[music]

[music]

Chi-Chi's was a popular chain of Mexican

inspired restaurants that was most

popular throughout the 1980s and the

1990s. But after years of falling sales,

closing restaurants, and overall

struggling to maintain their customers,

they filed for bankruptcy in 2003 and

completely shut down shortly after. Most

of those locations were actually bought

by Outback Steakhouse for $42 million,

who went on to convert them into one of

their own restaurants, likely Outback

itself, Kurabas, or Bonefish Grill.

Considering Chi-Cheese has been gone for

over 20 years now, you'd have to be a

little older and likely from the Midwest

to have experienced it. In fact, I'm

guessing that most of the people

watching this better recognize Chi-Chi's

as a tortilla chip and salsa brand that

you buy at the grocery store, right? And

that is because Hormell, the consumer

foods company probably most known for

making Spam, made a licensing deal with

Chi-Chi's back in 1987 to use the brand

on those products. And as it turns out,

those products have long outlasted the

original restaurants. But for many

people who have been there, I think it

is safe to say that Chi-Chi's has left a

lasting impression. They were known for

making fresh tortillas that were used in

their famous fajitas along with other

Mexican dishes that you would expect.

But most people seem to remember

Chi-Chi's for serving deep fried ice

cream, margaritas, and of course, its

energetic environment.

[music]

>> Recently, this is unusual news, there's

been a serious effort to bring back the

chain. As of October 2025, there is a

Chi-Chi's restaurant open for business

outside of Minneapolis, potentially the

first of many more. I will talk a little

bit more about that, but I think that

makes this the perfect opportunity to

look back and explore what happened to

this once popular chain. So, in this

video, I want to identify what I believe

to be five of the biggest reasons behind

the decline of Chi-Chi. Starting out

with rapid expansion. The first

Chi-Cheese was opened in 1976 by Marno

McDermott and Max McGee, who was a

former NFL player for the Green Bay

Packers. They both had experience in the

industry and were correct in their

assessment that there was an underserved

demand for Mexican food in the

Minneapolis area. I mean, that is pretty

far from Mexico and there were few

others serving it at the time.

Reportedly, they decided on the name

Chi-Cheese because it was the nickname

of McDermott's wife, and it proved to be

a catchy enough name for the concept.

Sales for that first year totaled around

$2 million, which was five times their

original estimates and enough to make

them believe that it could be successful

throughout other parts of the Midwest.

To my understanding, in the 1970s,

Mexican food was just starting to become

popular in select parts of the United

States. For example, Taco Bell was

expanding successfully throughout the

Southwest, but the middle of the country

was mostly untouched. So, Chi-Chi's felt

that pressure to establish themselves in

new markets before someone else got

there. Being aggressive in that

situation, I think, made perfect sense.

But most would agree that they went a

little overboard with it. Within a

decade, they were operating 200

locations, 42 of which were opened in

1985. This 1982 article from the New

York Times called it the fastest growing

restaurant chain in the country. Most of

these new restaurants were on the larger

end and located fairly close to each

other. They wanted to focus in on

certain areas to ensure that they would

be the dominant restaurant within that

region. Also, because their attempts to

open restaurants in the country's

largest, most competitive markets like

New York, California, Texas, and Florida

were unsuccessful. They were mostly

confined to the center of the country,

potentially proving that chi-chi may

have never been the most attractive

concept and that people would often pass

it up when presented with similar

alternatives. Leading me right into the

next reason behind their decline,

competition. There are so many different

ways that we can look at this, but I

think Taco Bell would be the most

obvious one. In 1978, they were bought

by Pepsi, who went on to open thousands

of locations across the country,

including most of the markets where

Chi-Chi was already established. Also,

in 1993, I want to mention that Taco

Bell acquired a casual dining restaurant

similar to Chi-Cheese that was called

Chvies. At the time, the head of Taco

Bell said, "We think that the resources

of Taco Bell will help them grow their

business into a national chain."

However, they only opened about 20 of

them outside of California over the next

few years before selling it as part of

Pepsi's plan to exit the restaurant

industry. But then also in 1993, the

first Chipotle opened, who obviously

went on to become a national brand as

well. I don't want to go through the

entire industry, but my point here is

that Chi-Chi's extended themselves into

a vulnerable position and a lot of their

initial success came from the fact that

they were operating in markets with very

little competition. Then suddenly when

people of these communities wanted some

Mexican food, they were not

automatically going to Chi-Chi's. And I

would go so far as to theorize that

Chi-Chi was often seen as one of the

least attractive options. Leading me

into my next reason, Chi-Chi's being

perceived as more of a novelty, and I

will admit there is a lot of speculation

on my end here, but looking back at the

old menu items and the commercials, it

is hard to take them seriously. One that

stands out to me was their 725 Cancun

dinner special that included two big

seafood enchiladas stuffed with a blend

of snow crab, bay shrimp, and white

fish. I don't know, everything just

feels so silly and exaggerated and

over-the-top filled with lame jingles

and wild graphics.

