$73.23
$211.18
bear $73.23
base $132.49
bull $211.18
margin of safety $78.00
market price* $204.14
Brinker owns Chili's (1,110 company-owned restaurants in the United States, plus a franchise system; 1,635 restaurants in all across 28 countries and 2 U.S. territories) and Maggiano's Little Italy (49 restaurants). Chili's is nearly the whole business. What changed in the business. A value-led menu lifted Chili's guest traffic 16.0% in fiscal 2025 and another 3.6% in fiscal 2026 (comparable sales up 25.3% and then 9.2%) with almost no net new restaurants. The cash the business produces before paying its lenders, after stock compensation, working-capital swings and maintenance spending, ran between $114 million and $259 million a year in fiscal 2017-2024 (median about $205 million). It then jumped to $471 million in fiscal 2025 and $586 million in fiscal 2026 (about $12.21 per share after interest). Maggiano's is moving the other way: fiscal 2026 comparable sales fell 3.9% on traffic down 9.3%. Our earlier published figures were built on a different basis and are not comparable with these; what matters now is how much of the Chili's surge lasts. How we sized it. For the starting level we use the middle of the last two years, about $528 million, less about $35 million a year. The company plans $265-285 million of capital spending in fiscal 2027 (a 'Greenville' remodel program covering 60-80 restaurants next year and roughly 10% of the fleet annually after that), versus about $215 million of maintenance spending last year, so the plan implies $40-45 million more per year. That gives a starting level of about $493 million. Last year this cash grew 24.5%; we assume 0% growth in year one. The slowdown is already visible: the company's August 12, 2026 earnings release put fourth-quarter Chili's traffic at only +1.5% and comparable sales at +5.6%. We credit no growth because none is secured or proven: last year's 4.4 points of menu pricing merely offset higher meat and seafood costs, the domestic restaurant count is flat (1,109 to 1,110), and new-restaurant openings and international development agreements start contributing only from fiscal 2028 or later, so they are left out of the base case. Base case: about $493 million a year, held flat for ten years. Because casual dining has no durable moat and the surge is only two years old, we then fade it over the following ten years to $205 million, the level the business earned before the surge, and hold it there. The business is worth about $6.13 billion, it owes about $495 million, leaving about $5.63 billion, or $132.49 per share on roughly 42.5 million diluted shares. Bear case: rivals copy the value offers and Chili's traffic gains reverse. Cash falls to $400 million, $300 million and $230 million in years one to three and settles near $205 million in year four. Chili's fiscal 2026 labor savings from higher sales (1.4 points of sales) also reverse as sales fall. In year five we add a consumer downturn of the kind casual dining has repeatedly had (2008-09, the 2020 shutdown), sized by Brinker's own weakest year in our ten-year record, fiscal 2019 at $114 million, so cash drops to $115 million, recovers to $160 million and then stays at $205 million. Even in the trough year, cash before lenders is more than three times the roughly $35 million of annual interest, so the debt is carried. The business is worth about $3.61 billion, owes about $495 million, leaving about $3.11 billion, or $73.23 per share. Bull case: the company's own levers execute: the remodel program, new restaurants from fiscal 2028 and the international development agreements. Cash starts at about $545 million (last year's $586 million less roughly $40 million for the higher remodel spending), grows 4% a year to about $807 million in year ten, then eases over the next ten years to $400 million. The business is worth about $9.47 billion, owes about $495 million, leaving about $8.98 billion, or $211.18 per share. What the business owes. The $350 million of 8.25% notes were redeemed on July 15, 2026 at 104.125% of face (a $14.4 million premium; total outflow $378.9 million including interest), funded on the $1.0 billion revolving credit facility, which matures May 1, 2030 and carried a 4.90% rate at June 24, 2026. We count the $350 million of notes, the $14.4 million premium, $98.0 million of finance leases, the $27.5 million agreed purchase of 12 Chili's restaurants in Alabama and Mississippi (expected to close August 27, 2026; no earnings credited for it) and $75.0 million spent on share repurchases after year-end, less about $70 million of the $110.0 million of cash on hand (about $40 million is kept for operations). The total is about $495 million. The bank facility's covenants were met at year-end. Rent on the restaurants already runs through operating cash flow, so it is not deducted again. No dividend is paid; the company bought back $400 million of stock in fiscal 2026 and raised its repurchase authorization to $750 million on August 10, 2026. Testing the case. The load-bearing assumption is that most of the surge persists. In favor: traffic was still positive in the fourth quarter on top of last year's 16.0% gain, and Chili's restaurant margin rose to 18.6% from 18.2%. Against: part of the margin gain came from spreading labor over more sales, and the fiscal 2026 increase was 4.4 points price and 1.2 points mix against 3.6 points traffic. Price-led sales gains are being absorbed by meat and seafood costs, which is why no growth is credited. If the starting level were $400 million rather than $493 million, the base case would be about $112 per share; if the surge lasted forever at $493 million, about $182. Nothing in the filings required a going-concern or covenant concern. Margin-of-safety price. We are fairly sure of a floor near $205 million a year, because the business produced that or better in six of the eight years before the surge, and much less sure of the $493 million. The worst plausible outcome is competitors matching the value offers just as consumers pull back, with one brand carrying essentially the entire company; the structure survives that, since debt is modest relative to cash flow and the revolver does not mature until 2030, but shareholders would be left holding the pre-surge business, which we value at about $69 a share by itself. If our level is wrong, the shares are worth about $112 on a $400 million level, or nearly $182 if the surge is permanent. The price assumes a three-to-four-year holding period, with cash returned through share repurchases rather than dividends. The margin-of-safety price is $78, which covers almost exactly the business as it was before the surge plus a small amount for the surge proving partly durable, and leaves the rest of any lasting gain as upside.