Chipotle is Playing Games Again

By Markets

Image source: Chipotle.

Continue Reading Below

This has been the year ofChipotle Mexican Grill(NYSE: CMG)giveaways as it tries to win back customers. The latest offer is a BOGO entree mobile coupon after playing the burrito roller's new online game.

Just like the Guac Hunter game that the chain introduced in March -- where freebie seekers had to spot differences in a digital photo hunt to win a free order of chips and guacamole -- the actual quality of the game won't impress you. A Love Story Game is just an online version of the Concentration card game where folks have to score matching sets before the clock runs out. And just like Guac Hunter you don't have to win to nab the freebie. Playing the game and then offering up your name and mobile phone number is all it takes to land a digital coupon code for a free burrito, bowl, salad, or order of tacos with the purchase of a second entree.

There's a flimsy educational component to the game. You're trying to match all-natural ingredients. Flip over a card for an artificial color or flavoring and you will be have a few seconds knocked off of the timer. It's a shell of a lesson. Chipotle just wants to get you to come back with a half-priced meal for two. Tethering it to its "food with integrity" message or ashort film it rolled out over the summer is just window dressing. Chipotle may be an educator, but like an overmatched substitute teacher trying to wrestle back control of a rowdy class, it's a desperate one.

Putting the "free" in sofritas

Chipotle's still smarting. It likely wrapped up its fourth consecutive quarter of double-digit negative comps, a sad feat that even bad restaurant chains rarely achieve. If sales are taking it on the chin, profitability is getting sucker punched even lower. Margins are getting squeezed as Chipotle discounts aggressively and pays up to improve its food safety procedures. Chipotle posted its first quarterly deficit as a public company during this year's first quarter, followed up by an 82% year-over-year plunge in net income during the second quarter.

Continue Reading Below

From burritos to a side of chips, it seems as if there has always been some form of giveaway or promotion going on at any given time this year. Last month it culminated with free fountain beverages for high school and college students and free kid meals on Sundays. This was all happening during the third and final month of its Chiptopia program where repeat customers would be rewarded with a free meal every fourth visit in any given month. Three freebies at the same time in September may have seemed like overkill, but it was a shrewd multi-point attack to court diehard fans, social media-influenced millennials, and young families concerned about food safety.

The only real surprise about the new BOGO game that Chipotle introduced yesterday is that it wasn't the permanent customer rewards program that everyone figured would follow Chiptopia's summertime run. The game also chose to promote a video it put out three months ago instead of playing up the chorizo that it introduced nationwide last week. Right now the goal is to get traffic levels back up, something that should be easier starting next month when the year-over-year comparisons will get easier since the comps slide started last November. When margins and earnings growth matter we'll see Chipotle pulling different levers. Enjoy the freebies now as a customer, and hope that they pay off come tomorrow as a shareholder.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Rick Munarriz has no position in any stocks mentioned. 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.