>> They had taglines like a celebration of

food or get salsified. Look, I'm not

saying that every company has to be seen

as cool and professional. Even Taco Bell

had that talking dog. But I cannot

recall seeing a more consistently goofy

brand image. Comedian Mitch Hedberg even

made a movie in 1999 called Los

Enchiladas set at a crazy Mexican

restaurant that was based on the Chi-Chi

that he used to work at growing up in

Minnesota. I don't mean for any of this

to sound insulting against Chi-Chi's. I

apologize if it does. I'm just trying to

say that I question if all of these

brand elements are effective enough to

maintain a wide customer base. Going

back to the list, I'm going to say that

another issue for Chi-Chi's was

repeatedly changing owners. Just some of

the highlights here would be in 1979

after only 3 years of operation, it

became a publiclyowned company. Then in

1988, it was acquired by Food Maker, who

was already the owner of Jack in the Box

at the time. In 1994, Chi-Chi was

acquired by Family Restaurants, which

was a newly formed company created

through a bankruptcy that already owned

a different casual dining Mexican

restaurant chain called El Torito. They

went on to acquire other restaurant

chains and changed their name a couple

of times before filing for bankruptcy in

2002, which to be clear is separate from

the Chi-Chi's bankruptcy the following

year that I mentioned earlier. And

obviously through all of this, there

were multiple different leaders and

management teams placed in charge,

sometimes with conflicting approaches

and opposing visions. My point here is

that things were often chaotic and

unstable, particularly in the case of

that last owner. It could be argued that

they were not able to dedicate the

proper resources to recover the

struggling chain. The last reason on my

list is going to be a hepatitis

outbreak, which I realize might sound

crazy when I say it, but to this day, a

chi-chi at the Beaver Valley Mall

outside of Pittsburgh remains the

setting of the largest hepatitis A

outbreak in US history. It was traced

back to green onions that were sourced

from Mexico, which proved to be a major

issue because those onions were used in

their salsa that they provided free of

charge to every customer. So pretty much

everybody who ate there was exposed. In

the end, 9,000 people were given shots

to prevent an infection, 650 people were

sick, and four people died. As you could

imagine, it led to countless lawsuits

and even helped influence the CDC's

recommendation that all children receive

a hepatitis A vaccine. Obviously, a

major outbreak like this would

understandably make the public hesitant

to eat at Chi-Chi's. I know that I would

be. Similar to what happened with the

E.coli coli outbreaks at Jack in the Box

in the 1990s or at Chipotle in the

2010s. However, compared to those other

two restaurants who were able to recover

from it, Chi-Chi's was considerably more

vulnerable because it happened after

everything else I have been talking

about in October of 2003, just after

they had filed for bankruptcy. I mean,

that would have to be one of the

all-time worst months for a restaurant

chain. Clearly things were already

looking bad and this outbreak crushed

any kind of hope that they could make a

recovery. Honestly, given all the

factors against them at that point,

shutting down all the restaurants may

have been the most logical conclusion.

So, for the past 20 plus years, Chi-Chi

has only existed in our memories and as

a consumer food brand at the

supermarket. Well, currently, a man

named Michael McDermott is actively

working to revive the brand. He has an

extensive history in the industry having

established multiple concepts including

Kona Grill and he also happens to be the

son of Chi-Chi's co-founder Maro

McDermott who also appears to be working

with him as an adviser. In a statement

on their website, Michael said, "I grew

up inside Chi-Chi's restaurants. I

watched my father and uncle build

something people loved. Not just a

restaurant, but an experience that made

people happy. After years of running my

own restaurants, I woke up one morning

during meditation and realized it's

time. So, I called my father, Chi-Chi's

founder, and my uncle, Chi-Chi's first

VP, and they both said the same thing.

It's time to bring it back. The plan is

to convert two existing restaurants into

Chi-Chi's flagship locations, one of

which has recently opened, and then

build back up from there through

franchising. He has already crowdfunded

$2.4 $4 million of his $3.5 million

goal. So, progress has been made.

Honestly, I don't have a lot of faith in

a sizable comeback considering there is

so much more that would have to be done.

And I don't know if it was ever that

strong of a concept, but still, I have

to respect that this is a unique

situation as someone with a personal

connection is behind the project, and it

is a nostalgic factor going for it

considering how quickly it disappeared.

So, for anybody out there who truly

misses this restaurant and the good

memories associated with it, you might

want to look deeper into this initiative

and maybe even try to make your way over

to that Minneapolis location. Let me

know in the comments. Do you have any

memories associated with Chi-Chi? If you

were a regular customer at one point,

what kept you coming back? And what do

you remember most about your

experiences? Also, I think the obvious

question here would be, what do you see

for the future? Does Chi-Chi's have a

realistic chance at returning to their

former glory as a major chain of casual

dining restaurants, or is it going to be

a failed effort? However you feel about

Chi-Chi's, you have to admit that it

would be a cool story if it ended up

coming back in a big way. And finally,

do you agree with my reasons behind

their decline, or do you think something

should be added or subtracted from the

list? And any other thoughts you have

about Chi-Chi, leave them in the

comments. I'd like to hear what you have

to say. The legend lives on.

>> Thank you for watching.