Chili’s: Virtual Brand Customers More Open to Price Increases

As restaurants struggle to manage rising food costs, Brinker International, parent company of Chili’s Grill & Bar, Maggiano’s Little Italy and two virtual brands (It’s Just Wings and Maggiano’s Italian Classics), is finding that it has more leeway to raise menu prices on its delivery-only chains than their brick-and-mortar counterparts.

On a call with analysts Wednesday (Aug. 24) discussing the company’s fourth-quarter fiscal year 2022 financial results, Kevin Hochman, president and CEO of Brinker International and president of Chili’s, shared his view that the company can raise the prices on these brands to refocus on the core omnichannel chains.

“We’re going to take pricing on virtual brands, as the vast majority of business goes out to delivery customers, who are much more focused on convenience and are willing to pay for that convenience,” Hochman said, adding that he “know[s] that from [his] pizza days.” (Hochman served as president of Pizza Hut, U.S. from December 2019 to January 2022.)

Hochman added that investing less in low virtual brand prices will free the company up to invest in Chili’s delivery business, noting that the casual dining chain’s off-premises sales outpace the virtual brands’ five- or six-to-one.

Additionally, the company appears to be using its virtual brands as something of a testing tool for its significantly larger omnichannel brands. Hochman noted that, next week, Brinker is adding It’s Just Wings’ popular wing flavors and curly fries and adding them to Chili’s menu, because the casual dining chain “does about 24 times the sales” of the virtual brand.

Additionally, the company is rethinking its traffic-driving efforts, shifting away from rewarding its loyalty program members with free food towards spending that investment on targeted marketing.

“We’re going to reboot the My Chili’s Rewards program,” Hochman said. “We probably will still give some things away, but it will be focused more on compressing the time between visits for our loyal guests and we think we can make that loyalty program more traffic driving, but less costly with a better strategy and execution based on key customer insights.”

On the other hand, free food is the number one benefit consumers look for in signing up for and engaging with loyalty programs.

Research from the August 2021 edition of PYMNTS’ “Delivering on Restaurant Rewards” report, created in collaboration with Paytronix, which drew from a survey of more than 2,000 U.S. adults, found that 78% of consumers considered the availability of free food when deciding whether to sign up for loyalty programs, more than said the same of any other benefit. In second place, 66% considered customized coupons or discounts.

See more: Two-Thirds of Consumers Find Restaurant Rewards Impersonal

Still, while Hochman did not specify what the company would replace these free food offerings with, he noted that the investment in these giveaways has proved not to be cost-effective, especially with rapid food inflation.

“We give away a lot of free food in our My Chili’s rewards,” he said. “There’s probably a better way to do that and still maintain the traffic that, that drives without constantly giving away free food every week.”