How Chili's is Beating McDonald's At Their Own Game

Jun 09, 2025 • 10 min read

Chili's has aggressively marketed directly into McDonald's core tenant: Value meals. Why pay virtually the same price for fast food when you can have a properly-cooked burger at Chili's? This is the bet the fast casual dining chain is making; and it's working.

A Surprising Role Reversal In many American households, the calculus of dining out is shifting. For decades, McDonald’s was the no-brainer choice for feeding a family on a budget; now even some loyal customers are reconsidering. If a fast-food combo meal can run close to $10, they wonder, why not spend a few dollars more for a sit-down dinner that feels like a real treat? That question highlights a broader trend upending the restaurant industry. Chili’s Grill & Bar – a casual dining chain known for baby back ribs and frosty margaritas – is soaring by doubling down on value, even as McDonald’s, the fast-food giant, navigates a growing backlash to its price hikes.

Chili’s has recently pulled off a comeback few saw coming. In the first months of 2025, the chain logged an astonishing 31% jump in same-store sales, fueled largely by a 21% surge in foot traffic. These kinds of numbers are virtually unheard of in casual dining, a sector that not long ago was considered in decline. The crowds filling Chili’s restaurants aren’t coming by accident: they’re lured in by a deliberate value-based strategy that makes a night at Chili’s feel like a bargain. Meanwhile, McDonald’s – long the standard-bearer of “cheap eats” – is seeing the other side of that equation. U.S. sales at McDonald’s slipped by about 3.5% in the first quarter of 2025, the company’s worst performance since the pandemic’s height, as higher prices sent some cost-conscious diners elsewhere. McDonald’s executives acknowledged that visits by lower- and middle-income customers plunged nearly 10% in that period – a stark drop for a brand that built its empire on affordability. In short, the value crown that once belonged securely to McDonald’s is now up for grabs, and Chili’s is making a play for it.

Betting on “Barbell” Bargains At the heart of Chili’s resurgence is a deceptively simple idea: give customers more for their money. Two years ago, under CEO Kevin Hochman, Chili’s introduced its “3 for Me” menu – an aggressively priced meal bundle that offers an appetizer, entrée and drink for a starting price of just $10.99. One headline item is the “Big Smasher” double cheeseburger: nearly a half-pound of beef served with bottomless chips and salsa and a unlimited soda. In TV commercials and cheeky online ads, Chili’s has boldly compared that bundle to what the same dollars buy at a drive-thru. (One Chili’s ad last year pointed out its burger pack had “twice the beef of a Big Mac,” urging consumers to ditch the “tiny” fast-food burger.) The message landed at a perfect moment. With inflation pinching wallets, many diners have grown sensitive to value – and Chili’s is telling them that a sit-down restaurant can beat fast food on bang-for-buck.

Chili’s isn’t shy about using humor and spectacle to hammer this point home. The chain launched a tongue-in-cheek “Fast Food Financing” campaign this spring that spoofed payday loan shops – a playful jab at how expensive a quick burger run has become. It even created a retro-style video game and pop-up events around the theme, generating buzz on social media. “Now more than ever, as consumers make tough choices about where to spend money, we want to be a brand people trust to deliver great food, atmosphere and value,” says George Felix, Chili’s chief marketing officer. That blend of savvy marketing and straight-up deal pricing has transformed Chili’s image. What was once a middle-of-the-pack casual chain now has people joking that it’s become “the new value meal champ” – a title that would have sounded absurd a few years ago.

Value on the Menu, Profits at the Bar One might assume that selling such cheap bundles would hurt Chili’s profits, but the strategy is more nuanced – a “barbell” approach to pricing. The idea is to hook customers with low-cost options on one end of the menu and still offer enough premium choices on the other end to make money. In Chili’s case, that means the $10.99 combo is just the entry point. In practice, fewer than one in five guests actually stick to the base price tier, according to the company. Most diners upgrade to higher tiers (the 3 for Me menu has $13, $15, even $16 options with more indulgent entrees) or add extras like dessert and appetizers. And crucially, over 80% of Chili’s customers still end up ordering from the regular-priced menu – an appetizer here, a side dish there – even as they take advantage of the deals. The result: Chili’s dining rooms are full, and checks are healthy enough to keep margins strong. In its most recent quarter, the chain’s restaurant-level operating margins neared 19%, a remarkably solid figure for casual dining. High volume is part of that story, but so is something else many Chili’s patrons are ordering: margaritas.

