Chipotle's Sales Have Dropped by 10.3 Million Burritos
These days, a weekday lunch at a Manhattan Chipotle is a lovely, languorous affair. There’s hardly ever a line. Empty seats abound. Even the once elusive pork carnitas are plentiful. It’s a meal devoid of the frenzy and strategy a noontime Chipotle run used to demand.
Of course, for the company and its shareholders, this is a terrible thing. Almost six months after a series of food poisoning incidents rocked the chain and shuttered dozens of its restaurants, we are just now beginning to get a sense of how many people are going elsewhere for their fast-casual burrito fix. Chipotle doesn’t break out data on foot traffic, but it does report revenue and we know generally how much a lunch costs.
We decided to see just how many meals Chipotle has missed, assuming an average burrito price of $7
Burrito prices vary by menu item and restaurant location, but $7 is a typical median—somewhere between the price of the chicken and the beef at most of the country's Chipotles.
. In the fourth quarter, the company's 6.8 percent drop in sales equates to about 10.3 million fewer burritos than it moved in the year-earlier period, back when McDonald's and virtually every other fast-casual concept yearned to be "the next Chipotle."
"The fourth quarter of 2015 was the most challenging period in Chipotle's history," Chief Executive Officer Steve Ells said in a statement.
More troubling, however, is that Chipotle’s meals are being spread thin. The company opened new restaurants at a brisk pace throughout 2015, so the equivalent in burritos it sold per location plummeted even more precipitously than overall revenue. With 2,010 locations, the average Chipotle is selling the equivalent of 771 burritos a day. That's a lot of meat and cheese, but still a 17 percent decline over the year-earlier period. Meanwhile, the company plans to open another 220 to 235 restaurants this year.
Finally, there are the mounting costs of Chipotle’s sizable food-safety push. In late October, the company hired Mansour Samadpour, head of IEH Laboratories & Consulting Group in Seattle, to put together a food-safety plan. In accordance with the recommendations, Chipotle is preparing more food at central commissaries and stepping up its pathogen screening as well as its employee training.
Not surprisingly, the company’s food and administrative costs are surging. Operating margins at the restaurant level fell from 26.6 percent at the end of last year to 19.6 percent in the recent quarter.
"Right now, we're not trying to make this cost-effective," Ells told Bloomberg Businessweek in December. "We're just doing it."