Chili’s 2023

Apr 10, 2023 | Insights, Restaurant Research

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Executive Summary

Chili’s (5th largest casual segment player) enjoys core brand equity as a sit-down Southwest (Tex-Mex) chain that specializes in Big Mouth burgers, sizzling fajitas, chicken crispers and margaritas. Brand positioning elements also include: good value for the money; great place to hang-out with family & friends; a great bar atmosphere; and a casual segment leading tech platform. Leading value scores reflect: its new, margin friendly 3 for Me platform featuring 3 price tiers; $10 lunch combos (salad or soups & entree) which are available M-F; $6 Margarita of the month offers; and practice of offering discounts through direct & digital as opposed to operationally complex LTOs. The relaunch of TV ads (after a 3 year hiatus) was prompted by new CMO & VP of Marketing who previously worked with Brinker’s new CEO to implement KFC’s successful turnaround. Use of a cost-effective digital marketing strategy leverages its 12MM loyalty program while helping to: better target a younger demo; support off-premise & digital ordering; and promote It’s just Wings virtual brand. Notably, Chili’s off-premise business has grown by +51% from the beginning of FY20 to FY22. Its new “Raise the Bar” program is driving high-margin alcohol sales and its “Team Service Evolution” labor model is improving the quality & efficiency of its operational execution (further improving its overall value equation). All-the-same, Chili’s declining domestic system sales market share through 2022 and a significant average check underperformance reflects a higher-than-average mix of value seeking guests during tough economic times. Notably, a resultant inability to pass along its cost inflation to its value oriented guests has led to a system worst store-level FY22 EBITDAR margin. In conclusion, while Chili’s has been able to distinguish itself in a crowded FSR space with an attractive Tex-Mex menu, fun experience, leading value and digital strength, the chain’s immediate challenge is to survive the onslaught of economic pressures on its value oriented customer base.

Chili's Share of $1B+ Casual Chains

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