Chili’s Bar & Grill said it has bounced back from business struggles earlier this year by introducing new, lower-priced menu items that compete directly with fast-food restaurants.
The 49-year-old, Dallas-based restaurant chain — known for its baby back ribs and sizzling fajita platters — on Wednesday reported a whopping 14% increase in same-store revenues and 6.5% growth in customer traffic in the latest quarter.
The company said the growth has been fueled in particular by three items: a $10.99 Big Smasher burger, a $6 margarita and the $17 Triple Dipper appetizer.
The Big Smasher “Is bringing in more new guests across all demographics,” Chili’s president Kevin Hochman said on an earnings call this week. “Turns out that all households, regardless of income want unbeatable value.”
JPMorgan Chase analyst John Ivankoe described Chili’s results on the earnings call as “truly remarkable,” adding that the chain – which made headlines last year and earlier this year for closing stores – is “in a class of very, very few…in a difficult category.”
Shares of Chili’s parent Brinker International jumped 7% on the news Wednesday, hitting an intraday 52-week high of $107.15. The shares were recently trading on Thursday at $103.30.
Brinker’s shares are up 150% for the year.
The Big Smasher made its debut in April as fast food chains, including McDonald’s were shedding customers across the country over their menu price increases.
Customers flocked to Chili’s 1,500 restaurants after the campaign crowed that Big Smasher burgers have “twice the beef of a Big Mac and flavors fast food lovers will recognize.”
The meal also includes chips and salsa and a non-alcoholic drink.
The Triple Dipper appetizer accounts for 11% of Chili’s sales while orders grew by 70% for the calorie busting meal, which includes a choice of three items and dipping sauces, in the latest quarter.
Chili’s gains come, in part, at the expense of McDonald’s, which is battling slowing growth and an E. Coli outbreak caused by slivered onions in its Quarter Pounders.
McDonald’s same-store sales in the US missed estimates as customers continued to pull back on spending, top brass said on an earnings call this week.
“Consumers, especially those in the low income category, were choosing to eat at home more often. This trend continued in the third quarter,” CEO Chris Kempczinski said during the call. “Our performance so far this year has fallen short of our expectations.”
Some fast-food operators have expressed concerns — particularly in California where the minimum wage for fast food workers rose to $20 per hour this year — that they will soon be competing for customers with casual restaurants like Chili’s.
Nearly 100% of fast food chains in California raised their menu prices to cover their higher labor costs, according to an Employment Policies Institute survey.
Casual restaurants are exempt from the wage hike in California, where many fast food eateries have closed since the wage law went into effect in April.