New York
CNN
—
Americans don’t get their Big Mac at McDonald’s anymore. They’re going to Chili’s instead.
Brinker International, Chili’s parent company, reported a nearly 15% jump in same-store sales and a nearly 6% increase in traffic during the latest quarter, thanks in part to the promotion of a new burger that’s now targeting fast food.
Rising fast-food prices have given restaurants like Chili’s and Applebee’s an opportunity to outbid their quick-service rivals with their own deals. Social media conversations tracked by Chili’s showed that customers were “frustrated with fast-food prices,” Brinker CEO Kevin Hochman said on an earnings call in April, prompting them to run ads that “use fast food as chips.”
Chili’s launched a New Ad Campaign Brazen In April for a $10.99 meal deal that included its new Big Mac competitor called the Big Smasher, which it described as having “twice the beef of a Big Mac and flavors fast food fans will recognize.”
However, the Big Smasher doesn’t have two patties like the Big Mac sandwiched between three slices of bread, but rather a larger half-pound patty 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 an earnings statement Wednesday, a subtle jab at McDonald’s, Burger King and Wendy’s, all of which have reported generally dismal quarters.
The deal “has been successful in driving traffic and tapping into the cultural conversation around fast-food pricing,” Hochman said on the analyst call, and that the promotion will continue for the rest of the year.
Applebee’s also boosted the number of value-focused deals this quarter, though it didn’t see as much success as Chili’s.
“You can get our burger for $9.99,” John Peyton, CEO of Dine Brands, Applebee’s parent company, previously told CNN. With that in mind, “Why would you take a $10 burger … and you can eat it in a bag from your car?”
The overlap provides a “new opportunity,” Peyton said. Lunch at McDonald’s now costs the same as lunch at Applebee’s, where you sit at a table and order your meal through a server. Pointing that out is a new way to bid on customers.
The three fast-food chains launched their own deals shortly after Chili’s new value meal. The chain recently announced that McDonald’s $5 promotion was so successful that it stayed on U.S. menus for an additional month until August.
McDonald’s $5 deal “meets the goal of bringing guests back to our restaurants” and prompts some people to buy full-price items, leading to a further increase in sales, the company said in a July memo obtained by CNN. Financial results won’t be released until the company’s next earnings report in the fall.
However, Chile’s results weren’t enough to help Brinker’s shares. Shares fell 11% in trading as earnings fell short of analysts’ expectations and investors weren’t happy with its pessimistic outlook.
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