• IDEAS & INNOVATION •
THE ECONOMY, CHILI’S MARKETING, AND THE FUTURE OF SALAD EXPLAINED IN TED-STYLE TALKS
Michael Halen of Bloomberg Intelligence, George Felix of Chili’s, and Nicole Portwood of Salad and Go share their perspectives in CREATED Talks C REATE: The Event for Emerging Restaurateurs was designed to pro- vide busy restaurateurs with useful information in quick, easily digest- from 39% in 2021, and 90-day delinquen- cies are 7% higher than before the pan- demic. BY BRET THORN
importantly, “Chili’s had lost its rele- vance,” he said. In the past, Chili’s, which probably in- troduced most American consumers to fajitas, appeared with some frequency in pop culture, including in The Office, the Austin Powers films, and of course, boy band NSync created their own version of the Baby Back Ribs jingle. Felix delved into the brand’s archives to understand its history better and also mapped out its brand purpose. That pur- pose is to make everyone feel special through a fun atmosphere, delicious food and drinks, and “Chilihead hospitality,” Chilihead being the term for employees. “The success we have is really due to the 60,000 Chiliheads,” Felix said. He also had to determine where the brand should sit trend-wise: It’s not sup- posed to be cutting edge, but at “the fore- front of the mainstream,” being cool with- out being off-putting. Hence new items like the Big Smasher, which ties into the ongoing smash burger trend while also resembling a larger version of the Big Mac, an item that has received flack as the Golden Arches has raised prices. In fact, Felix and his team coined the term “McSpensive” as a reminder of how Chili’s should position itself. Chili’s also introduced Nashville Hot sauce as an off-menu condiment for its fried mozzarella, an item that took on a life of its own as TikTokers created vid- eos of themselves pulling the stretchy, stretchy cheese. Chili’s also rationalized its menu to streamline operations and make the lives of its employees easier. It cut 25% of the menu in the past two years to focus on its “core four” categories of fajitas, burgers, Crispers (Chili’s version of chicken ten- ders), and Margaritas.
On the bright side, real income has increased for 16 straight months, mean- ing that the inflation rate is lower than increases in income. Minimum wages are slated to go up in nine states, including big ones like Florida and New York, which could affect restau - rants’ profitability, but employee turn - over rates are improving, reducing the expenses related to training. To help bring customers back, chains are spending more money on advertising and also discounting. Halen advised against straight dis- counting because it devalues guest per- ception of what an item is worth, but strategic pricing — varying menu prices based on the market, can be a useful strategy. He said Chipotle has “crushed it” thanks in part to its strategic pricing. “They’re pricing down to the individual unit level,” he said. Of all the different segments in so - ciety, Gen Z — those born after around 1995 — is the only one Halen expects to spend more in the next 12 months. He said they don’t remember the Great Recession of 2008-09, so aren’t worried about an economic slowdown. Perhaps more importantly, “most of them aren’t working and they have their parents’ credit cards.” Chipotle is not the only chain that’s doing well at the moment. So is Chili’s Grill & Bar, and its chief marketing offi - cer, George Felix, told attendees how the casual-dining chain is succeeding during this challenging time. When Felix joined Chili’s two years ago, he said the in-restaurant experience at the chain “wasn’t ideal.” Maybe more
ible presentations, sort of like TED talks. In fact, the program included three quick 20-minute presentations called CREATED Talks. They began with Michael Halen, se- nior restaurant analyst for Bloomberg In- telligence, who gave us a rundown of the macroeconomic environment operators face. “Restaurants are the canary in the coal mine,” he said; they’re an early indicator of what direction the economy is going, and for the past several years now, they have indicated that people are pulling back on their spending. That’s particu- larly true of low-income customers, but Halen said a recent survey indicated that 74% of consumers are cutting back on restaurant spending. In fact, 36 out of the past 38 months saw negative traffic at quick-service restaurants, the segment that caters most to low-income consumers. Halen said the pullback was in re- sponse to rising menu prices, and is im- pacting most segments, including most fast-casual restaurants, with the notable exception of Chipotle, which continues to enjoy sales growth. Casual dining chains are also suffering from low traffic, but family dining not so much, he said, maybe because consum- ers are trading down from casual, he said. But fine dining is back as wealthy con - sumers continue to spend: Their equity in real estate continues to accrue, and their retirement plans look to be in good shape thanks to the bullish stock market. Meanwhile, 50% of low-income con- sumers now have credit card debt, up
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