The moves come only days before parent Brinker International's April 24 third-quarter earnings release. Chili's has suffered dismal same store-sales with its most recently reported month, February, down 5.1%, the sixth consecutive month of decline.
No. 2 casual-dining chain
The No. 2 casual-dining chain behind Applebee's is said to have ended its nearly 20-year relationship with GSD&M earlier this week, one day after Ken Thewes, Chili's VP-marketing, left the company, according to executives.
Mr. Thewes referred calls to Brinker, which did not return calls for comment. GSD&M also did not return calls for comment; it is said the companies are preparing a joint announcement about the split.
While some blame Chili's results on the weather, most of the evidence points to segment decline and Chili's relative lack of promotion despite a new menu in January. The marketer hadn't advertised during January and February or much of 2006, for that matter. It went back on air with new spots in March featuring "fire-grilled" specials. Chili's spent $125 million in measured media during 2006, according to TNS Media Intelligence.
"They're suffering from the whole segment malaise," said Bob Goldin, exec VP at industry consultant Technomic. "Consumers seem to have lost interest in the [casual dining] segment. It may be too little, too late. All the major players are looking for ways to energize their business. It's not just them."
Casual dining chains, seeing consumer traffic migrate to fast food and the so-called fast-casual segment, have recently begun offering more value-priced combo plates fro less than $10.
Under Krista Gibson, senior VP-brand strategy, Chili's recently decided to focus on limited-time offerings and new-product innovation for core menu items such as ribs, burgers and fajitas. For years the chain, founded on burgers, tacos and chili, didn't promote its namesake product other than on its menu.
John Glass, restaurant analyst with CIBC World Markets, called Brinker's second quarter "probably the worst blended same-store sales quarter in the company's history at an estimated negative 4%." He also has low expectations for March sales for Chili's, considering weak sales already reported by industry peers. Mr. Glass pointed to easier comparisons during the back half of this calendar year and the marketer's sizable ad budget as bright spots in an otherwise gloomy outlook, but noted that Chili's outperformed many of its rivals in traffic.