Chipotle, the once high-flying fast-casual burrito chain, is desperately looking for a marketing plan B or C or D that will turn the tide of dwindling sales and draw people back into their restaurants. The company is looking at adding chorizo, a rewards program and special offers on top of its current national advertising push. The combined effort is attempting to entice formerly loyal customers and their previously long queues to return and newcomers to check them out.
Staying out of non-business section headlines is clearly the first priority for Chipotle after being rocked by more news stories about possible health problems tied to the chain surfaced last month. In that instance, four employees contracted the norovirus and a Boston location was temporarily closed as a precaution. But, given the hundreds of patrons and employees who became sick in the last half of 2015 from outbreaks of E. coli, norovirus and salmonella, the public has reasons to be skeptical that the burrito chain once famous for its fresh, natural ingredients might still have quality problems.
Same-store sales in the first quarter of 2016 were down 29.7 percent compared to 2015 and comparable transactions decreased 21.1 percent, according to Chipotle. The net result was a $26.4 million loss last quarter, the company’s first-ever loss.
To turn things around, the company implemented new food safety procedures, trained staff extensively and began the biggest marketing campaign in its history during the first quarter. They gave away millions of meals and dramatically boosted their advertising to try and lure customers back in. That has not been enough, however, so Chipotle is looking at a plan B or other options (C & D?) to draw in customers.
According to the chain’s Chief Marketing and Development Officer Mark Crumpacker, the firm is considering two strategies to bring back former fans and regulars who have cut their frequency of visits: a limited-time frequency incentive and new menu items. The company has realized that its biggest sales declines have come from two constituencies: customers who used to visit 25 or more times per year and consumers who only visited two to five times per year. Clearly the company is concerned about the drop off in business from the first group.
Consequently, Chipotle plans to introduce a temporary rewards program for the summer and fall of 2016. “There’s always the possibility of a permanent program [down the line],” according to Crumpacker. Loyalty programs are common at other companies like Starbucks, 7-Eleven, Capriottis and, their Mexican fast-casual food competitor, Qdoba.
Adding chorizo to the menu as a protein alternative has been tested in Kansas City, except Chipotle’s version of chorizo includes chicken with the pork as opposed to traditional chorizo, which is a pork sausage seasoned with paprika in much of the world (In Mexico, mixing in other meats in more common than in other countries.).
Any other menu changes planned have not been announced. It would not be surprising if they joined in the lucrative breakfast options competition. Making Egg McMuffins a lunch and dinner food has certainly helped McDonald’s increase its sales. However, adding breakfast would require extened hours, staff training as well as other overhead costs. Also, if the public is concerned about Chipotle’s food safety record, eggs might not go over easy.
One other way they plan to lure people to try Chipotle again is through an upcoming buy-one, get-one offer. The free burritos they offered earlier this year did draw business but cut into revenues. A BOGO offer ensures that visitors spend some money.
It remains to be seen if Chipotle’s marketing plans B, C, D or the equivalent of a corporate “Hail Mary” pass will turn things around. Still the company optimistically has plans to open more restaurants. Ultimately, the best option would be for continued success with their food safety and training programs. Not being in the news – except maybe a store opening – would do wonders for Chipotle; people have short memories.
Written and Edited by Dyanne Weiss
Eater: Chipotle Announces Chorizo, Rewards Program in Light of Slumping Sales
Bloomberg: Breakfast Burritos Could Save Chipotle
Chicago Tribune: Is Chipotle doing enough to get customers to come back?
TIME: Chipotle Could Make a Huge Change to Its Menu
Photo by Chris Potter, courtesy of StockMonkeys.com — Creative Commons license