Chili’s Adds Virtual Brand to Core Menu to Combat Traffic Decline

With Chili’s seeing its customers pull back amid continued restaurant inflation, the chain is taking its virtual brand into the physical world to draw customers into stores.

Casual dining group Brinker International, the parent company of Chili’s Grill & Bar, Maggiano’s Little Italy and two virtual brands, shared in its fourth-quarter 2023 earnings report Wednesday (Aug. 16) that, across company-owned stores, traffic in the quarter was down about 7% year over year, driven by an 8% decrease for Chili’s.

Amid these traffic declines, the chain is adding its It’s Just Wings ghost kitchen brand to bar and restaurant menus to drive visits to the former and boost average check size for the latter.

“We’ll be graduating the virtual brand It’s Just Wings to the real world where they will now have the marketing power and distribution of Chili’s Grill & Bar,” Brinker International CEO Kevin Hochman told analysts on a call. “… We see an opportunity to leverage It’s Just Wings’ brand as a trip driver for bar visits, and … It’s Just Wings will also appear on the everyday dining room menu, and we expect it to drive add-ons and trade-up in the appetizer section.”

Hochman said the brand is “one of the largest, if not the largest virtual brand in the world,” such that, with its wide following, it may prove a real draw. The move comes as Brinker turns its focus away from its “unprofitable” virtual brands toward its brick-and-mortar business.

Additionally, Chili’s is focusing on leveraging its bars to draw consumers back into stores, per Hochman’s comments, with seasonal deals and happy hour specials, and the addition of these wings only supplements those efforts.

Yet much of Chili’s traffic decline may come from the brand’s decision to eschew heavy discounting at a time when consumers are increasingly seeking deals. Findings from the March edition of PYMNTS’ Connected Dining study, “Connected Dining: Consumers Like the Taste of Discount Meals,” revealed that discount redemption on restaurant meals increased 86% from March 2022 to February 2023. The share of consumers who reported having used a discount on their most recent purchase from a restaurant rose from 14% to 26% in that time.

Since the February survey, restaurant inflation has surpassed grocery, which has likely spurred further discount-seeking. The latest Consumer Price Index (CPI) data from the U.S. Bureau of Labor Statistics (BLS) revealed that, in July, restaurant prices were up approximately 7% year over year, on top of a roughly 8% increase the year prior, leaving consumers straining under double-digit inflation relative to 2021.

With these increases, restaurant customers are pulling back. PYMNTS research last year for the study “The 2022 Restaurant Digital Divide: Restaurant Customers React to Rising Costs, Declining Service,” which drew from a survey of nearly 2,400 U.S. consumers, revealed that roughly a third of diners have been making purchases from restaurants less frequently amid inflation, and more than 80% have changed their restaurant spending behavior in some way in response to rising prices. Given that restaurant prices have only continued to rise, even as grocery inflation has slowed, it seems likely those figures would be even higher today.

Notably, Chili’s is seeing the most softness in the middle-income bracket.

“From a cohort standpoint, the low-end customer is hanging in there — we haven’t seen any change in frequency quarter to quarter,” Hochman told analysts. “The … higher-income customer is actually coming more often, and that middle ground, we’ve seen a little bit of fall off.”