Chipotle is Giving Away Millions of Free Burritos to Lure Back Wary Customers

Chipotle bosses will now see pay linked to share-price performance
Provided by MarketWatch

In an effort to accelerate a recovery from E. coli outbreaks that pushed share prices to low points in recent months, Chipotle Mexican Grill Inc. has given away millions of burritos and says it will offer millions more.

Chipotle   received 5.3 million requests for free burritos over about five hours when every restaurant was closed on February 8, a “rain check” to customers who couldn’t purchase food, Chief Creative and Development Officer Mark Crumpacker told attendees at the Bank of America Merrill Lynch Consumer and Retail Tech Conference.

“[T]hat was about 14,000 per minute at peak,” said Crumpacker, who said the company had anticipated 2.5 million participants. The company saw a 67% redemption rate, he said.

Of course, giving out free burritos isn’t free. In an after-hours regulatory filing posted on Tuesday, Chipotle said it will incur higher-than-expected expenses during the quarter, in part due to marketing and promotions.

Executives noted that there weren’t any new costs incurred, and “everything that we’re seeing in the first quarter is largely confined to the first quarter.” More importantly, they’re having the desired effect.

“[W]e bring customers into the restaurant via a free burrito offer, our restaurants will be full, we would remind people about what an authentic Chipotle experience really feels like, what a full restaurant feels like, again, and then they would return and pay for their burrito and that’s happening,” said Chief Financial Officer Jack Hartung.

Another free burrito promotion is already underway, with six million to 10 million direct mail offers already in the market and a total of 21 million planned. The company expects redemptions to be lower for the promotion, which ends May 15.

Though the company did provide a weak outlook in the filing, and suffered a setback with the most recent news of ill workers in Boston, executives expressed confidence that all signs are pointing in a positive direction. With customers coming back, even if it’s for a free burrito, executives believe that trust is slowly being restored.

“We recognize that this will take some time, however, but we we’ve always taking the long approach, and we’re pleased the recovery is off to a good start, said Chief Executive Steve Ells. “We’re also confident that our strategy for the full year including our use of aggressive marketing and promotions activities will help welcome customers back.”

Though wary, analysts were largely in agreement, mostly maintaining their stock ratings and price targets.

“While still volatile week to week, the directional trend is net positive,” said Barclays analysts in a Tuesday note. They rate the stock equal weight with a $450 price target.

“Chipotle’s announcements contain several negative data points and read-throughs; however, we come away from the announcements feeling cautiously optimistic about the outlook for an intermediate-term same-store sales recovery,” BMO Capital Markets analysts wrote in a Wednesday note. Analysts rate the stock at outperform with a $550 price target.

SunTrust Robinson Humphrey maintained its buy rating, but raised its price target to $550 from $520.

“Although February same-store sales and first-quarter 2016 earnings per share guidance are lower than estimated, we expect investors to take a longer-term view on valuation given recovering (albeit slowly) sales,” analysts wrote.

Chipotle shares are trading at nearly $502 Wednesday afternoon. Shares are down 26.2% for the past 12 months, but up 4.4% for the year so far. The S&P 500 is down 1.5% for the year to date.

Written by Tonya Garcia of MarketWatch

(Source: MSN)

‘Fast Food’ Becoming a Dirty Term in Restaurant Industry

Getty Images/Justin Sullivan 

NEW YORK — Fast food is becoming a dirty term.

As smaller players challenge fast-food chains like McDonald’s and Burger King, they’re fighting to set themselves apart by describing their food as “fast-casual,” ”fine casual,” ”fast crafted” and even “fan food.” That’s even though they follow the same basic format: People standing in a line to order and pay a cashier for their food.

The new phrases are being embraced as companies try to position their offerings as fresher or higher quality to distance further their menu items from the stigma that fast food is greasy, cheap and unhealthy.

Even traditional fast-food chains acknowledge they have an image problem. McDonald’s Corp. has said it wants to transform into a “modern, progressive burger company.” And Yum CEO Greg Creed has noted the need for the company’s Taco Bell, KFC and Pizza Hut chains to redefine the meaning of fast food, which is seen as industrial and impersonal.

In the meantime, others are cooking up phrases to telegraph that they are anything but fast food.

Chipotle Mexican Grill Inc. and Panera Bread Co. are widely referred to in the industry as “fast casual” chains, a term meant to convey that they serve dishes that are in line with what people might find at a casual, sit-down restaurant. Shake Shack, the New York City-based burger chain, took it a step further last year when it declared itself to be “fine casual.”

