Why Chipotle Sales Lag in London

Back home: a bustling Chipotle Mexican Grill in San Mateo, Calif. Photograph by David Paul Morris/Bloomberg

Burrito overlord Chipotle has afairly devoted following in the States. (There’s even a fan site.) Not so in the U.K. In a recent earnings call, the company said that Londoners have been slow to warm to its oversized burritos and that awareness of the brand has remained low in the three years since Chipotle arrived.

Overseas expansion has been a key growth strategy for restaurant companies from Yum! to McDonald’s, and Domino’s. Chipotle is still in the early stages of expanding outside of U.S. and it’s moving slowly. The company has 12 international restaurants so far and plans to open an additional four this year, including its first in Germany. Still, “gourmet burritos and tacos,” aka American-style Mexican food, seems to have less allure in the U.K. than good old burgers and pizza do.

Mexican food—or at least its fast-food approximations—has always struggled in the U.K. In the late 1980s, Taco Bell tried to launch in the U.K. but closed all its restaurants by the mid 1990s. It returned in 2010 and now has three U.K. restaurants, with plans to “pursue development more aggressively in the future,” Rich Pinnella, general manager of TacoBell International, said in an e-mail.

Given the dearth of Mexicans in the U.K., salsa, guacamole and tacos are still novel treats. Brandon Stephens, founder of U.K. burrito chain Tortilla and a California native, says he still sometimes hears people pronounce the l’s in “tortilla.” When he first started the restaurant in 2007, customers had basic questions such as how to eat a burrito (some unwrapped it). “We’re still grappling with those things,” he says, but he’s now got diners at his 11 restaurants saying “carnitas” instead of “pork.”

As for Chipotle, it turns out most Londoners are not yet familiar with the brand, so the Denver-based chain plans to increase marketing. A study by Chipotle found that only 1 percent of survey takers knew about the brand without prompting, compared with 16 percent for Pret A Manger and 23 percent for McDonald’s. (With a nudge, Chipotle awareness rose to 34 percent.) “It looks likely that London will be a developing market for a while, until our awareness is raised there,” Co-Chief Executive Officer Steve Ells said during the earnings call.

Chipotle spokesman Chris Arnold says part of the reason brand awareness is low in London is that the company has just six locations—four of which opened in the past year. New York, also a global city of 8 million-plus, has 40 locations. And even in the U.S., Arnold says, Chipotle’s approach has been “to build up the business organically, [which] gives us a chance to build up our crews and operations in a new location.” Its efforts in Canada, where Chipotle has opened five stores in five years, have gone better, he says.

As in the U.S., price has been an issue for some Londoners. Tortilla’s Stephens points out that many diners have a mental barrier against paying more than £5 for a lunch item. (Burritos at Tortilla start at £4.95, or $7.51.) Chipotle’s burritos start at £6.50.

As one reviewer commented on Yelp commented, “£18.15 for two burritos and a non-alcoholic drink, WTF!” Still, he noted, the restaurant did have a line of eager Americans and tourists.

    Before it's here, it's on the Bloomberg Terminal.