Problem of Growth and Chili's Restaurant Chain In less than ten years, Chili

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 mig

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ovement in the economy, such marketing efforts might be necessary merely to keep sales at present levels. The third option, national expansion, offers advantages that affect the first two options. First, national advertising becomes far more cost-effective and commercials and print ads prepared for national marketing schemes could be used more intensively in the existing markets. Thus, increased market penetration in older locations might be assisted by the expansion efforts. Second, since the new locations would rely largely on the example of the older sites, the introduction of new menu items in the earlier location might be undertaken on an experimental basis. In other words, since such introductions would be unlikely to have an adverse effect on sales, the older sites could be used as testing areas for new items. This would allow a program of menu innovation to continue while the operations of the various new locations could be customized and could avoid the confusion of new products during the time the restaurants were becoming established. There were several general factors that could have an effect on any of these options. Consumer retrenchment, on a national scale, meant that people were eating out far less often

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