Financing

Chili’s to push value with first TV ads in more than 3 years

With sales (and prices) on the rise, the chain is turning its attention to traffic by promoting a $10.99 meal deal.
Chili's restaurant exterior
Sales rose 8% at Chili's, while traffic fell at nearly the same rate. / Photograph: Shutterstock

Chili’s Grill & Bar is returning to the airwaves.

The chain this year will run its first TV ads since the pandemic began, promoting a $10.99 value meal that has become a key piece of its turnaround strategy. 

Executives of parent company Brinker International said Chili’s can afford the marketing push thanks to improved restaurant economics. The chain has cut back on discounts, raised prices and restructured the menu to encourage trade-up, moves that helped generate same-store sales growth of 8% in the quarter ended Dec. 28.

The growth came entirely from price (up 10% year over year) and mix (up 5.6%) as traffic fell 7.6%. Restaurant-level operating margins for parent Brinker International, meanwhile, improved nearly 6 points quarter over quarter, to 11.6%. 

Executives said the transaction decline was expected due to fewer discounts, and that the other improvements have put Chili’s in a position to build traffic back up with ads.

Those ads will focus on the 3 For Me meal, which offers an entree, unlimited chips and salsa and a bottomless soft drink starting at $10.99, with additional tiers at $13.99 and $15.99. Executives believe it rivals even some fast-food offers and will help get more customers in the door, particularly lower-income ones who have strayed from the brand.

And yet guests have shown a willingness to pay more. Two-thirds choose the $13.99 or $15.99 options, which feature more premium items like steak and shrimp, Hochman said. Chili’s plans to reinvest profits from those bigger tickets to pay for things like ads.

The new TV spots will serve another basic but important function: Put Chili’s back in front of consumers after years of relative silence. 

“Our top-of-mind awareness has declined versus pre-pandemic,” Hochman said. “It's clearly the biggest opportunity for this business, and from an advertising standpoint, is just to get back in the consideration set.”

Hochman declined to reveal when the ads will air or for how long, but said they’ll include elements of past campaigns. 

Meanwhile, Chili’s continues to work on improving customers’ experience once they’re actually in the restaurants. It has simplified its operations and menu and added staff, such as more bussers and bartenders, and the changes seem to be working: Chili’s key customer metric—guests experiencing a problem—“has improved pretty significantly,” Hochman said, and food scores are the best they’ve been in a long time. The chain also got better marks on value despite higher prices, which Hochman attributed to better food and service. 

Employees are also responding positively to the changes. Manager turnover is now below pre-pandemic levels and hourly turnover is moving in the right direction, Hochman said.

All in all, the results led Brinker to raise its earnings outlook for the year. It now expects revenues to be $4.05 billion to $4.15 billion, up from $3.9 billion to $4 billion. Brinker also owns 53-unit Maggiano's, where same-store sales rose 21% in the period. 

“I don't want to say that victory is accomplished, and there's not a lot more work to do,” Hochman said. “But as I said in previous calls, as long as we continue to make progress every quarter, we know that we're making the right moves and we're headed in the right direction.”

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