As TikTok Faces Chopping Block, Chili’s Scores Social Media Win With GenZ

TikTok is back on the chopping block after a three-judge panel on the US Court of Appeals in Washington DC upheld a new law requiring its Chinese parent company, ByteDance, to sell the video-sharing app by January 19th.

The decision leaves the Supreme Court as the company’s last hope for stopping the law from taking effect.

D.C. Circuit upholds law that will result in @tiktok_us ban unless the app is divested by ByteDance pic.twitter.com/sUg1oUfccL

— Wendy Davis (@wendyndavis) December 6, 2024

President-elect Donald Trump, whose inauguration will take place one day after the ban, has spoken out against the ban – saying that it would mainly benefit Mark Zuckerberg-owned Meta.

The US Government has alleged that TikTok allows Beijing to collect data and spy on users, and that it’s a conduit to spread propaganda. China and the company have denied these claims, while free-speech advocates say the USG is trying to punish a platform they can’t control.

Chili’s Scores Win With TikTok

Goldman analysts have uncovered a fascinating new trend in the casual dining industry: Cash-strapped consumers (GenZers) are flocking to the American chain Chili’s Grill & Bar. 

Chili’s, Brinker International’s core brand (close to 90% of revenue)—trading on the NYSE under the ticker “EAT”—has outperformed the broader full-service restaurant industry. 

On Thursday, Goldman’s analysts Christine Cho and Teddy Farley told clients that the brand is experiencing a “clear turnaround.” 

The analyst said Chili’s revamped its core menus and offered new pricing strategies, which are now paying off. 

They continued:

Focus on Core Menus and differentiated pricing strategy paying off. Company has reduced roughly quarter of Chili’s menu in the last 2.5 years and shifted focus to the Core 5 SKU categories (Burgers, Crispers, Fajitas, Margaritas, and newly added Triple Dippers) which now comprises 58% of Chili’s revenue.

An unexpected twist in all the new traffic: Chili’s social media team appears to have captured the hearts and minds of GenZers… 

The analysts provided more color on this: 

This has enabled the company to simplify kitchen operations, improve throughput and improve the guest experience. Moreover, successful menu/ marketing strategy has drawn a new generation of younger guests into the stores, who tends to spend more per visit and to visit more frequently

Chili’s is winning the eatery TikTok promo wars:

For instance, Triple Dipper (mix-and-match of 3 appetizers served with dipping sauces) received 200mn views on a viral Tik Tok campaign this year, driving sales up 70% YoY and contributing to c.11% of sales.

Traffic Surge

With Gen Z enamored by Chili’s, foot traffic at its restaurants nationwide has surged in the second half of the year. There is a notable negative divergence in traffic and spending compared to other major FSRs.

Sales growth at Chili’s has also picked up compared with other FSR brands. 

However, GenZers are likely just coming in for the deals. 

Increased sales and foot traffic (thank the TikTok promo) at Chili’s have sent EAT shares parabolic. 

The analysts maintain a “Buy” rating on EAT with a $150 price target. 

Take note other FSRs!