What do Chipotle’s First Quarter Losses Really Mean?
April 27, 2016
April 27, 2016
This week, Chipotle announced that sales were down 29.7 percent during the first three months of 2016—its first quarterly loss ever as a public company. Reeling in the wake of the E. coli crisis, one might look at those numbers and conclude this is the beginning of the end for the Mexican fast food chain.
But you could also reasonably argue the loss was a hit Chipotle had to take in order to get customers comfortable and confident eating in their restaurants again. According to an AP story, Chipotle said it gave away coupons that consumers redeemed for about 6 million free entrees in the first quarter. “Executives say the coupons help stores look busy again, which is an important psychological cue in assuring people business is back to normal.”
That’s a pretty savvy PR move. Unless you’re watching the register at the end of the burrito assembly line, how would you even know who was the paying customer and who was just there for some free grub? As for the individual diner, there’s nothing like a free meal to let down one’s guard. Once you’ve tasted the product again— seemingly with no gastrointestinal repercussions—you’ve got to be more likely to return, right? The giveaways might just be the move that saves the company, making it easier for once-loyal customers who are feeling hesitant to give Chipotle another chance.
This PR Professional has been rather outspoken about Chipotle’s response, characterized by misleading signs in store windows, a lack of transparency on social media, and a highly-publicized one-time nationwide closing to teach staff about hygiene and cleanliness in the workplace, which turned out to be a boon for competitors like Moe’s Southwest Grill and Qdoba. But even I have to admit, the coupon giveaway might be the one great call Chipotle made during this health crisis which started all the way back last summer.
So while the first quarter may be one to forget for Chipotle’s accountants, I’m more interested in how the burrito giant does once customers have to fork over their hard-earned dollars, especially when there are so many other choices on the table.