5 Things Chipotle Is Doing to Win You Back
Image source: Chipotle.
It's hard to tell what is more out of favor these days --Chipotle Mexican Grill(NYSE: CMG), the stock or the restaurant. Shares of the fast-casual restaurant chain hit fresh three-year lows after posting another rough quarter.
Sales are falling. Margins are getting creamed. Store-level popularity continues to fade, with the chain now rattling off four-straight quarters of double-digit declines in comparable-restaurant sales. It's a tough time to be Chipotle, but the former market darling isn't standing still. Let's go over a few of the ways that the burrito roller is trying to woo diners back to its assembly lines.
1. Chewing on chorizo
Chorizo -- Chipotle's first new protein since the tofu-based Sofritas hit the menu in 2014 -- went nationwide earlier this month. The spicy chicken and pork sausage is quickly gaining traction, accounting for 7% of sales.
Chipotle isn't the type to take new additions lightly because it alters its assembly-line setup. However, giving folks a savory option that most rival burrito chains aren't offering is important.
2. Sweet endings
Chorizo may not be the newest menu item at Chipotle for long. The chain's been quietly testing two different types of dessert. It will roll one of them out.
There's no official word on what the two meal enders being considered may be. Churros is an obvious choice, but it poses prep challenges. The more likely dessert candidates are pre-made treats along the lines of flan, key lime pie, or tres leches, which can be kept in the cooler until they're ordered. The key draw to dessert is that it would be incremental to sales.
3. Shifting focus on sister concepts
It may come as a shock to see Chipotle announce that it's giving up on ShopHouse. The Asian fast-casual concept expanded slowly to 15 locations across three markets, but Chipotle has concluded that ShopHouse doesn't have the ability to support compelling unit economics. It will seek out strategic alternatives, something that should help it focus more on its struggling namesake business.
However, Chipotle has a new toy to play with. The first Tasty Made burger joint opened in Ohio on Thursday. It will serve up burger, fries, and shakes, hoping to cash in on the "better burger" craze. It's a more familiar concept than the ethnic complexities that ShopHouse offered, making it an easier chain to expand quickly.
4. Take two tablets
Long lines aren't much of a problem at Chipotle these days, but the chain's already working on what it can do to improve the customer experience when the long lines return. There's a big push to improve mobile ordering, as digital ordering only accounts for 6% of its sales at the moment.
Chipotle has created a second assembly line to piece together mobile and catering orders to help speed up the process of walk-ins, but it's also experimenting with tablets to see if folks -- facing long lines as they enter -- would prefer to peck out their orders on the mobile devices and head to the register.
5. Life after Chiptopia
The three-month Chiptopia rewards program has come and gone, and while it didn't do much to drum up sales -- comps were still a negative 21.9% during the quarter -- it did help the chain load up on contact information of its most loyal customers.
Chipotle got 6 million of its customers to participate in the program, and 2.5 million of them came back at least three times in any given month to win a free entree. The program was supposed to be temporary, but Chipotle's move to tie registrations and rewards to mobile phones, now has given it easy access to millions of customers. It's been pushing out mobile marketing missives on a weekly basis, promoting items like chorizo's arrival, or Halloween's upcoming Boorito promotion, where folks in costume on Monday after 3 p.m. can buy an entree for just three bucks.
A more permanent loyalty rewards program will come eventually, but for now, Chipotle has a wider promotional net. With the chain also evaluating what would be its first national television commercial campaign, shaving corporate and new unit buildout costs, and getting ready to introduce a new mobile ordering platform that doesn't require an app download, Chipotle isn't standing still. It doesn't have much of a choice.
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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.