Chili’s Grill & Bar, hurt by a shift away from sit-down dining, is hoping to win back customers with a new tactic: bringing food to them.
The restaurant chain, owned by Brinker International Inc., will begin offering delivery through the startup Postmates Inc. this Saturday. The test project will include 50 locations in states such as California, Florida, North Carolina and Texas. Chili’s is the largest sit-down chain to sign on as a Postmates Plus merchant -- a program that ensures patrons pay no more than $3.99 for deliveries, rather than higher rates.
In taking the step, Chili’s becomes a test case for whether casual-dining brands -- mainstays of the 1990s and early ’00s -- can reinvent themselves. Today’s consumers often prefer fast-casual restaurant chains like Panera Bread Co., or they would rather just order in. Denny’s Corp., a 63-year-old chain of diners, also is testing Postmates Plus in some markets.
“It’s a great way to take dollars back from fast casuals that have been doing well at lunch,” Wade Allen, Chili’s vice president of customer engagement and digital innovation, said during an interview in Chicago. “That’s who we’re chasing.”
Chili’s U.S. systemwide sales have dropped for the past three years, according to data from research firm Technomic Inc. Its domestic sales sunk 0.3 percent in 2015, while those of fast-casual eateries jumped 11.5 percent. The chain’s same-store sales declined 3.6 percent in the latest quarter.
Americans are increasingly seeking faster and more convenient meals, a trend that has left many sit-down chains in a slump. Chili’s, Applebee’s and other companies are trying different approaches to enliven the category. Many have invested in table-top tablets, for instance, which let customers pay more quickly and play games while dining.
Still, it’s hard to challenge newer fast-casual chains, which tout fresh ingredients and relatively quick service. The competition is especially tough during lunchtime, when few workers have time for a sit-down meal.
“Millennials are just opting for high-quality food like you can get at Chipotle or Panera for less money,” said BTIG LLC analyst Peter Saleh. “Fast casual is definitely more convenient for lunch.”
While Denny’s turned in same-store sales growth of 2.5 percent in its most recently reported quarter, that’s a slowdown from the increases last year. With delivery, the chain says it’s trying to give customers “convenient opportunities to experience the Denny’s brand.” The program includes restaurants in Los Angeles, Phoenix and San Diego.
“We are currently in an early testing phase with Postmates in a handful of locations and are in the process of analyzing the results,” the Spartanburg, South Carolina-based company said in an e-mail.
Postmates also delivers food for other chains, including McDonald’s Corp., Chick-fil-A Inc., Starbucks Corp. and Olive Garden. Once restaurants or retailers sign up as partners, Postmates’ delivery fee drops to a flat rate, which makes customers more likely to order. (Postmates still delivers from restaurants without a partnership, but it can charge higher rates.) In return for cheaper delivery, Postmates gets a commission on sales -- anywhere from 15 percent to 30 percent.
Offering delivery builds on Chili’s to-go business, which makes up about 10 percent of sales and is growing faster than the dine-in option, Allen said. Many busy families don’t have time to eat out and may appreciate delivery, he said.
“Our intention is to take it national,” he said, without giving a time frame for the rollout.
Delivering menu items like ribs, fajitas and omelets, however, has its risks, said Saleh, the BTIG analyst. Sandwiches and cold salads usually can withstand longer delivery times, but other food sometimes suffers.
“Delivery could be something that works well,” he said. “But not all food is going to travel well. It’s going to have to get there hot and in good shape.”