Chili’s is blaming the transition to a new mobile loyalty program for disappointing sales during its more recent financial quarter while still calling the launch a success, underscoring both the challenges and opportunities with mobile loyalty.

The My Chili Rewards program has signed up close to 3 million members in almost three months, most of them new guests – a strong signal of potential future success Brinker International executives said during a conference call with analysts last week to discuss its financial results. However, because the chain decided to have wait staff promote the new program to guests over add-on items and eliminated email incentives with the mistaken expectation these customers would become loyalty members, sales were down during the period.

“Overall, we believe the Q4 sales softness is temporary and linked to the transition to the rewards program, and the strength of the Chili’s brand remains intact,” said Wyman T. Roberts, president and CEO with Chili’s parent company Brinker International, during the conference call.

“We can clearly see this strength reflected in the results of our franchise system, which hasn’t yet launched the rewards program and delivered 2.1 percent positive comp sales during the quarter,” he said. “So while we had a couple of challenges during the transition, the actual rewards roll-out has been successful.

“The program is built to drive traffic and frequency, which has definitely played out in our test markets.”

Comp sales decline
Chili’s saw a 0.8 percent decrease in comparable store sales during the fiscal fourth quarter ended June 24, 2015.

During the period, traffic was down because of a decision by the company eliminate incentives to its database of opted-in email subscribers to encourage migration to the rewards program, assuming that most would make the transition.

While this proved to be a miscalculation, going forward the company will have two vehicles for promoting offers and driving customers into its locations.

“As it turns out, most of our reward members are actually new guests, which caused an unexpected headwind for us,” Mr. Roberts said. “The good news is, since many of our e-mail database members have elected to remain in the database, we’re now able to leverage both of these robust direct marketing vehicles to drive future traffic.”

Increased frequency
Chili’s starting rolling out the My Chili’s Rewards program during the spring. Guests are able to use Ziosk-powered tablets in restaurants to sign up for the platform, check accumulated points and redeem them when paying for meals. The program is also integrated into the Chili’s application.

During the quarter, Chili’s also focused on driving sign-ups for the program, which reduced add-on sales. Going forward, wait staff will be focused on driving sales as well as sign-ups.

The loyalty program is structured with points that expire after 120 days unless the guests come back into a restaurant. As a result, Chili’s sees sales and traffic begin to increase once members have been in the program for about three months.

The test markets have shown increased frequency for customers who were infrequent visitors previously.

The company also reported that in the test markets where the loyalty program has been available for approximately nine months, these restaurants posted positive fourth quarter comparable store sales, boding well for future gains as the program continues to roll out.

To help Chili’s effectively handle the expected additional traffic, the company recently linked a program to its mobile app enabling guests to add themselves to the wait list from home, thereby reducing their time waiting at a restaurant and increasing the efficiency of restaurants.

“Our commitment to leverage advanced technology like these has created a fundamental shift in how we do business,” Mr. Roberts said. “We’re increasing our ability to use big data to make faster and better decisions and to truly know our guests and to allow our operators to focus on what’s most important to their guests and their team members, so they can deliver on our passion of making people feel special.”

Final Take
Chantal Tode is senior editor on Mobile Commerce Daily, New York