Chilli's just revealed news about customers that should terrify Applebee's and TGI Fridays

People are ditching casual dining chains — and that’s terrible news for chains like Chilli’s.

On Tuesday, Chilli’s parent company Brinker International announced that traffic at company-owned stores dropped 6.2% in the third quarter at the casual dining chain. Same-store sales dropped 2.3% in the quarter.

Over the last two years, Chilli’s traffic has decreased by more than 10% as casual dining chains have struggled to stay relevant.

“Casual dining is under more pressure now than ever to win consumers’ hearts and minds,” Wyman Roberts, Brinker International’s CEO, said in a call with investors.

Roberts acknowledged that Chilli’s needs to improve, and said that changes are in the works to speed up service, ensure food is served hot, and improve menu quality. Customers may have already noticed adjustments such as a new burger preparation — now smashing burgers, a style popularised by burger chain Smashburger — and adding “50% more protein” to fajitas.

Chilli'sChilli’sChilli’s burger.

However, the biggest problem seems to be one that Roberts cannot fix. Brinker CFO Thomas Edwards Jr. said the casual dining industry continues to be “weaker and more volatile than expected,” something that impacts not just Chilli’s, but also chains such as Ruby Tuesday, Applebee’s, and TGI Fridays.

Casual dining chains have struggled to win over customers as trendy and inexpensive fast-casual chains like Chipotle and Shake Shack have become more popular and malls have closed. And, with analyst concerns that the US could be entering a restaurant recession and that the industry is “over-retailed,” casual dining chains are being hit especially hard by customers’ disinterest.

“When you look at the alternatives out there in the marketplace today and who’s creating buzz and creating excitement, it’s gone away from chain casual dining,” TGI Fridays CEO John Antioco recently told Business Insider.

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