Chipotle Is Having a Very Bad Year. Here’s Why


Chipotle ($CMG) is one of the most popular restaurant chains in the United States. They have over 2,000 locations around the world, had a net income of $475.6 million in 2015, and sell their famous burritos for more than the price of an average McDonald’s meal. They’re not Taco Bell famous, but their nearly just as well known and slightly healthier.

In the last two years, however, Chipotle became famous for something bad: a series of E. Coli, Salmonella, and norovirus outbreaks. Even after retraining their staff on safe food handling and trying to prove to customers that they were, in fact, safe to eat, some customers weren’t having it. Their stock, once a money-making machine, also lost an incredible amount of money, causing some shareholders to flee or bet against the company.

Since these outbreaks appeared to stop, Chipotle has pulled out all the stops to regain the trust of their customers — and win back Wall Street. The results, however, have been mixed.

Chipotle always dealt with its fair share of food poisoning incidents, but that never stopped millions of people from eating at the burrito chain.

Northfoto / Shutterstock.com

Northfoto / Shutterstock.com

Chipotle’s revenue increased every year, which led them to open more stores. This would inevitably lead to more people learning about and falling in love with their food.

When the company faced numerous food contamination outbreaks and incidents in 2015, however, the company took a turn for the worse.

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Sales were down, and faith in the company was steadily decreasing.

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StockTwits

Since there was less faith in the company, there was less demand for their stock. With less demand and the same amount of supply came a sizable decrease in the stock’s value.

Chipotle tried many things to bring customers back into their store, with mixed results.

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StockTwits

They created a rewards program for the summer, but the program was confusing and didn’t provide a long-term solution for bringing in customers. They also started a buy one, get one free promotion (currently ongoing), but investors’ faith in the company (according to StockTwits) is still fairly low.

Some remaining investors don’t believe the company has the ability to return to its glory days and aren’t doing all they can to bring in more customers.

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StockTwits

Other investors are still holding out hope, believing that the company can move past its image of an unsafe place to eat and sell more burritos.

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If Chipotle wants to get customers back in their stores, they need to come up with a year-round incentive and not just a summer promotion. After all, their food is pricier than McDonald’s, a chain with less quality ingredients that they just so happen to be losing a lot of business to. They also have to shake off the image of selling tainted food and highlight their quality ingredients. Investors are carefully watching if their current promotion wins people back, but until they deliver real results, the company’s future could be in jeopardy.

Share this story with your friends below, and maybe consider eating at Moe’s Southwestern Grill instead.