Chili’s Grill & Bar, a popular casual dining chain, has seen a significant boost in its same-store sales, with a growth rate of nearly 15% in its latest quarter. This success can be attributed to an effective ad campaign targeting fast-food chains and the popularity of a TikTok-viral appetizer. Kevin Hochman, the CEO of parent company Brinker International, believes that this strong performance is a result of the chain’s successful two-year turnaround.
The market value of Brinker International has risen to $2.99 billion, with the company’s shares increasing by 53% this year. However, the stock experienced a 10.7% decline after the company reported weaker-than-expected earnings and a conservative outlook for its fiscal 2025. Despite this setback, the stock rebounded by 7% in afternoon trading on Thursday, as analysts stated that the initial reaction from investors was an “overreaction.”
Chili’s has surpassed expectations, with its same-store sales growth of 14.8% outperforming estimates of 8.6% growth. This places the chain in a rare category, alongside Chipotle and Wingstop, as one of the few public restaurants experiencing strong traffic and same-store sales growth during a time when consumer spending is declining. In contrast, Chili’s casual-dining rivals, such as Applebee’s and Outback Steakhouse, have reported declines in same-store sales for their latest quarters.
One of the key drivers of growth for Chili’s in the latest quarter was its $10.99 Big Smasher meal, which accounted for about 60% of the chain’s growth. The chain strategically targeted fast-food rivals in TV ads, capitalizing on customer dissatisfaction with rising fast-food prices. Another successful menu item was the Triple Dipper, which went viral on TikTok in May and contributed to approximately 40% of the chain’s sales growth.
However, the popularity of these menu items presented new challenges for Chili’s. The chain had to handle an influx of new customers, many of whom were trying Chili’s for the first time or returning after a long hiatus. To accommodate this surge in customers, Chili’s has been investing in its workforce by hiring bussers and adding more cooks. While these efforts have strained the company’s bottom line in the short term, they have been crucial for maintaining customer satisfaction and ensuring efficient operations.
Under Kevin Hochman’s leadership, Brinker International has focused on growing sales profitably. This has involved streamlining the menu by eliminating approximately 22% of items. The company has also discontinued less profitable strategies, such as offering fewer coupons and discontinuing its Maggiano’s Italian Classics virtual brand.
Chili’s has been proactive in offering value to customers, even before its competitors rolled out their own deals. Hochman believes that Chili’s can maintain its lead in the market, thanks to the brand’s long-standing commitment to advertising its value. However, as other restaurants introduce their own value meals, retaining these new customers may become challenging.
The restaurant industry as a whole is facing economic headwinds, with rising prices for food away from home. Brinker International is anticipating earnings per share of $4.35 to $4.75 and revenue growth of 3% to 4.6% for its fiscal 2025. While investors were expecting a stronger outlook, given Chili’s recent success, the company is taking a cautious approach to account for potential worsening economic conditions.
Overall, Chili’s impressive same-store sales growth can be attributed to its effective marketing strategies, menu innovations, and focus on value. However, the chain will need to navigate increasing competition and changing consumer behaviors to sustain its growth in the coming years.