In a filing with the Securities and Exchange Commission, Shake Shack explained: “Fine casual couples the ease, value and convenience of fast casual concepts with the high standards of excellence in thoughtful ingredient sourcing, preparation, hospitality and quality grounded in fine dining.”

Even Arby’s, whose food has been mocked on The Daily Show by former host Jon Stewart, is trying to change its image and has started calling itself “fast crafted.”

Chris Fuller, a spokesman for Arby’s, said the chain came up with description after holding “Brand Camp” meetings with employees around the country in 2014. Workers were given cards with the names of restaurant chains, and told to lay them out in order, with “fast-food” representing one end and “fast casual” representing the other end. Arby’s always fell somewhere in the middle, Fuller said.

As a result, he said the chain realized it offered the convenience of fast-food, but also offers “that made-for-your care” with its sandwiches.

When asked how he thought Stewart might react if he were still on The Daily Show, Fuller said: “I think he would come up with his own term, but I’m sure he would have some fun at our cost.”

Arby’s isn’t alone, of course. Del Taco says it considers itself to be “QSR-plus,” a reference to the industry term “quick service restaurant” that’s used to refer to fast-food. And Dairy Queen’s tag line is “Fan Food Not Fast Food.”

Allen Adamson, founder of BrandSimple Consulting, said the trend shows the term fast-food has become the “death star” of the industry.

Adamson noted there was a time when the idea of getting food quickly was a unique concept, but that restaurants can no longer rely on speed alone to attract customers.

“Everything can be fast today. What you want to communicate is something more desirable,” he said.

Written by Candace Choi of Associated Press

(Source: MSN)

Why Chipotle Stock Is Dead Money in 2016

Craig Warga/Bloomberg via Getty Images

Chipotle Mexican Grill Inc. (CMG) has been one super-sized success story over the last few years. But after CMG stock posted unappetizing earnings two weeks ago, investors may want to find a new favorite restaurant.

Sure, Chipotle has a powerful brand with some consumers. But Wall Street doesn’t care about the touchy-feely vibe or how good a product is; it cares about whether your stock trades for a fair price and whether the growth will continue as expected.

Both of those factors are working against Chipotle stock now.

Just take a look at the last month or so and you’ll see a waterfall drop for CMG stock. Shares are firmly beneath the 50- and 200-day moving averages, and that kind of technical downtrend is hard to reverse.

Throw in a possible E. coli outbreak and general market uncertainty, and it’s hard to think that new money should be chasing CMG stock now.

But just in case you’re thinking of taking the plunge into Chipotle stock on hopes of a rebound, here are three big reasons to avoid the burrito biz right now:

Slowing Sales: On the surface, Chipotle’s Q3 report looked good. Same-store sales were up 2.6%, and revenue grew 12.2% overall. However, those numbers are down dramatically from the recent past. Consider that in the third quarter of 2014, same-store sales were up a mind-blowing 19.8% on revenue growth of 31.1%. CMG stock is simply failing to live up to expectations it had created over the past few years.

Sinking Margins: As InvestorPlace assistant editor John Divine put it right after earnings, an equally important story besides slowing revenue are sinking margins. Earnings of $4.59 per share fell short of forecasts of $4.62 in large part because operating margins fell 50 basis points on increased costs. “This sort of thing could be a lingering problem for CMG stock — and others in the retail and restaurant industries — as a push for higher minimum wages gains national traction,” Divine wrote.

Price Problems: Building on that last thought, Chipotle has little ability to juice results by simply doing more from existing operations. At another company, if margins were a concern, management could just raise prices, but prices have already jumped 10% this year in some markets. According to, a steak burrito or bowl at Chipotle goes for an average of $9.83 in New York, $9.60 in California and $10.05 in Washington, D.C. How much does this chain think it can boost prices before it starts to lose customers, particularly given its issues with ingredients lately?

No Upside Left for Chipotle Stock

There are plenty of other reasons to be bearish — the E. coli buzz that I mentioned, the continued problems with carnitas thanks to supply chain issues, questions of whether the Chipotle menu is indeed any healthier than McDonald’s (MCD) when steak burritos with cheese and sour cream can easily top 1,000 calories….

But the biggest reason to be a bear is history. Because momentum in stocks like these always ends, and ends badly.

