Chili’s take on the Big Mac is beating McDonald’s at its own game
Brinker International, Chili’s parent company, reported a nearly 15% in jump in same-store sales and increase of almost 6% in traffic for the most recent quarter thanks in part to a promotion of a new burger that now targets fast food.
The rising prices of fast food gave sit-down restaurants such as Chili’s and Applebee’s an opportunity to take on its quick-service competitors with its own deals. Social media conversation tracked by Chili’s showed that customers were “frustrated by fast food prices,” Brinker CEO Kevin Hochman said in a April earnings call, prompting them to run ads that “use fast food as a foil.”
Chili’s launched a cheeky new advertising campaign in April for a $10.99 meal deal that included its new Big Mac challenger called the Big Smasher, which it described as having “twice the beef of a Big Mac and flavors fast food lovers will recognize.”
However, the Big Smasher doesn’t have two patties like the Big Mac sandwiched between three bun slices, but it has a bigger, half-pound slab of meat with similar toppings like diced onions, lettuce, pickles, cheese and Thousand Island dressing.
Chili’s “significantly outperformed the industry in both sales and traffic during the quarter,” Hochman said in Wednesday’s earnings release, a veiled jab at McDonald’s, Burger King and Wendy’s, which all reported generally dismal quarters.
Hochman said on the analyst call that the deal has “been successful in driving traffic and tapping into the cultural conversation about fast food prices” and that the promotion will continue for the rest of the year.
Applebee’s also bolstered the number of deals that centered around value in the quarter, although it didn’t see as much success as Chili’s did.
“You can get our burger for $9.99,” John Peyton, CEO of Applebee’s parent company Dine Brands, previously told CNN. With that in mind, “why would you take a $10 burger ... that you can eat in a bag out of your car?”
The overlap offers “a new opportunity,” said Peyton. Lunch at McDonald’s now costs about the same as lunch at Applebee’s, where you can sit at a table and have your meal delivered by a server. Pointing that out is a new way to bid for customers.
The three fast-food chains all launched deals of their own soon after Chili’s new value meal. McDonald’s $5 promotion has been so successful that it’s staying on US menus for an additional month through August, the chain recently announced.
McDonald’s $5 deal is “meeting the objective of driving guests back to our restaurants” and is even prompting some people to buy full-priced items, resulting in a greater lift of sales, the company said in a July memo obtained by CNN. The financial results won’t show up until the company’s next earnings report in the fall.
Still, Chili’s results weren’t enough to help Brinker’s stock. Shares plunged 11% in trading because the profits came in below analyst expectations and investors weren’t thrilled with its downbeat outlook.
The success of Chili's new promotion highlighted the effectiveness of their Big Smasher burger and the value meal deal, attracting customers who were frustrated with rising fast food prices. To stay competitive, major fast-food chains like McDonald's and Burger King quickly launched their own deals, such as McDonald's $5 promotion.
