Americans are increasingly bypassing McDonald’s for their burger fix and heading to Chili’s instead.
Chili’s parent company, Brinker International, recently reported a nearly 15% increase in same-store sales and a 6% rise in customer traffic for the last quarter. This surge is partly due to the launch of a new burger aimed directly at fast-food competitors.
As fast-food prices continue to rise, sit-down restaurants like Chili’s and Applebee’s are seizing the opportunity to lure customers with their own value deals. According to Brinker CEO Kevin Hochman, social media buzz revealed that many customers were “frustrated by fast food prices.” This led Chili’s to roll out ads that positioned fast food as a contrast to their own offerings.
In April, Chili’s introduced a $10.99 meal deal featuring the Big Smasher, a burger they promoted as having “twice the beef of a Big Mac” and flavors familiar to fast-food enthusiasts. Unlike the Big Mac, which has two patties between three slices of bun, the Big Smasher boasts a hefty half-pound patty topped with diced onions, lettuce, pickles, cheese, and Thousand Island dressing.
Chili’s significantly outpaced industry averages in both sales and traffic during the quarter, Hochman noted in an earnings release, indirectly referencing competitors like McDonald’s, Burger King, and Wendy’s, all of which reported weaker performance.
Hochman also highlighted that the Big Smasher deal has successfully drawn more customers and sparked conversations about fast-food pricing. The promotion is set to continue throughout the year.
Meanwhile, Applebee’s also rolled out its own value-focused deals, though it didn’t experience the same level of success as Chili’s. Applebee’s parent company, Dine Brands, CEO John Peyton, pointed out that their burger is priced at $9.99. “Why would you settle for a $10 burger eaten out of a bag in your car when you can enjoy a meal served at a table?” he remarked.
Peyton sees this pricing overlap as an opportunity to attract more diners. With the cost of a meal at McDonald’s now comparable to one at Applebee’s, the latter offers a more appealing dining experience with table service.
In response, the three major fast-food chains quickly introduced their own deals following Chili’s launch. McDonald’s $5 promotion has proven so popular that the chain has extended it through August. According to a recent memo, McDonald’s stated that the promotion is effective in bringing customers back to their restaurants and even encourages them to purchase full-priced items, which boosts overall sales. However, the financial impact won’t be visible until McDonald’s next earnings report in the fall.
Despite the positive sales figures, Brinker’s stock took a hit, dropping 11% as profits fell short of analysts’ expectations, and the company’s outlook remained cautious.