Sure, Chipotle stock soared 200% in the past five years (at least up until the earnings debacle) to outperform the S&P 500 two-fold. But I challenge you to find a fast-growing chain that hasn’t seen this kind of flame-out.

Some can and do come back, with Starbucks (SBUX) the prime example of the past decade or so. But others, like Krispy Kreme (KKD,) struggle mightily to make it back in Wall Street’s good graces.

I do believe Chipotle is more a Starbucks than a Krispy Kreme, but that doesn’t mean you should buy and hold through what could be an ugly downturn.

Don’t mess around with Chipotle stock in 2016 given the brutal earnings, technical breakdown and history of stocks like these wandering in the wilderness.

If you have a nice profit in CMG stock, take that money in run. And if you’re a new investor, don’t consider this battered burrito play a bargain.

Written by Jeff Reeves of InvestorPlace

(Source: MSN)

Chipotle’s Stock Plunges on More Bad E. Coli News

Provided by CNBC

Chipotle (CMG) stock dropped after a CDC post about an E. coli outbreak listed three more states reporting people being infected by E. coli.

The fast-casual chain’s stock lost more than 12 percent Friday.

To date, the multi-state outbreak has affected 45 people in six states: California, Minnesota, New York, Ohio, Oregon, and Washington. Of this group, 43 ill people interviewed reported eating at a Chipotle in the week before their illnesses started.

“The epidemiologic evidence available at this time suggests that a common meal item or ingredient served at Chipotle Mexican Grill restaurants in several states is a likely source of this outbreak,” the CDC stated.

In a Friday statement, Chipotle reiterated it continues to work closely with state and federal health officials.

“We take this incident very seriously because the safety of our food and wellbeing of our customers is always our highest priority,” said Steve Ells, chairman and co-CEO of Chipotle. “We are committed to taking any and all necessary actions to make sure our food is as safe as possible, and we are working diligently with the health agencies.”

Written by Katie Little of CNBC

(Source: CNBC)

Chipotle’s Stock Rocked By Worry About E.coli Outbreak

© Craig Warga/Bloomberg via Getty Images

Chipotle Mexican Grill Inc. shares took another drubbing Friday, on mounting concerns about the E.coli outbreak that has shuttered 43 of the company’s restaurants in Washington and Oregon.

Shares of the fast-casual dining chain fell 2.6% Friday, and are now down 16% in the past month, underperforming the S&P 500 which is up 5.5% in the same time frame. The stock  is down 12% in the year so far, after gaining 29% in 2014.

Baird Equity Research downgraded the stock to neutral from outperform, and said the situation is taking much longer than it expected to resolve, and attracting a great deal of media attention that may dent consumer sentiment toward the company.

“Our call is based entirely on concerns about the uncertain near-term outlook; we remain highly confident in longer-term fundamentals and would quickly return to a constructive stance if the issue proves to be only a minor/temporary headwind,” analysts led by David Tarantino wrote in a note.

Chipotle has built its brand on the back of its use of fresh foods, striking a chord with millennials seeking a healthier alternative to traditional fast-food restaurants.

Chipotle earlier this week said it has hired two food safety consulting firms to help assess and improve its food safety standards. The company is cooperating with health officials investigating the outbreak, which had sickened 12 people in Oregon as of Tuesday, according to the Oregon Health Authority.

Three of those patients had been hospitalized. In Washington, the number of patients stood at 28 as of Thursday, according to the Washington Department of Health.

There have been no deaths from the current outbreak. Scientists believe the microorganism responsible was carried on fresh produce such as lettuce or tomatoes, Dr. Kathy Lofy, a state health officer for Washington, told a news conference earlier this week.

Chipotle said the outbreak has been linked to just eight of its restaurants but it has closed all 43 in the area as an extra precaution. The company has conducted deep cleaning and full sanitization of all restaurants in the area, and conducted environmental testing in restaurants and distribution centers, in addition to those conducted by government officials.

Baird’s Tarantino said he is less concerned about the temporary closings, and more about the media coverage linking the brand to other outbreaks of foodborne illnesses, such as an outbreak of Salmonella in Minnesota in September, which the Minnesota Dept. of Health said was caused by tomatoes. As many as 64 cases and 22 Chipotle locations were identified in that outbreak, according to the health department.

