Casual full-serve restaurant chains like Brinker International's (NYSE: EAT) Chili's and DineEquity's (NYSE DIN) Applebee's have suffered as fast-casual concepts have caught fire.
Consumers have shown a preference for higher-quality food served without waiters over restaurants that offer table service, but sometimes lesser fare. That has forced a number of sit-down chains to up their game. For Applebee's, that has meant adding wood-fired grills in all of its locations.
Chili's, which saw company-owned same-store sales decrease by 1.5% quarter-to-date as of June 2, now has a plan to similarly remake its menu.
What is Chili's going to do?
The company plans to launch a value-based menu in July, Nation's Restaurant News reported. Among its other plans, it will be adding hand-made burgers, improving its bar program, and improving its technology. And the chain plans to replace its in-house My Chili's Rewards loyalty program with a Plenti rewards partnership.
Chili's also plans to build on its place as a value option in the sit-down category.
"Affordability at Chili's is a strength compared to rest of the category," said Chief Marketing Officer Krista Gibson during the company's earnings call, NRN reported. She also noted that the company has a "strong family position," with 40% of parties including children under age 17, and value positioning including kids-eat-free offers, $6-$7-$8 weekday lunch combos, and long-standing two for $20 meal deals.
In addition to adding more value options, the company plans to add more craft beers and enhance its margaritas.
"We believe strongly as a team that we are staring at incremental growth potential here with the bar," Chili's Executive Vice President John Cywinski said during the call.
Will it work?
Consumers have shown a willingness to pay more for better food. The new Chili's hand-made burgers will include the option to get a grass-fed, hormone free patty for an extra charge, which might appeal to the type of customers who left it behind for fast casual chains. Craft beers and better bar drinks may also check off that box. Still, the chain faces an uphill battle because consumer behavior has shifted.
Fast casual has won business partly because of quality, but also partly due to being fast. Chili's can address some of its problems by improving its menu, but it can't win over people who simply don't want to spend the time to sit down. Perhaps an improved bar will help offset some of that behavior, but both companies face an uphill climb when it comes to building back their business.
A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.
Daniel Kline has no position in any stocks mentioned.