Chili’s Success: A Pоwerful Cоmbо of Mаrketing аnd Operаtions Chili’s, a casual-dining restaurant chain headquartered in the United States, has achieved an incredible turnaround and is one of the hottest restaurant chains. They have 1600 locations worldwide, same-store sales have increased for the last 20 straight quarters, and the company is now the second-largest casual dining chain in the United States. Much of the successful turnaround can be traced to Kevin Hochman becoming CEO of Chili’s in June 2022. According to Hochman, “…marketing brings them in and operations brings them back.” Several factors contributed to this resurgence. First, the company has invested heavily in marketing. The current marketing budget is over $140 Million, which is an increase of more than $100 million from prior to Hochman’s taking the helm. One factor is the targeted use of social media. Customer videos of pulling mozzarella sticks got a lot of visibility. And then Chili’s added Nashville Hot Mozzarella sticks to the menu. The result was an increase in sales of Chili’s “Triple Dipper,” which consists of three appetizers. Another factor has been menu simplification. Over a quarter of the menu was eliminated. Now, the menu focuses on fajitas, appetizers, burgers, and margaritas. A recent reemphasis has been on Chili’s improved ribs. They also made several popular additions to the menu, including Three for Me (an appetizer, entrée, and drink starting at $10.99), Triple Dipper (three appetizers), and Nashville Hot Mozzarella Sticks. Chili’s has also worked to improve kitchen operations. They have made numerous small changes to simplify and standardize kitchen processes. One improvement was switching to only one type of dill pickle, a less expensive product in an easier-to-open container. A second improvement was to redesign the shaker for seasoning fries, to reduce the number of shakes required from approximately 20 down to 5. They reduced the breading for chicken crispers from two to one layer, resulting in improved quality, and a 66% increase in sales for the last 3 years. Shrimp are no longer counted; cooks now scoop up a handful for each order. Paper-lined metal baskets were eliminated, allowing restaurants to skip skip lining and washing the metal baskets. So, what’s next? Chili’s answer: the “North of 6” plan. The top performing restaurants have an AUV (Annual Unit Volume) of over $6 Million, substantially higher than the average AUV of $4.6 million. The company’s goal is to benchmark these restaurants to see what they do differently and bring these changes to other restaurants. (8 pts.) We discussed four elements of the strategic planning process (shown below). For each, explain or give examples of what you feel these elements might be at Chili’s. Define the business - Set goals - Develop strategies - Select metrics - B. (6 pts.) Explain the difference between resources, standard operational practices, and operational capabilities. Give an example of each that might be present in a Chili’s restaurant. Resources - Standard operational practices - Operational capabilities - C. (6 pts.) We discussed four levels to describe the strategic role of operations in a firm: internally neutral, externally neutral, internally supportive, and externally supportive. Give a brief explanation of each of the four levels, and then explain which level you think Chili’s is on. Internally neutral Externally neutral Internally supportive Externally supportive Chili’s
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