While fast-food chains are losing favor with customers due to skyrocketing prices, more sit-down restaurants are making gains through competitive meal deal campaigns – including Chili’s 2024 Big Smasher.
Turning Away from Fast Food
Customers across the US are disenchanted with fast-food giants like McDonald’s and Burger King, where the cost of a basic burger combo can feel like a blow to their bank account. Now, many are turning to casual dining and sit-down restaurants like Chili’s and Applebees.
Growth Explosion for Chili’s
Chili’s in particular has seen major growth this year. Its parent company, Brinker International, reported a nearly 15% increase in in-store sales and a 6% increase in foot traffic in the latest quarter.
Meal Deal Magic
The company has attributed a significant part of that growth to a new meal deal, which offered a Big Smashers Burger with fries, bottomless non-alcoholic beverages, and bottomless chips and salsa for just $10.99.
New Ad Campaign
The promo deal was first advertised in April, competing directly with a swathe of competitive meal deals from the country’s biggest fast-food restaurants, including McDonalds, Taco Bell, and Wendy’s.
Taking Shots at the Golden Arches
Chili’s launched an aid campaign for the Big Smasher which took a direct shot at the McDonald’s Big Mac, with a side-by-side visual comparison between the two burgers.
Side-by-Side Comparison
While the advertisements never directly mention the Big Mac, the burger pictured is almost identical to the fast food giant’s signature burger and is referred to as a “tiny drive-through burger.”
A Timely Choice
The comparison was a clever and timely choice, as many customers have turned their back on the Golden Arches due to excessive price increases that have significantly outpaced inflation.
Major Price Increases
While fast-food prices have risen across the board, McDonald’s menu price changes have been particularly steep, increasing by 100% since 2014 according to a study by online personal finance platform FinanceBuzz.
60% of Growth
Brinker CEO Kevin Hochman claimed that this new Chili’s meal deal was responsible for 60% of the chain’s sales growth last quarter.
Touching a Nerve
“We had tapped into this insight that we were seeing in social media months prior, that customers were upset about where fast-food prices were going,” Hochman told NBC News last week. “The advertising clearly touched a nerve on that.”
Triple Dipper Deal
He also attributed the remaining 40% of growth to the new Triple Dipper deal, which allows customers to choose three appetizers with dips and made a brief viral splash on TikTok in May.
Outperforming the Industry
Hochman also referenced the changing trends between fast food and casual dining chains, saying that Chili’s “significantly outperformed the [fast food] industry in both sales and traffic during the quarter,” in an earnings release last Wednesday.
Weaker Than Predicted
While the increase in sales and traffic is undoubtedly good for the chain, its earnings were still weaker than Wall Street previously predicted.
Stock Prices Drop
Following the company’s fiscal fourth-quarter earnings call, Brinker’s stock prices fell by 10.7% by the close of trading.
Investor “Overreaction”?
Regardless, Hochman has maintained that the markets are wrong, and BMO Capital Markets also called the fall in stock price an “overreaction” by investors. Previously, Brinker stock prices had risen by 53% since the beginning of the year.
“We Have Industry-Leading Value”
“We see our competitors report, and they have down traffic — we just haven’t seen it in our business. So we know things are tough out there, but we have industry-leading value,” Hochman told Yahoo Finance.
Others Chime in
Chili’s isn’t the only sit-down restaurant that has taken shots at fast-food establishments by pointing out the industry’s widening gap between price and value.
Applebees vs McD’s
“You can get our burger for $9.99,” said John Peyton, CEO of Applebee’s parent company Dine Brands, in an interview with CNN. “Why would you take a $10 burger … that you can eat in a bag out of your car?”
Uncertain Future
Whether the likes of Chili’s and Applebee’s will continue to thrive at the expense of these fast food giants is unclear. McDonald’s saw enough customer success with its June-July $5 meal deal that it has extended its stay on menus, and restaurants across the board are amping up their own discounts and promotions.
$5 Meal Deal Success
According to a July company memo released by CNN, McDonald’s claimed the meal deal was lifting sales for the company and “meeting the objective of driving guests back to our restaurants.”
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