Apparently, Chili’s does have a dress code.
“You have to be dressed when you come to Chili’s,” CMO George Felix said. “That’s probably about it.”
This apparent “dress code,” requiring actual pants and shirts to eat at the casual-dining restaurant, is more assumed than in actual documents. That kind of low bar, however, emphasizes what makes the chain great: Its broad appeal to the casual restaurant consumer.
That appeal has helped the company target customers frustrated by rising fast-food prices. Chili’s on Thursday coined the term “McSpensive” to refer to those prices on the day that McDonald’s debuted the Chicken Big Mac.
“We need to be at the forefront of mainstream,” Felix said. “We should not be on the bleeding edge of trends. But we should be really attuned to the simple pleasures loved by everyday people.”
Felix was speaking at the CREATE conference, an event for emerging restaurant chains put on by Restaurant Business sister company Nation's Restaurant News. Here are some other takeaways from the event in Nashville.
The California effect
Are restaurants raising prices in California? Yes.
According to data from Technomic Senior Principal David Henkes, quick-service burger chain prices in California increased 2.7% from the first quarter to the second quarter—after the state implemented a $20 minimum wage for fast-food chains.
By contrast, prices increased 1% nationally. They increased 0.8% in New York, and 0.5% in the second quarter.
The data echoes figures and comments from quick-service chains, who on earnings reports have indicated they’ve raised prices in the state. Domino’s, for instance, said this week that it has raised prices in the “high single digits” in California, but 1.6% nationally.
I Love Lucy
Candace Nelson and her husband Charles founded Sprinkles cupcakes in a tiny shop in Beverly Hills, California. They had no operating experience. And they weren’t prepared for the response.
“We were like Lucy and Ethel in that one episode of I Love Lucy where they were working in a chocolate factory and chocolates kept coming off the belt faster than they could keep up,” Candace said. “It didn’t matter how hard we worked, we couldn’t keep up with demand.”
They sold out before noon.
And one more little nugget: They always had a line out the door. Not necessarily because they were always super busy, though they frequently were. “Our space was so tiny it only took two people waiting in line before we had a line out the door,” Candace said.
Knowing your name
Nick Stone moved from Australia to New York in 2010 and worked as an investment banker. While there, Stone regularly got himself some coffee. He often visited the same place twice a day.
Yet he saw a problem: Staff had no idea who he was.
“I can’t believe that I was going to the same place twice a day, every day and nobody knew my name,” Stone said. “I was just a homogeneous transaction.”
Based on that experience, Stone would found the upgraded coffee concept Bluestone Lane in 2013. “It’s definitely an unusual jump from investment banking to start a coffee shop,” he said.
Booming LTOs
Everybody is doing limited-time offers these days.
No, seriously. LTOs are booming, said Robert Byrne, senior director of consumer research for Technomic. The number of limited-time offers increased 46% last year and was up 53% compared with five years ago. LTOs were up at both limited and full-service restaurants.
We can only theorize why: With traffic down, companies are doing everything they can to get customers. Also, there’s this, per Byrne: Fifty-two percent of customers said the availability of such offers is important when choosing a restaurant. That’s up from 48% in 2021.
The problem with whole hog barbecue
Opening a new restaurant is never easy. But it’s particularly difficult to open a whole hog barbecue concept.
Just ask Rodney Scott, who has been expanding his Charleston, South Carolina-based concept around the country.
“It’s kind-of a challenge opening modern restaurants,” Scott said. “Whole hog requires open fire. People are afraid of open fire. You’ve got to find the right place where you’re celebrated, where barbecue is appreciated.”
Indeed, not everybody is all that impressed with barbecue, even if Scott has won a James Beard award. “I’ve been to places where they lifted their nose at the idea,” he said.
How Wendy’s does social media
Not every post Wendy’s sends via the social media channel formerly known as Twitter or Facebook or TikTok goes through the same process, said Kristin Tormey, global director for social media and digital engagement for the fast-food chain.
In some, she is confident the team can respond or post in Wendy’s voice.
Others, however, take a bit more effort.
“Some may take the full team of 10, 15, 30,” Tormey said. “And maybe legal needs to review it. It ebbs and flows depending on the content.”
Salad to the price rescue
Consumers clearly do not like inflation, which has been made clear for months as restaurants struggle to generate traffic.
“It’s become part of the zeitgeist,” said Nicole Portwood, chief marketing officer with Salad and Go. “Americans are fed up with food inflation. That’s a very real thing.”
Traffic numbers across the board have been tough. “One of the redeeming qualities of fast food was its cheap price and reliability,” Portwood said. “That entire channel of nourishment has become inaccessible for a lot of people.”
Portwood believes that her concept, which uses centralized kitchens to produce fresh ingredients for salads, wraps and other items sold in drive-thru locations, could help change that—while providing healthy meals in the process.
Speaking of salad
El Pollo Loco does some big business in bowls.
Twenty percent of the chain’s sales are either salads or bowls, which gives the chain a unique positioning, said CEO Liz Williams.
She was named CEO of the chain earlier this year. Among her previous jobs: Head of international for Taco Bell.
Expanding Taco Bell internationally, she said, is not all that different from expanding El Pollo Loco domestically.
“In a new country with people who don’t know the brand, you had to tell them about the brand, and sometimes you had to teach them what a taco is,” Williams said. “It’s the same with El Pollo Loco. You go into a new market and educate people to drive awareness.”
Less debt, more cash
Want to grow and ultimately get an investment from private equity or another source of financing to get to the next level?
Make sure you have plenty of cash on the balance sheet. And don’t take on too much debt.
“You are trying to grow,” Jeff Brock, founder of Hargett Hunter, said at the CREATE Investment Summit. “When you’re in that mode, any hiccup is a big deal.”
Lauren Fernandez, founder of Full Course, said that brands need to know their “worst-case scenario” and be prepared for it.
“Never take debt that puts you outside what you believe to be a reasonable payback period,” Fernandez said. “For us it’s two to three years.”
UPDATE: This story has been updated to fix that the fast-food wage in California is $20.
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