“Incidents involving foodborne illness tied to Chipotle’s restaurants could damage the reputation of the brand and impact demand trends negatively,” said Baird.

The Center for Disease Control and Prevention said the Washington and Oregon E.coli strain is the same—O26—confirming that they are linked. But the CDC has not yet identified which food stuff caused the outbreak. Laboratory testing is continuing, it said.

Written by Ciara Linnane of MarketWatch

(Source: MarketWatch)

Chipotle Broke The Law When It Fired A Fast-Food Striker, Feds Find


 The National Labor Relations Board ruled in a decision released Thursday that fast-casual chain Chipotle broke labor law when management fired an employee of a Missouri store who’d taken part in fast-food strikes.

The ruling from the board affirms a decision issued against Chipotle by an administrative law judge earlier this year. As a result, Chipotle has been ordered to reinstate the worker with back pay, and to post a humbling notice of employees’ labor rights inside the store.

The notice pledges that workers will have the right to “form, join, or assist a union,” and that Chipotle “will not discharge or otherwise discriminate against any of you for engaging in protected concerted activities.”

A Chipotle spokesperson said the company does not comment on litigation.

According to the ruling, a worker named Patrick Leeper was fired in 2014 after missing a staff meeting at his store in St. Louis. Leeper had worked at the burrito chain for three years and earned $8.80 per hour, a little more than a dollar over the minimum wage. He had joined a local worker group that’s part of the Fight for $15, a union-backed campaign aimed at raising wages in the fast-food industry, and taken part in three strikes shaming Chipotle and other chains over low pay.

Healy was reprimanded after discussing with his co-workers how much they earn, even though such discussions are protected under the law, according to the decision. Healy was allegedly told that “the next time I hear you speaking about wages in the workplace, we will be parting ways.” The judge found that such an admonition violated Healy’s rights.

The judge also found that Healy was treated unfairly when he was canned after oversleeping and missing the staff meeting. Other workers who were discharged for similar offenses hadn’t even worked at Chipotle for three months, compared to Healy’s three years. And another employee who had missed a store meeting was merely given a written warning, according to the decision. Chipotle, the judge wrote, “did not discipline employees as severely, if at all, for missing or being late to all-store meetings.”

The protests in St. Louis involving Healy were spearheaded by a group called the Mid-South Workers Organizing Committee. That group is funded by the Service Employees International Union, which has coordinated the national Fight for 15. The campaign’s periodic one-day strikes in cities around the country have roiled the fast-food industry, shining a spotlight on the plight of workers earning as little as $7.25 an hour.

The SEIU and its affiliates have brought a raft of so-called unfair labor practice charges against Chipotle and other fast-food chains, claiming they trampled the rights of activist-workers like Healy. Late last year, the labor board issued 13 complaints against McDonald’s and several of its franchisees, accusing them of retaliating against workers who joined the strikes.

Written by Dave Jamieson of The Huffington Post

(Source: The Huffington Post)

Subway Transitioning to Meat Raised Without Antibiotics

Provided by Associated Press

Subway plans to switch to meat raised without antibiotics over the next several years after a coalition of advocacy groups planned to deliver petitions to the company’s headquarters Thursday calling for the change.

The sandwich chain had already said this summer that it would start switching to chicken raised without antibiotics important to human medicine by next year. Now it says it will serve chicken that receive no antibiotics starting in March 2016. It will also make the change to turkey starting sometime next year, with a transition expected to be complete within two to three years.

Pork and beef raised without antibiotics will follow within six years after that, or by 2025, the company says.

The announcement Tuesday comes as multiple groups including Natural Resources Defense Council, Friends of the Earth, the Center for Food Safety and food blogger Vani Hari had campaigned to get Subway to commit to buying meat produced without the routine use of antibiotics, and provide a timeline for doing so.

Livestock producers often give their cattle, hog and poultry antibiotics to make them grow faster and to prevent illnesses. The practice has become a public health issue, with officials saying it can lead to germs becoming resistant to drugs so that they’re no longer effective in treating a particular illness in humans.

Chipotle and Panera already say they serve meat raised without antibiotics, and McDonald’s said earlier this year it would make the switch for its chicken.

Kari Hamerschlag, a representative for Friends of the Earth, said a coalition of groups had notified Subway last week of their plans to deliver their petitions on Thursday to its headquarters in Milford, Connecticut, but had not heard back from the company. She said the groups have been trying to get a meeting with Subway since this summer, but that the company has not been responsive.

