Call it the Chili’s Effect.
In April 2024, the casual-dining chain launched its Big Mac dupe, the Big Smasher, and added it to its popular 3 for Me combo meal lineup that includes bottomless chips and salsa and a bottomless drink for $10.99. With the rollout came a robust social media push from Chili’s, presenting its value meal as a better option than fast food.
Anybody who follows the restaurant industry (and probably many who don’t) know how well Chili’s has performed in the quarters since then, with consistent double-digit same-store sales growth. McDonald’s, on the flip side, has not fared so well, with U.S. same-store sales up just 2.5% during its second quarter.
Chili’s success set the $10 full-meal price point (or thereabouts) as a restaurant sweet spot in this tough economic environment.
“Our research on study after study this year suggests that consumers start to tune out past $10, especially for lunch,” said Rich Shank, senior principal and vice president of Innovation for RB sister research firm Technomic.
And restaurants, both full service and limited service, are clearly paying attention to those studies. Just some recent examples:
- In August, California Pizza Kitchen launched a $10 Pizza Days promo on Mondays and Tuesdays
- Moe’s Southwest Grill last month launched a $9.95 Moe Value Meal that includes a junior burrito, queso, fountain drink, chips, salsa and dipping sauces
- Take-and-bake pizza chain Papa Murphy’s earlier this summer brought back its popular $10 Tuesday deal on large pizzas
- Habit Burger & Grill on Tuesday extended its Gotta Habit Meal Deals at $6, $8 and $10 price points. The meals include half a sandwich, five-piece chicken bites, a choice of side and a large fountain drink
- Red Robin in July debuted a $9.99 Big Yummm meal deal featuring a Red’s Double Tavern Burger, bottomless fries and a drink
- Applebee’s offers a $9.99 Really Big Meal Deal with the Big Cluckin’ Chicken Sandwich or the Big Classic Bacon Cheeseburger with fries and a drink
But the Chili’s Effect is having a chilling effect on one segment in particular: Fast casuals.
“They are getting pinched right now between QSR and FSR in a way that is unique in history,” Shank said. “They used to benefit from pricing separation from FSRs and that is no longer the case, and they could win customers from QSRs from their better quality position.”
A medium cheeseburger combo meal at a fast-food restaurant currently runs an average of $10.42, according to Technomic data, while a fast-food double cheeseburger a la carte averages $5.44. At fast casuals, an a la carte double cheeseburger averages $11, with an a la carte regular fry averaging $4.43 and a regular soda running $3.29.
At casual-dining chains, on average, a burger and a side of fries runs $13.87, Technomic found. And then there are the aforementioned meal deals from chains like Chili’s, Red Robin and Applebee’s.
“A full fast-casual burger meal would cost $17.72 on average with fries and a drink and the medium combo meal at QSR for $10.42 puts it within striking distance of CDRs,” Shank said. “It comes down to the perception of that ~$4 difference being perceived as worth or not for specific occasions. CDRs are able to deliver a quality product under fast-casual list prices, which is definitely putting pressure on this segment of the industry right now.”
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