Is a New Menu Enough to Save Chili’s?
Despite ending the first quarter of fiscal year 2018 with a 9 percent drop in traffic, a 3.4 percent drop in same-store sales, and major impacts from hurricanes Irma and Harvey, Chili’s leadership—and its investors—are hopeful. The brand, which made major changes to its strategy in September, actually performed better than expected, according to Wyman T. Roberts, CEO, president, and non-independent director for Brinker International Inc., the parent of Chili’s.
“Hurricanes aside, our plan for the year is playing out as we designed it,” Roberts said in the earnings call. “First quarter was all about finalizing our turnaround strategy for Chili's and training and preparing our teams for the new menu launch.”
On September 18, Chili’s cut 40 percent of its menu offerings, bringing its list of 125 selections down to a total of 75 in its new “Less is More” menu. One reason behind the reduction was to speed up back-of-house operations.
And so far, the move has paid off. Roberts reported that overall ticket times have decreased by 12 percent, and tickets that that take longer than 15 minutes and “generate the greatest number of guest complaints” have dropped by 40 percent. This is paired with the brand’s renewed focus on ensuring guests have top-notch experiences and return.
“We are seeing an increase in guests that haven't been to Chili's in a while, which is encouraging to us and exciting from the standpoint of getting to introduce some folks that haven't been in for a while to the new menu and the faster, hotter food,” Roberts said.
Additionally, by scaling back selections, Chili’s has focused on improving its core offerings, including burgers, ribs, and fajitas.
“With this simplified menu, we now offer guests full-on fajitas with improved-quality products and presentation and nearly 50 percent more meat; Texas-sized ribs, a new meatier rib offered at the same price as our original product; and bigger, Big Mouth Burgers, industry-leading, half-pound, handcrafted patties across the category, smashed for greater flavor, and served on a brioche bun,” Roberts said.
Value was another component of this renewed strategy. The classic Oldtimer with cheese, served with fries, is now competitively priced at $6.99.
“We're about six weeks into the new menu and preference is up to nearly 40 percent across these signature entrées,” Roberts said. “And with so many of our guests choosing burgers, ribs and fajitas, our operators can focus on delivering faster, hotter foods.”
The brand also returned to its iconic “I Want My Baby Back” jingle in its latest ad campaigns with a twist highlighting new offerings and value promotions and has launched a reimage program to improve atmosphere. Roberts said that the brand will continue work on dayparts, products, and price points to improve the value strategy.
“For the balance of the year, we're focused on marketing and operational execution that will bring guests in, increase future visits and capture market share,” Roberts said.
Joseph G. Taylor, senior vice president and CFO of Brinker, said these results are encouraging.
“In summary, we delivered against our expectations for the quarter, and we remain on track for the year,” he said. “We believe this now provides us multiple near-term opportunities to build further momentum as we move through the upcoming quarters.”
Investors responded positively to the earnings report and new strategy. Shares were up by more than 7 percent after the earnings call and continue to show improvements over recent prices.
Amid declining sales throughout the entire casual-dining segment, Chili’s strategic improvements have played out well for the brand so far and built a foundation for future developments. Yet only time will tell how guests will respond in the long run and whether changes will be enough to save the brand.