While other chains serve meat from animals that are given antibiotics, Hamerschlag said the groups singled out Subway because of its image and lack of transparency on the matter.

“We thought Subway was the most important one to target publicly because they claim to be this healthy fast food restaurant chain,” she said.

Hamerschlag did not immediately know whether the groups would still deliver their petitions Thursday.

Written by Associated Press

(Source: MSN)

Chipotle Puts Carnitas Back on the Menu

Provided by Proshob/Wikimedia
Provided by Proshob/Wikimedia

Chipotle Mexican Grill, Inc. (NYSE: CMG) is known as a staple in any millennials’ diet. However the company had been missing a key component of its burritos and bowls for a fair amount of 2015, but now its back on the menu. The company announced that it has restored most of its pork supply and is again serving carnitas in 90% of its restaurants. Chipotle expects to have carnitas back in all of its restaurants by the end of November.

Chipotle stopped serving carnitas at over a third of its restaurants earlier this year after one of its primary pork suppliers failed to meet routine auditing standards under the company’s pork protocol.

These high standards require that pigs are raised with access to the outdoors or deeply bedded barns, without the use of antibiotics, and with no gestation crates. These practices are completely opposite with how pigs are conventionally raised. As a result, Chipotle opted to pull carnitas from hundreds of restaurants rather than compromise its commitment to animal welfare.

Steve Ells, founder, Chairman and co-CEO at Chipotle, added:

The decision to stop selling carnitas in many of our restaurants was an easy one. We simply will not compromise our high standards for animal welfare. Since making this decision, we have heard from thousands of our customers who have expressed support for our decision, and commended us for standing on principle. Now, we are excited to have carnitas back in nearly all of our restaurants, and want to thank our customers for their patience while we worked to address this issue.

Currently the option for carnitas is now available at all Chipotle locations in the U.S. with the exception of restaurants in the Cleveland and Atlanta areas, and in North Carolina and South Carolina.

The company has been able to replenish its pork supply working with existing suppliers and by adding a new partner, United Kingdom-based Karro Food. Karro produces pork from pigs raised to Chipotle’s standards for animal welfare.

Shares of Chipotle were down 2.4% at $712.75 on Monday afternoon. The stock has a consensus analyst price target of $762.26 and a 52-week trading range of $597.33 to $758.61.

Written by Chris Lange of 24/7 Wall St.

(Source: 24/7 Wall St.)

Starbucks Has Plans to Become the Next McDonald’s

© Provided by Business Insider
© Provided by Business Insider

Starbucks wants to be the next McDonald’s.

The coffee chain is constantly introducing improved food offerings, according to a recent report by Deutsche Bank.

The analysts believe that more food offerings will drive sales at Starbucks.

Traditional fast food chains are losing market share to up-and-coming establishments like Chipotle as millennial customers search for healthier options.

This shift in consumer mindsets puts Starbucks in a unique position to take over, according to a recent report by Goldman Sachs.

“Starbucks is virtually the only large incumbent that can offer millennial parents the convenience of a (fast food chain) and food they would not feel guilty/embarrassed to feed to their kids,” Goldman Sachs’ analysts write.

Starbucks has been expanding its menu to include more food options such as sandwiches and salads. It has also added drive-thrus to many locations.

The coffee chain has also been “steadily expanding kid-friendly snack options, such as organic fruit squeezes, organic food snacks, and organic Greek yogurt,” according to Goldman Sachs.

Capturing millennials, defined by Goldman Sachs as anyone aged 15-35, and their children is key because they could become lifelong customers.

“With the continued expansion of the lunch platform and investments in both drive-thru and in-store throughput (Starbucks’) advantages in these areas appear set to expand,” the analysts write.

The fast food giant has more than 36,000 locations around the world. By comparison, Chipotle has 1,700.

McDonald’s is struggling to convince parents that its food is healthy.

Families with a child age 12 or under represent 14.6% of McDonald’s customers today, down from 18.6% in 2011, according to Technomic.

“Kids are more sophisticated,” Mary Chapman, director of product innovation at Technomic, told Crain’s Chicago Business in September. “They’re not just looking for the Golden Arches and the toy.”

In an recent step in that direction, the company pledged to remove antibiotics and hard-to-pronounce ingredients from its chicken.

Written by Ashley Lutz of Business Insider

(Source: Business Insider)