Chili's Plans to Spend a Lot of Time on Your TV Screen

Advertising will be fuled by $55 million to $60 million more in marketing spend.

For Chili's, fiscal 2024 is all about reinvestment.

A major objective involves advertising, which will be backed by $55 million to $60 million in incremental marketing spend year-over-year.

In fiscal 2023, the brand promoted its 3 for Me value menu, which proved crucial in gaining market share. Unlike the previous year when the company had four weeks of TV time, in the 2024 fiscal calendar, it will be on air for 21 weeks. That will commence in September when football season kicks off. The brand will use value and the core four menu items (burgers, Chicken Crispers, fajitas, and margaritas) to bring in customers and use menu merchandising to drive check. The idea is to ensure guests who come in for the 3 for Me platform can enjoy it, but not make it so obvious inside restaurants that customers who didn't come for the value start to trade down from pricier entrées.

Chili's will supplement these advertising windows with social media and digital initiatives to get the chain "back in the cultural conversation," said Brinker International CEO Kevin Hochman. These efforts have proven fruitful, with Chili's becoming a trending topic four times on Twitter in the past few months. The brand hopes to add to that with an enhanced CRM program. The company has partnered with the media agency GALE, which was responsible for developing Chipotle's highly successful loyalty program. The idea is to continue reducing CRM discounts and redeploy those saved dollars into more effective messaging to customers.

Hochman said there will be one major advertising blast per quarter. In between those four instances, Chili's will remain in the news with some PR events. The executive outlined three criteria for impactful advertising: the content of the commercial, its quality, and the budget allocated for it. Hochman is confident in Chili's meeting each requirement with its planned core four innovations and experienced marketing team.

"We saw that the first slug of advertising that we did last fiscal year, we are very encouraged by what we saw based on the level of spend and the quality of advertising," Hochman said. "And the reality is we're going to do that another four times this year. So I'm very confident that that's going to continue to close the traffic gap. That's what we've seen in the numbers. So there's nothing that we haven't seen based on what we put in market that would say that strategy is not working, and 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."

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As for the menu, Chili's will look to continue the progress it's made on Chicken Crispers, which relaunched this past spring. The brand simplified the menu item by eliminating one of its batters. This move was made ahead of a new platform that offers the chicken alongside premium White Cheddar Mac & Cheese, fries, house-made ranch, and two dipping sauces. Guests have the choice of four, five, or six Crispers. Because of the changes, Chili's has seen more than 40 percent more Crisper volume—and that's without the benefit of advertising.

"Guest feedback on the new Crisper fries and mac and cheese has been phenomenal and has confirmed moving to one type of breading to both improve the recipe and allow teams to produce much higher quantities consistently has been the right choice," Hochman said during the chain's Q4 and full-year earnings call. "The end result is a much bigger and marginal accretive Crisper business driven by both higher pricing, higher piece counts, and better taste with less complexity because we eliminated the low-mixing original Crisper. And our restaurant teams love the changes. More sales with less complexity is a big win."

Chili's will also use its bar to grow frequency. A menu will come online in September with a new Chicken Crisper flavor, happy hour specials, and premium margaritas. Additionally, virtual brand It's Just Wings will be prominently featured in the bar lineup and used as an appetizer on the everyday dining room menu. If the results go well, the digital concept could be part of advertising to boost Chili's position as a place to watch sports.

"It's Just Wings is one of the largest, if not the largest virtual brand in the world, and it's likely to get a lot bigger in the for-real restaurant world," Hochman said. "We see an opportunity to leverage It's Just Wings brand as a trip driver for bar visits and provide credibility to Chili's as a wing player. We'll start with football season and drive the wings business throughout the year, leveraging relevant sports viewing occasions to drive traffic."

Chili's set up these investments by resetting itself in fiscal 2023. Hochman, former president of KFC U.S., became CEO of Brinker International in May 2022 (fiscal 2023 started June 29). His tenure began with clear-cut strategies to drive margin improvement—pulling back on deep discounting, reducing investment in unprofitable virtual brands, simplifying operations, adjusting the labor model, implementing pricing to catch up to inflation, and returning to national advertising in March for the first time in three years.

All of those initiatives are the reason why Chili's is now "significantly outpacing" industry sales growth since the middle of February and narrowing the gap in traffic, Hochman said. The company's same-store sales lifted 6.3 percent in Q4 year-over-year and grew 7 percent in fiscal 2023 compared to 2022. Quarterly comps came from 9.4 percent price and 4.6 percent mix. That was offset by negative 7.7 percent traffic, however, visitation improved as the brand moved through the quarter. That momentum continued into Q1.

In Q4, Chili's opened seven restaurants, bringing the 2023 total to 14. Recent store debuts have consistently set sales records. The goal for 2024 is 12 openings. The brand finished the fiscal year with 1,231 domestic and 374 international locations.

Maggiano's same-store sales increased 9.1 percent in Q4 year-over-year, thanks to 9.5 percent pricing, offset by negative 0.2 percent mix and negative 0.2 percent traffic. For the entire fiscal 2023, comps grew 17.3 percent versus 2022. The chain finished the year with 52 domestic units.

The brand wrapped up the year with a $9.5 million AUV. The casual-dining chain is currently working to clarify its brand positioning, with a focus on modernization and accelerated growth. The chain's virtual brand, Maggiano's Italian Classics, was shut down due to unprofitable sales figures.