People are getting tired of Chipotle’s menu, and that could be an even bigger problem for the company than its recent E. coli crisis.
The burrito chain’s sales have plunged after last year’s E. coli scare, which affected restaurants in 14 states.
The outbreak was declared over in February, but same-store sales, or sales at stores open at least a year, continue to fall.
Same-store sales dropped 26.1% in February after a 36.4% decline in January. The company’s stock price has lost more than 27% of its value in the past six months.
The declines were so severe that they have made the entire restaurant industry look bad, Jonathan Maze reports for Nation’s Restaurant News. Restaurant same-store sales are up just 1.3% this year. Without Chipotle’s performance, the average same-store sales uptick would be 1.8%.
But even before the E. coli crisis, Chipotle was showing signs of decline.
The chain’s sales growth was contracting for several quarters before the outbreak, which emerged in the fourth quarter of 2015.
Same-store sales grew 10.4%, 4.3%, and 2.6% in the first, second, and third quarters of 2015. By comparison, same-store sales grew 16.8% in 2014.
Analysts have said menu fatigue is to blame for the declines.
- Thomson Reuters
“We believe [Chipotle’s] success made them a bit complacent (although not with its desire to expand its store base or improve in-store operations) as the company’s lack of interest in innovation over the last decade has resulted in what we consider to be menu fatigue,” Deutsche Bank analysts Karen Short and Brett Levy wrote earlier this year.
The “menu fatigue” strikes at the heart of Chipotle’s core business strategy.
Chipotle has left its menu virtually unchanged since the company was founded more than two decades ago. The only major change in the menu in the past 23 years has been the addition of tofu sofritas in 2014.
The company prides itself on the simplicity of its menu and boasts that customers can create thousands of combinations from the ingredients it offers.
But Chipotle is now recognizing that it needs to change.
Company executives said last month that they were considering adding several new menu items, the first of which will most likely be chorizo, a spicy pork and chicken blend.
A test of chorizo in Kansas City last year was “very, very popular with our loyal customers,” Chipotle co-CEO Monty Moran said on a call with analysts. He said he was hoping that the addition of chorizo would “make our loyal customers come more often.”
It remains to be seen whether chorizo or any other new items will be too little too late or just the thing Chipotle needs to draw back old customers.