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Wednesday
Mar072018

Chili's Bar & Grill

Chili's has finally decided on a repositioning that makes it simple to understand what the brand is all about. This refined brand positioning centers around getting friends & family together over improved burgers, ribs & sizzling fajitas and includes a 40% reduction in low-mixing menu items along with quality improvements across signature items (burgers, ribs & fajitas). A 10/17 ad says it best: "We're focused on 1 thing burgers, ribs & fajitas. We're reeling in our menu cuz it got out of hand. We had a moment of self actualization." Noticeable signature menu improvements include: fajitas with 48% more meat; Texas Size Ribs with 30% more meat offered at same price; and Bigger Big Mouth Burgers (half-pound with handcrafted smashed patties). Also, Chicken Crispers (another core category) was upgraded with the use of all-natural chicken and the custom combo section was replaced with Smokehouse combos (bone-in chicken, ribs & jalapeno sausage). An added benefit is that menu simplification is driving faster & hotter food with a 50% reduction in frequency of problematic 15+ minute tickets. Impressively, preference has increased +40% across these signature entrees. The brand is also executing around its goal of offering more compelling price points with value LTO platforms that include: popular $22 Dinner for 2 (pricing increased by 10% to help pay for food investments); Oldtimer Burger With Cheese for $6.99; Bigger Fajitas for $10.99; and 3 Course Meal for $10. Lunch benefits from 10 lunches for $7 offer and innovation around burgers, ribs & fajitas which track dinner menu improvements. We like the catchy "Oh Chili's is back. Baby back, baby back." jingle which provides an effective platform to message about core signature items. With that being said, it remains to be seen whether this repositioning will drive sufficient traffic and sales growth to cover this very substantial investment in food costs. It is possible that a shift to higher quality positioning will ultimately provide the brand permission to increase pricing and check in-line with the segment average which we think is necessary to justify this new strategy. In conclusion, while the chain's new course is quite sensible, there is still the fundamental issue of whether it will improve the brand's overall value/quality equation sufficiently in the eyes of today's consumers to ignite long-term traffic/comp growth. 

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