The Untold Truth Of Chi-Chi's

The restaurant industry is a brutal one. With an estimated 60 percent closing in their first operating year alone, it's no surprise that few have connected with the consumer to find everlasting success. More often than not, many burn fast and bright only to have their light just as quickly burn out. That could be said for the casual Mexican chain Chi-Chi's. Once a pioneer in the industry, we likely have them to thank for the now widespread availability and accessibility of Mexican food in America. Authentic it was not, but good times were had by all. This beloved chain still has a fiercely loyal following as evidenced by this Facebook group of former employees reminiscing about the good old days.

Issues such as too rapid growth, increased competition, executive level turnover, and a very serious health scare led to the demise of the still fondly remembered chain. They are all but gone in the United States, with just a few locations remaining to this day overseas. Maybe it was the bright and colorful welcoming atmosphere, or the smell of freshly cooked tortilla chips, but memories are a funny thing. Join us for some Mexican pizza, fried ice cream, and a heavy dose of nostalgia as we explore the untold truth of Chi-Chi's.

It takes some heavy capital to open a restaurant and properly set it up for long-term success. Luckily, Chi-Chi's had some true heavy investors behind it. Marno McDermott, a graduate of the University of Minnesota, was one of the founding partners. With an affinity for Mexican food, his first foray into the restaurant business was the small fast food concept restaurant Zapata in the 1960s. His eyes were set on something much grander, though, seeing a need for a full-service Mexican concept, and he approached former professional ball player Max McGee for the investment opportunity, according to Sports Illustrated. McGee himself was already in the restaurant business, owning the Minneapolis bar and restaurant The Left Guard. And so, using the nickname of McDermott's beloved wife, Chi-Chi's was born (via Smartyflix on YouTube).

After sweeping success the first year, the duo was then approached by a local stockbroker, John Stephens, who had the grand idea of making Chi-Chi's a national brand by franchising it, according to Reference for Business. It was Stephens who then enlisted Kentucky Fried Chicken's vice-president of concept development, Shelly Frank, to run the new franchise business. This large-scale expansion all happened within just two years of the first Chi-Chi's opening.

It's safe to say, Chi-Chi's wasn't exactly known for its authentic Mexican food, but rather an Americanized version of what we now know of today as Tex-Mex cuisine. Along with the not-so-authentic food came some pretty cheesy branding that fit right into Chi-Chi's brightly colored dining rooms. It was a 365-day-long fiesta in the restaurants, which touted slogans such as "life always needs a little salsa," hawked cheap and boozy margaritas, and flaunted servers around in multi-colored eyesores for uniforms.

There were also some pretty cringeworthy moments (and accents, if we could even call them that) in the television marketing campaigns. This 1991 commercial is the epitome of kitschy, with a super gimmicky song, bizarre attempts at accents, and an odd ode to "Fri-yi-yi-yied ice cream." Ay, caramba! This "celebration of food" is all over the place and is just one of the many commercials Chi-Chi's pushed in the 1990s. We're not sure about you, but we just can't turn away from these train wrecks.

It was a great time to be Chi-Chi's in the 1970s and 1980s. Riding the wave of success, they expanded to over 200 stores with profits in the multi-millions. There were a multitude of factors that led to their slip in sales, though, with one being the major concern associated with the real estate needed to operate a restaurant. During the high tide of the 1980s, Chi-Chi's was opening restaurants that took up a whopping 10,000 to 12,000 square foot of floor space (via Funding Universe). Profits had to remain consistently up to maintain this amount of space. Sudden growth also led to problems at the corporate and management levels. It's reported that the turnover rate was a shockingly high 80 percent for restaurant managers, leading to inconsistencies in service, food, and most importantly, the customers' experiences (via Reference for Business).

After Chi-Chi's acquisition by Foodmaker in 1988, they placed the emphasis on affordable and fresh to fight the decrease in sales. A value menu was introduced that featured meals price at just $3.99 and $4.99. They also began to make their beans, rice, and beef fresh, and this was further driven home in their new marketing campaigns. If there was ever a question on freshness, customers would encounter a fresh tortilla making machine right when they entered the establishment (via Funding Universe). Freshness was the name of the game and they did everything they could to make the consumer aware.

With never-ending turnover at the tip-top of leadership, the company was an endless revolving door when it came down to its integral executive members. Unfortunately, the worst was yet to come for the once-thriving company. The struggle was real for them come the end of the 1980s, and they were eventually bought out by Jack in the Box's parent company, Foodmaker, Inc. (via The New York Times). Financially, things were starting to look up, but the restaurant had lost its way. Soon, the menus were completely devoid of the classic Mexican food they were known for, and what replaced it was figuratively watered down and Americanized food, along with stir-fry, pasta, and even taco pizza. By the early 1990s, sales were again slumping, leaders were jumping ship, and the company filed for Chapter 11 Bankruptcy (via Funding Universe).

Riddled with debt because of the company's multitude of failed expansion attempts, the company struggled on for the next decade. Attempts to regain its bearing included refurbishments, which ending up setting them back hundreds of thousands of dollars per location, as well as failed menu revamps. The clock was ticking and in 2003, under the renamed parent company of Prandium Inc., they filed Chapter 11 bankruptcy again. Chi-Chi's president at the time, Anthony Baril, was even quoted by the Los Angeles Times as proclaiming that Chi-Chi's is "burning cash at a rate that will result in them running out of free cash in the next five to seven business days."

By 2004, Chi-Chi's had dwindled to just over 60 restaurants in operation in the United States. Multiple bankruptcies, constant changes at the executive level, and the devastating hepatitis A outbreak proved far too damning for the company — which was once named American's Favorite Mexican Restaurant — to ever come back from. In the summer of 2004, Outback Steakhouse bid $42.5 million, according to USA Today, to purchase the remaining Chi-Chi's properties. This was more of a real estate move as opposed to buying the Chi-Chi's branding, as the purchase did not include the company name, its operations, or any culinary practices. By September of that year, all of the United States Chi-Chi's locations closed for good.

Outback's initial plan was to change the majority of locations to restaurants under their group, which included Bonefish Grill and Fleming's Prime Steakhouse (via USA Today). That plan didn't exactly come to fruition, but Outback still benefited just fine financially. Outback sold the majority of the locations to the real estate investment company, Kimco Realty Corp., according to The Journal Times. If you have an affinity for the past, there's even a website dedicated to abandoned former Chi-Chi restaurants.

With a passport and an international plane ticket, you could have the chance to revel in the sights, sounds, and smells of our dearly departed Chi-Chi's. While the Mexican chain is nothing but a thing of the past in the United States, maybe even a funny anecdote at a party, there are several locations still in operation throughout the world, according to Kiplinger. The multi-colored, lively restaurant and questionable Tex-Mex cuisine is still embraced in Europe, the United Arab Emirates, and Kuwait.