In less than ten years, Chili's had evolved from a single Dallas restaurant to a solidly established chain in Texas, California, and various Southern locations. By 1986, worsening economic conditions in most of the chain's energy-belt locations had flattened the firm's previous record of vigorous growth. The company's excellent management team had proved to be very skillful both in expanding the operation and in introducing new products. As a leader in the emerging "dinner house" market segment, the firm also had an important edge over potential competitors in new markets. The company owned the great majority of its restaurants but had one franchise operation, several joint-ventures, and a twenty-year agreement to open 50 restaurants in Northeastern markets in partnership with Dunkin' Ventures.
After years of growth, 1985 had been a banner year as the firm shifted the chain's focus from its original hamburger specialties to a much broader menu. In 1986, however, revenues remained flat. Continuing profitability seemed likely, but the potential for growth seemed very limited. The company's problem was to decide how to make the company grow again. Their options were national expansion, further penetration of existing markets, additional product introductions, or some combination of these alternatives.
JUSTIFICATION FOR PROBLEM DEFINITION
Growth is the problem facing Chili's. If the markets in which the chain was located were flourishing, it might be possible to concentrate on increasing profits and refining the concept even further. But the chain had gone about as far as it could go, given the economic circumstances. There were no significant problems with management of the firm or with personnel in general. The dinner house segment was one of the industry's slow-growth areas, but Chili's had, apparently, exceeded average growth among dinner house chains. Since the management was good and the concept was selling w...