Chipotle Doesn't Even Know If Those Free Burritos Are Working
Cue the shoulder shrug.
Chipotle has given away millions of dollars worth of free burritos in a bid to draw customers back into its stores after a debilitating food-safety crisis last year. But so far it has little to show for the burrito free-for-all, what with its sales dropping 24 percent in the latest quarter from the year before.
Now, there's even more evidence that all the free food isn't really moving the needle in terms of sales, and it comes from correspondence between the burrito chain and the Securities and Exchange Commission that was released on Wednesday.
In the exchange with the SEC dated July 1, Chipotle said it had accounted for $4 million in costs associated with giving away free food in the first quarter of 2016. But when asked to estimate what impact the promotions had on driving sales, Chipotle said it was kind of hard to tell because of all the disruption in its business. For that reason, it couldn't accurately come up with a figure, it said.
In other words, Chipotle is spending millions of dollars on giving away free food even though it can't tell if promotions are driving revenue and probably won't in the future.
This provides even more reason to change tactics in its strategy to win back customers. As I've argued, Chipotle needs to tone down the giveaways and concentrate more of its marketing power on communicating with customers.
Restaurant-goers who get a free burrito coupon might be convinced to eat at the chain once, but only customers who believe Chipotle has truly fixed its supply-chain and food-handling process will make it part of their regular routine again.
To contact the author of this story:
Shelly Banjo in New York at firstname.lastname@example.org
To contact the editor responsible for this story:
Beth Williams at email@example.com
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.