid business plan as part of your application. Download our template and access your 5 year pro forma financial statements and reports like breakeven, return on investment and more.

How does it compare vs. other restaurant franchises?