Chili's represents an unlikely resurgence in the American restaurant scene.
Chili's represents an unlikely resurgence in the American restaurant scene.
For a significant period, Chili's, well-known for its greasy American comfort food, was struggling against more contemporary and trendy eateries like Olive Garden and Texas Roadhouse when people desired an affordable and casual dining experience with their family.
Chili's was making several mistakes. Its marketing strategy centered around discounts, which eroded profits and prevented investments in modernizing the restaurants, enhancing the menu, and maintaining a happy workforce. As a result, employees started leaving, and customers were frustrated by the slow service and outdated ambiance.
As Chili’s president and CEO of its parent company Brinker International, Kevin Hochman explained to CNN, "We were very much on a strategy of just trying to be the lowest price out there. That made it very difficult for us to make the needed investments in labor and in the restaurants."
However, under Hochman's leadership, starting in 2022, Chili’s improved its french fry and chicken tender recipes, offered economical fast-food-like prices, and gained popularity on TikTok with memes about its gooey mozzarella sticks.
This helped Chili’s navigate this year's restaurant industry downturn. Establishments such as Red Lobster and TGI Fridays filed for bankruptcy, Denny’s and Applebee’s announced significant store closures, and customers' patience with McDonald’s, Burger King, and KFC's prices reached a limit.
Chili’s has been successfully attracting customers with deals like $6 margaritas, a new $10.99 "Big Smasher" burger, and a combination starting at $10.99 that includes an entree, appetizer, and beverage. Simultaneously, Chili’s has been drawing in customers with more disposable income interested in premium options like margaritas with Casamigos and Don Julio tequila, steaks, and ribs.
Chili’s sales at restaurants open for at least a year increased by 14.1% in the last quarter and 14.8% in the previous quarter. Chili’s positive streak has propelled Brinker’s (EAT) stock more than 200% over the past year.
Analyst Brian Vaccaro of Raymond James commented, "It’s sort of unheard of for a mature brand with more than 1,000 restaurants to put up these types of numbers. The trends are just getting stronger and stronger."
Back to basics
Hochman, a marketing expert who revitalized KFC and Old Spice, didn't attempt a complete overhaul at Chili’s.
Instead, he focused on the fundamentals—refining the food, streamlining operations, and enhancing the restaurants. Brinker International invested over $400 million to simplify Chili’s menu, employ more servers and busboys, and renovate the restaurants.
There were too many options on Chili’s menu, which overwhelmed the cooks. "When you have a certain amount of labor and you have a complex menu, it’s very hard to execute that consistently," Hochman explained.
Chili’s simplified the menu to four primary areas: burgers, chicken crispers, fajitas, and margaritas. Chili’s eliminated more than 50 items, approximately 25% of the menu. By item, they aimed to make what remained "more craveable" and more efficient for the kitchen staff to prepare, he said.
A significant menu improvement was the change to Chili’s Chicken Crispers, their signature variation of chicken tenders.
Chili’s started promoting larger, pricier Chicken Crispers portions with five and six-count options, replacing corn on the cob as a side with mac and cheese, and expanding the dipping sauce options. Chili’s abandoned its tempura-style breading method for Crispers and adopted a single breading option exclusively.
With the changes implemented last year, Chicken crisper sales surged by more than 50%.
Triple Dipper
Lately, Chili’s has exploded on TikTok with its "Triple Dipper" platter, which allows customers to choose from three appetizers, such as mozzarella sticks, nachos, and chicken wings, for under $20. Although this platter had been available for decades, Chili’s began heavily promoting it on social media during the spring.
The deal quickly gained traction on social media, with customers posting videos of their evaluations of the food.
A video of a customer dipping mozzarella sticks in sauce and eating the stretched cheese has garnered over 16 million views. "Never in my entire life would I have thought Chili’s has the best, dare I say, mozzarella stick," another customer posted, accompanied by a video that has been viewed over 1.4 million times.
The offer now accounts for 11% of Chili’s business, with sales growing by 70% over the previous year. Most significantly, the viral success is attracting younger customers to Chili’s for the first time.
"It’s effectively reintroducing the brand to a younger demographic that never considered Chili’s because that’s mom and dad’s brand," said analyst Brian Vaccaro.
Customers like Spencer Jones hadn't visited Chili’s since high school more than a decade ago, but he and his friends gave Chili’s another chance this year after seeing more of its advertising.
Jones went in with low expectations, assuming the food had deteriorated and the margaritas would be watered down. He was surprised.
"We’ve been sticking around because those southwestern egg rolls and margaritas are perfect," he said. "Especially with inflation, Chili’s prices are at a really good point."
Jones and his crew have a bi-weekly hangout at Chili's in Washington D.C. now, which he's thrilled about.
"I'm really diggin' Chili's, super stoked it's back in my rotation," he remarked.
'Attempt to undermine us all you like'
However, the main question is whether Chili's can maintain its growth, especially as some of the novelty wears off and other rivals try to replicate its strategy.
"How much of this is genuine versus a TikTok trend?" Vaccaro pondered. "We haven't got the answer yet."
Dennys recently introduced a $9.99 "Massive Meal Bundle" and took aim at Chili's on X, implying that its offer was superior as it's $1 cheaper. Dennys' package includes either a fried chicken sandwich or bacon cheeseburger, fries, and a soda.
Chili's might no longer have McDonald's as a reference point. Chili's has been advertising its prices against McDonald's and other fast-food chains, but McDonald's is evolving.
McDonald's recently unveiled the "Value Menu," a new, cost-effective section that will be featured at US outlets from January onward. The popular $5 meal deal, introduced earlier this year, will serve as its central element. The menu will also feature a new "Buy One, Get One for a Buck" deal that includes breakfast. Burger King and Wendy's have also beefed up their value meals.
Red Lobster is also making a comeback under 35-year-old CEO Damola Adamolekun, who's gaining popularity in the restaurant industry. Adamolekun intends to focus on enhancing service at tables, streamlining the menu to ease kitchen operations, and upgrading dining rooms to win back customers – strategies similar to those Chili's employed.
But CEO Hochman isn't fretting over competitors like Dennys and others offering cheaper prices because they "haven't been hitting the gym hard for two years" like Chili's has.
"It's incredibly tough to match that in a short span of time. It's going to take them several years to catch up," he said. "You can undercut us all you like. It won't make a difference."
Chili's failed to invest in its restaurants and workforce due to focusing on discounts, which negatively impacted customer experience and employee retention.
In an effort to revitalize the business, Chili's president Kevin Hochman emphasized on improving the food quality, streamlining operations, and enhancing restaurant appearances, leading to a significant increase in sales and stock value.