Chili’s version of the Big Mac beats McDonald’s at its own game

New York
CNN
—

Americans no longer eat Big Macs at McDonald’s. Instead, they go to Chili’s.

Brinker International, the parent company of Chili’s, reported a nearly 15 percent increase in same-store sales and a nearly 6 percent increase in traffic in the latest quarter, driven in part by a promotion of a new burger now aimed at the fast-food chain.

The rising prices of fast food have given restaurants like Chili’s and Applebee’s an opportunity to compete with their fast-food competitors with their own offerings. Social media conversations tracked by Chili’s showed that customers were “frustrated with fast food prices,” Brinker CEO Kevin Hochman said in an April earnings call, prompting them to launch ads that “use fast food as a contrast.”

In April, Chili’s launched a cheeky new ad campaign for its $10.99 meal kit that included a new Big Mac competitor, the Big Smasher, which the company described as having “twice as much beef as a Big Mac and flavors fast food fans recognize.”

However, the Big Smasher is not made with two patties like the Big Mac sandwiched between three slices of bun, but rather a larger, half-pound piece of meat with similar toppings, such as diced onion, lettuce, pickles, cheese and Thousand Island dressing.

Chili’s “significantly outperformed the industry in both sales and traffic for the quarter,” Hochman said in Wednesday’s earnings call, a veiled attack on McDonald’s, Burger King and Wendy’s, which all reported generally weak quarters.

Hochman said on a call with analysts that the deal “has been successful in terms of driving traffic and creating a cultural conversation about fast food pricing” and that the promotion will continue throughout the rest of the year.

Applebee’s also saw an increase in value-focused deals this quarter, although it wasn’t as successful as Chili’s.

“You can get our burger for $9.99,” John Peyton, CEO of Applebee’s parent company Dine Brands, previously told CNN. With that in mind, “why would you get a $10 burger … that you can eat in a bag?”

The overlap offers “a new opportunity,” Peyton said. Lunch at McDonald’s now costs about the same as lunch at Applebee’s, where you can sit at a table and order your meal from a waiter. Pointing that out is a new way to pitch to customers.

All three fast-food chains launched their own deals shortly after the introduction of Chili’s new economy meal. McDonald’s $5 promotion has been so successful that it will remain on U.S. menus for an extra month through August, the chain recently announced.

McDonald’s $5 deal “is meeting our goal of bringing guests back to our restaurants” and even prompting some to buy full-priced items, resulting in a larger increase in sales, the company said in a July memo obtained by CNN. The financial results won’t come out until the company’s next earnings report in the fall.

Still, Chili’s results weren’t enough to help Brinker shares. The stock fell 11% in trading as earnings fell short of analysts’ expectations and investors were unfazed by the bearish outlook.