Instant Analysis: Chipotle Hopes Happy Hour Can Soothe Its Woes

By Markets Fool.com

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Image source: Chipotle.

Chipotle Mexican Grill, Inc.(NYSE: CMG) introduced its latest idea to beef up customer traffic this year, leading with its alcohol platform for the first time. At a few hundred stores in the Midwest, the burrito chain is offering 2-for-1 drink specials and half-priced drinks from 4 p.m. to 8 p.m. through September. The specials vary state to state, with some happening only once a week, while others are every day.

Earlier in the summer, the company launched the Chiptopia loyalty rewards program, which management indicated on the recent earnings callhad helped boost sales. Alcohol is available at nearly all of Chipotle's locations, with either beer or beer and margaritas as an option, but those beverages only make up 2% of total sales. Compared to the average full-service restaurant, that's clearly an opportunity.

Does it matter?

Considering that the after-work hours tend to be slower for Chipotle and other restaurants, offering cheap booze to attract young office workers makes sense. The move should help boost the company's brand image at a time when it needs to reingratiate itself to its customers.

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There's no word yet on whether the company might expand the program, as it's set to expire in September. Chipotle spokesperson Chris Arnold said that local liquor laws restrict the option of such a promotion in some states but noted, "It's possible we'd do it elsewhere."

Earlier in the year, management toyed with the idea of leveraging its beverages in a different way. At a Denver location, the company introduced a menu called "Beverages with Integrity," which includes Mezcal, sangria, and natural sodas. There's been no word on the program since its launch in April.

With just a few hundred restaurants participating in the new happy hour, it won't have significant impact on Chipotle's performance, but such a deal could help the company distinguish itself from other competitors and lure customers in with something other than food -- a key factor at a time when it's still reeling from last year's food safety scares.

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Jeremy Bowman owns shares of Chipotle Mexican Grill. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.