Chili's bets more TV ads will help traffic

After a successful return to the airwaves earlier this year, the chain plans to invest up to $60 million in more commercials.
Chili's first round of ads featured R&B singer Brian McKnight.| Photo courtesy of Chili's Grill & Bar

Chili’s Bar & Grill is betting that more airtime over the next 12 months will drive more guests to its restaurants.

The 1,130-unit chain plans to spend an additional $55 million to $60 million on marketing this fiscal year, which will include 21 weeks of national TV advertising, up from four last year.

The casual-dining chain returned to the airwaves for the first time in over three years in February and March with a campaign promoting its $10.99 3 for Me value meals. The ads led to increased visits, narrowing Chili’s traffic gap to the industry from 6 points to 2. That has given it confidence to invest in more ads.

“We'll continue to do that and continue to build on it because right now, it is closing the traffic gap versus the industry and accelerating our market share,” Brinker International CEO Kevin Hochman said during an earnings call Wednesday.

The campaigns will focus on Chili’s “core four” menu items—burgers, fajitas, Chicken Crispers and margaritas—and will be scheduled around tentpole TV events, Hochman said. They’ll be supported throughout the year with digital and social campaigns and other publicity efforts.

The ads will continue to highlight value to lure guests into restaurants, while in-restaurant merchandising will push customers toward higher-priced items. It’s a tactic Hochman learned from his days in marketing at Yum Brands, and it appears to be working.

For example, Chili’s menu mix was positive in the fiscal fourth quarter, with customers ordering fewer value offers like 3 for Me, even as Chili’s has raised prices. 

“When you take pricing and you do a couple of waves of it, you typically would expect to see more mix start to shift into the value parts of the menu,” Hochman said. “We haven't seen that. In fact, we've seen just the opposite.”

Traffic remains negative year over year, but improved throughout the fourth quarter and the first seven weeks of the current period, executives said. Same-store sales for the quarter rose 6.6%, which included 9% pricing.

After a “reset year” in which the chain worked to stabilize sales and profits, it is planning to tackle traffic head-on in fiscal ’24.

It has a new customer relationship management (CRM) strategy, for instance, that will use targeted emails to entice guests to visit Chili’s around specific events.

The old CRM program was really about what you could get for free from us versus here's how Chili's fits in your life based on these occasions,” like sporting events or weeknight dinners, Hochman said. There are 11 million people in Chili’s CRM database.

The chain is also revamping its bar menus with a new food and drink offerings, including the virtual It’s Just Wings brand for the first time. The update will be tied to the start of football season as the chain looks to establish itself as a gameday destination.

But the biggest traffic play will be TV advertising, where Chili’s is prepared to go “into the deep end” with its investment, Hochman said. 

“We saw sequential improvement versus the industry [last year], and so we're very confident that that will continue throughout the year and then accelerate as we cycle out of the things that we're doing to remove the bad traffic,” he said. 

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