When Brinker International CEO Kevin Hochman took the reins last summer, he laid out a very clear plan for fixing the ailing Chili’s Grill & Bar brand: Focus on core menu items, improve service, discount less and advertise more.
One year later, that strategy appears to be working on all fronts. Chili’s same-store sales rose 6.1% in its fiscal first quarter, while restaurant operating margin increased by more than 400 basis points, to 10.4%.
Chili’s traffic was still down nearly 6% in the period, but 4 points of that came from the retirement of its Maggiano’s Italian Classics virtual brand and the de-emphasis of its It’s Just Wings virtual brand. Chili's prices were 8.8% higher than a year ago and menu mix was up 3.1%.
Notably, traffic turned positive in October, executives said Wednesday, setting the brand up for a strong second fiscal quarter.
A barrage of TV advertising and revamped chicken tenders are playing a big role.
On the airwaves, the chain pushed value by highlighting its $10.99 “3 for Me” deal. The ads performed better than the ones it ran in March and July, which “tells us that the consumer was definitely responding to that [value],” Hochman said during an earnings call Wednesday.
Meanwhile, revamped chicken tenders (or Crispers), featuring bigger portion options, new sauces and sides and simplified execution, worked as intended: Crispers sales rose 40% while their food cost decreased by 3 points.
The success of these two initiatives is a good example of Chili’s menu marketing strategy: It broadcasts value to draw in customers but emphasizes full-price items like Crispers in its actual restaurants. It has seen good uptake on both options. “We're doing a really good job with our menu merchandising to be able to maintain that margin growth that you're seeing in the business results,” Hochman said.
In other encouraging news, Chili’s manager turnover fell to 24%, while hourly employee turnover improved by 44 points to 144%. And customer satisfaction scores for food and service continue to get better.
And while some other full-service chains saw demand soften in the quarter, Chili’s did not, which Hochman attributed in part to its value messaging. “Maybe the improved performance of the advertising, part of that's driven by where the customer is,” he said.
The question now is, how does Chili’s sustain this success, especially given that much of it has come from advertising?
Well, for one, it will do more advertising. Chili’s plans to run an additional four weeks of ads this fiscal year, bringing its total airtime to 25 weeks. It spent $28 million on ads in the first quarter and will spend another $32 million in the second quarter.
But it believes those ads will translate to sustained growth by bringing new or lapsed customers to Chili’s, where the brand hopes to wow them with upgraded food and service.
“As we continue to improve the guest experience, that will become a more meaningful traffic builder over time like you see in some other concepts that don't advertise as much,” Hochman said.
It’s also in the early stages of developing a digital marketing strategy that will allow the chain to target ads to specific customers or segments, giving it another way to build traffic.
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