Chi-Chi’s is making a comeback 20 years after its last restaurant closed

By: CNN

Posted: Dec 4, 2024 2:08 PM CST

Gene J. Puskar/AP via CNN Newsource

By Jordan Valinsky, CNN

New York (CNN) — Chi-Chi’s, the Mexican restaurant chain that closed 20 years ago, is staging a comeback.

Hormel Foods, current owner of the Chi-Chi’s trademark, announced Tuesday it’s letting Michael McDermott, son of the chain’s co-founder, use the fabled name to reopen restaurants in 2025. Specific locations, menu items and designs weren’t immediately released.

Chi-Chi’s, started in Minnesota in 1975 by Marno McDermott and Green Bay Packers player Max McGee, would eventually expand to more than 200 locations.

However, the chain closed in 2004 following a hepatitis A outbreak at a Pittsburgh-area location traced to green onions served in its complimentary salsa, sickening about 650 people and resulting in four deaths and several hundred lawsuits. It’s the largest hepatitis A outbreak in United States history and led to nationwide food safety changes.

Outback Steakhouse bought Chi-Chi’s in a $40 million deal and closed the remaining restaurants. The former rival used the locations to open Outback, Bonefish Grill and other concepts that its parent company owns.

Michael McDermott will revive Chi-Chi’s, which was known for its eclectic interior as well as an expansive Tex-Mex menu that served everything from fajitas to fried ice cream. He is an industry veteran who launched Kona Grill and sold it to trendy steakhouse STK’s parent company in 2019.

“We have seen the impact our restaurant has had on individuals and families across the country and believe there is a strong opportunity to bring the brand back in a way that resonates with today’s consumer — an updated dining experience with the same great taste and Mexican flavor,” McDermott said in a press release.

The Chi-Chi’s branding, which is still used on packaged food and margaritas, will continue to be sold at stores. Hormel has made chips, salsas and other Chi-Chi’s products since the late 1980s.

The revival of Chi-Chi’s comes as other nostalgic chains are facing mixed results. Chili’s has repeatedly reported strong earnings this year, while Red Lobster and TGI Fridays both filed for bankruptcy. The seafood chain introduced a new happy hour, among other menu changes, to revive the chain under a new CEO; while Fridays has quietly closed another dozen restaurants in the past few weeks.

“While restaurants continue to face challenges like rising food costs, labor shortages, and higher buildout expenses, nostalgia has emerged as a powerful driver of customer visits,” R.J. Hottovy, head of analytical research at Placer.ai, told CNN. “Strategies like reintroducing beloved menu items or offering exclusive collector’s items have resonated with consumers, suggesting these tactics could also work well for reviving these classic brands.”