Fast-food rivalry with TikTok boosts Chili's sales, says parent Brinker as turnaround gains momentum.

• In its most recent quarter, Chili's experienced a 14.8% increase in same-store sales, which can be attributed to the success of its Triple Dipper and the popularity of its $10.99 Big Smasher meal.
• Kevin Hochman, CEO of Brinker International, stated that the chain's results this quarter indicate that their two-year efforts to turn it around are finally paying off.
• The company's outlook disappointed investors, as they awaited news on the economy's potential deterioration.

Nearly 15% increase in same-store sales for Chili's in its latest quarter was due to an ad campaign targeting fast-food chains and a TikTok-viral appetizer.

The CEO of the parent company, Kevin Hochman, stated to CNBC that the chain's recent success is a result of customers finally recognizing the two-year transformation.

Despite a 53% increase in shares this year, Brinker's market value dropped 10.7% Wednesday after analysts were disappointed with weaker-than-expected earnings and a conservative outlook for fiscal 2025.

On Thursday, shares rose 5% in morning trading, recovering from what BMO Capital Markets deemed an "overreaction" by investors. Additionally, KeyBanc Capital Markets upgraded the stock, stating that its quarterly results were misinterpreted.

Despite the forecast, Chili's outperformed StreetAccount's same-store sales estimates with a growth rate of 14.8%, making it one of the few public restaurants to achieve strong traffic and sales growth during a time when many consumers are cutting back on spending. In contrast, Chili's casual-dining rivals like Applebee's and Outback Steakhouse reported same-store sales declines in their latest quarters.

"This represents a new shift in the business," Hochman stated. "I believe the sky is the limit for this brand."

In its most recent quarter, Chili's experienced growth of approximately 60%, with the majority of this growth attributed to the popularity of its $10.99 Big Smasher meal. The company advertised the deal in TV commercials, targeting its fast-food competitors.

"Hochman stated that we had already identified the issue of customers being unhappy with fast-food price increases, which we had observed on social media several months ago. The advertising campaign seemed to have struck a chord on this matter."

In May, the Triple Dipper became a viral hit on TikTok, contributing to about 40% of Chili's sales growth this quarter.

The popularity of both the Triple Dipper and the Big Smasher has led to new challenges for Chili's. Its restaurants must be ready to accommodate the influx of customers, many of whom are trying Chili's for the first time or returning after a long absence. Hochman stated that Chili's has been investing in labor for the past two years, including hiring bussers and adding more cooks, but these efforts have put pressure on the company's bottom line this quarter.

According to Hochman, Chili's turnaround has affected more than just its employees.

Under his leadership, the company has spent the last two years trying to grow sales profitably. Chili's has reduced its menu by about 22%.

Brinker has discontinued some unprofitable strategies to attract customers, including offering fewer coupons for Chili's and canceling the Maggiano's Italian Classics virtual brand.

While competitors are now introducing their own promotions, Chili's has maintained its focus on value, and Hochman believes that the restaurant chain can maintain its edge and attract new customers through TikTok and TV advertising.

"For almost 18 months, we have been promoting our value, and now many people are discovering us, sometimes with a more aggressive approach, but they lack the awareness we have because we have been doing it for a longer time," he stated.

As Brinker begins a new financial year, retaining its new customers may be challenging. Numerous restaurants, including McDonald's and Outback Steakhouse, have introduced value meals to attract price-conscious customers. Additionally, customers may continue to reduce their restaurant visits to save money. Despite a 4.1% increase in food prices over the past year, these costs have remained relatively stable.

Brinker anticipates earnings per share of $4.35 to $4.75 and revenue growth of 3% to 4.6% for fiscal 2025, which began in July. Despite Chili's recent success, investors were expecting a stronger growth outlook. However, Brinker is taking a cautious approach to account for potential economic downturn.

Hochman stated that it is crucial for our team to establish attainable goals.

In the past three to four months, the economy has deteriorated, he stated.