Beverages – especially alcoholic ones – are a cornerstone of Chili’s playbook and a big contributor to its bottom line. “We actually sell more margaritas than any other restaurant brand in the United States,” Chili’s CMO Felix notes. The margarita, America’s favorite cocktail, happens to be a Chili’s specialty, and the chain skillfully uses it to straddle value and premium. There’s often a monthly margarita special at an enticing price (around $6) to draw in happy-hour crowds, while signature drinks like the Presidente Margarita command a higher price tag for those willing to splurge. In other words, Chili’s will give you a full meal for eleven bucks and tempt you to pair it with a top-shelf cocktail. Many guests do – and that’s where the margins fatten. This barbell strategy of “cheap meal, fancy drink” means Chili’s can proclaim itself a value leader without sacrificing the upsell opportunities that drive profits. It’s a delicate balancing act, but Chili’s is executing it with finesse.

McDonald’s Loses Its Discount Edge For McDonald’s, the situation on the ground is very different. Over the past few years, the fast-food behemoth has steadily raised menu prices – outpacing even the broader inflation in groceries and restaurants. By late 2024, the average price of a McDonald’s item was roughly 40% higher than in 2019. Staple items that anchor McDonald’s image, like the Big Mac, are significantly pricier than they were just a few years ago (the Big Mac’s cost is up around 20% since 2019, for instance). McDonald’s leadership maintains that these hikes were necessary to offset soaring costs for ingredients, labor, and transportation. But the consequence is that the once-clear gap between fast-food prices and casual dining prices has blurred. A family of four that used to turn to McDonald’s for a cheap night out might find the bill creeping toward $40 – not far from what they’d pay at a sit-down chain, especially one like Chili’s that’s running specials. As Sara Senatore, a restaurant analyst at Bank of America, has observed, the psychology is shifting: if you’re already spending ten or twelve dollars per person at McDonald’s, it’s becoming harder to justify not spending just a bit more for a perceived upgrade in quality and experience.

McDonald’s knows it has a perception problem on value. The company has been careful not to publicly admit to “pricing itself out” of the market – in fact, executives insist that their prices remain in line with competitors and that any recent sales weakness is due to factors like fewer people eating out for breakfast. But the consumer sentiment data tell a cautionary tale. Surveys and social media chatter reveal that some longtime McDonald’s fans feel the chain has lost its affordability mojo. “Yeah, I can afford to eat there, but the value is no longer worth it,” one Reddit user griped, encapsulating a common refrain. Foot traffic data underscores the trend: visits to McDonald’s U.S. restaurants in early 2025 were down a few percent compared to the previous year – a dip more pronounced than the overall fast-food industry’s decline. Importantly, much of that slippage came from lower-income guests who historically have been McDonald’s most loyal base. Some of those customers simply cut back on dining out altogether as budgets tightened, while others have traded down the chain ladder (to cheaper rivals like Taco Bell) or even up the ladder (splurging occasionally on something like Chili’s, which now feels within reach).

McDonald’s isn’t taking all this sitting down. Late last year, the company rolled out a $5 value meal deal – a throwback move aiming to rekindle some of that lost love among bargain hunters. For a brief moment, it worked: the promotion did bring more people in the door, and franchisees reported a noticeable uptick in traffic on deal days. But the bump was short-lived, and it highlighted a double-edged sword for McDonald’s. Yes, customers will come for a good deal – but doing so reminded them of what had been missing. As soon as the promo buzz faded, those same customers were again confronted with a menu where many items felt just a bit too expensive. In effect, McDonald’s must now actively re-market its value proposition to an audience that used to take it for granted. The company’s CEO, Chris Kempczinski, has said that finding the right balance on pricing and promotions will be a key focus going forward. McDonald’s is banking that more marketing – and perhaps more modest pricing moves – in the coming months will convince diners that it still can be the go-to choice for a cheap, convenient meal. In the meantime, competitors are gladly making their case to disillusioned McDonald’s fans.

Shifting Currents in Consumer Tastes The divergence between Chili’s and McDonald’s fortunes isn’t happening in isolation; it reflects a larger realignment in how Americans spend their food dollars. Overall, restaurants have been facing a tougher environment as food-away-from-home costs rose faster than groceries, prompting some households to cook at home more often. Yet within the dining-out category, not all segments are equal. Quick-service restaurants (fast food) have collectively seen a dip in their share of traffic in the past year or so, while casual dining and fast-casual chains have clawed back a bit of market share. CenterCheck’s analysis of retail performance data highlights this subtle shift: after years of ceding ground to the convenience of drive-thrus, sit-down eateries are now capturing a slightly larger slice of the dining pie. It appears that when people do decide to treat themselves by going out, they want to make it count – seeking atmosphere or portion size or perceived quality that justifies the expense. This doesn’t mean fast food is in free fall by any stretch; it remains a huge part of American life. But the halo that once surrounded the likes of McDonald’s (the feeling that it was always the cheapest option around) has dimmed, and that creates openings for other brands to steal a bit of thunder.

Chili’s, notably, isn’t the only winner in this environment. Taco Bell, a fast-food chain under the Yum Brands umbrella, also leaned into value in recent quarters – and saw a healthy 9% rise in same-store sales, even as burger-focused chains stumbled. Other players like Wendy’s and Burger King, facing the same pinch as McDonald’s, have reintroduced value menus and promotions to try to hold onto budget-conscious customers. And beyond the value conversation, some consumers are gravitating to fast-casual concepts (think Chipotle or Panera) where the price point might be a tad higher but the food quality or brand ethos deliver a different kind of “value.” In short, the consumer’s definition of value is evolving. It’s not just “cheapest meal wins” anymore; it’s a calculation of price, quality, experience, and even social media buzz. Chili’s managed to align several of those stars at once – leveraging a viral marketing moment (its Triple Dipper appetizer platter became a TikTok darling last year) alongside the rollout of its budget meal bundles. The result was a perfect value storm that lifted its sales to record heights. McDonald’s, for all its enormous scale and marketing muscle, has found itself on the wrong side of that storm, at least for now.

Implications Beyond the Menu For retail and real estate professionals, these shifting tides in the restaurant world carry real implications. A busy McDonald’s or Chili’s isn’t just a place to eat – it’s often an anchor tenant and a traffic driver for an entire shopping center or commercial district. Foot traffic patterns are changing as consumer preferences do, and that means the mix of tenants that can successfully draw crowds might be changing too. For example, if McDonald’s experiences lighter customer traffic due to higher prices, a gas station or convenience store next door could see slightly fewer stop-ins during traditionally busy meal rushes. On the flip side, if a casual dining spot like Chili’s is packing in families on weeknights with its meal deals, the other businesses in that plaza – from the ice cream shop two doors down to the retail stores – stand to benefit from the spillover. Unlike drive-thru patrons who zip in and out, Chili’s customers park their cars and often linger before or after a meal, potentially browsing nearby shops. The co-tenancy effect of a thriving restaurant can thus be significant: a restaurant that draws a new crowd can effectively rejuvenate a retail center’s evening scene, boosting sales for neighboring tenants and increasing the appeal of the location as a whole.

This trend also feeds into strategic decisions about expansion and leasing. If casual dining chains prove they can grow sales with a value-centric model, they may become more aggressive in seeking new locations – even in markets they once avoided due to high rents or tough competition. Chili’s, buoyed by improved performance, has hinted at renewed expansion plans, including in high-cost cities where it had previously been cautious. Commercial landlords and developers, in turn, are taking note that a well-positioned sit-down restaurant with the right offering can anchor a property much like a big-box retailer or grocery used to. We may see more shopping centers courting these “new value champions” as anchor tenants, blending dining and retail to create destinations that cater to savvy, budget-aware consumers. The real estate community is also watching how enduring this shift will be: is Chili’s just enjoying a temporary lift from a clever promotion, or does it signal a longer-term realignment in dining habits? Early evidence suggests something real is happening – consumers have discovered that value can live in unexpected places (like a Tex-Mex bar & grill), and they aren’t soon forgetting it.

The New Value Equation In the larger picture, the contrasting fortunes of Chili’s and McDonald’s tell a story of adaptation in a volatile economic climate. McDonald’s, with its vast resources, may very well course-correct – it has navigated countless consumer trend changes in its history. But the fact that America’s leading fast-food chain is even in this position speaks volumes about how consumer expectations have shifted. People still want convenience and low prices, but they also crave fairness and fullness: the feeling that they got a good deal and a satisfying experience. Chili’s figured out how to provide that feeling by tweaking the age-old formula of casual dining just enough to make it irresistible in 2025. The restaurant gave people more value, loudly told the world about it, and the world showed up at its doors.

For McDonald’s, the lesson may be that simply relying on a legacy reputation for cheapness isn’t enough – not when prices climb and competitors get creative. Value has to be continually re-earned and re-demonstrated. As one industry analyst put it, diners today are “more judicious” with their visits; they will flock to the brands that respect their wallets and their desire for a little something extra. This new value equation is reshaping not just the competitive landscape between fast food and casual dining, but also the literal landscape of retail real estate. Restaurants that hit the sweet spot are becoming focal points of consumer activity again, and those that miss the mark risk losing relevance in the places they once dominated. In the coming months, watch for McDonald’s to counter-attack with its own value messaging – and watch for Chili’s to keep refining its formula, perhaps pushing even further with specials and innovation to cement its gains. In the battle for America’s budget-conscious diners, the lines have been redrawn: the old fast-food versus sit-down hierarchy doesn’t hold like it used to. Now it’s all about who can offer the best deal and a good time. On that score, a scrappy Chili’s has shown it can beat the golden arches at their own game – and is having one heck of a run doing it.