Chipotle’s Health Scares Do Little For Competitors

CmM6g2YWEAAbmDC.jpgAfter their third straight quarter of declining sales, things continue to look bleak for the once-great Chipotle. The company posted sales this quarter down 24% from the previous year, and quarterly profits of $26 million (compared to $140 million immediately before the E. Coli outbreaks late last year).

One might think that such a plummet would be good news for competitors, but so far the opposite seems to be the case, with other Mexican fast food and fast-casual chains seeing a decline as well. Taco Bell’s same-store sales fell 1%, due in part to a decrease in foot traffic despite hefty advertising dollars spent selling items like the “Quesalupa.” Qdoba on the other hand tried to specifically target Chipotle customers, but claims such ads and promos ultimately hurt their margins.

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New Lawsuit Against Chipotle Execs

With sales and stocks still reeling, a small group of Chipotle shareholders have now filed an additional lawsuit against the company’s executives, claiming that they “abused their control of the Company, and dealt themselves excessive compensation worth hundreds of millions of dollars through a corrupt stock incentive plan.”

The suit explicitly names Co-CEOs Steve Ells and Montgomery Moran, and CFO Jack Hartung, among others. It claims that these executives, using insider knowledge about the food safety protocols that would cause Chipotle’s well-reported downfall in 2015, dumped their stocks at an artificially inflated price and raked in millions before the food poisoning scandals began. Supposedly Ells made $78 million by selling 119,057 shares, Moran raked in $107 million, and Hurtung $28 million.

Chipotle has not admitted any wrong doing, and both this suit and one from January are still pending.

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Free Burritos Can’t Help Chipotle Recover before 2018, But Maybe Burgers Can?

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Chipotle’s next move?

After their colossal – and well publicized – downfall, Chipotle has been doing everything possible to get back in customer’s good graces. That includes giving away about 9 million free burritos earlier this month, according to the chain (that’s $62 million worth, if anyone’s counting). They plan to send another 21 million free food coupons in the mail this month. But analysts from Wedbush Securities point out that, while sales may be returning slowly, the coupon strategy isn’t a sustainable one. Eventually, guests have to forget the reason they stopped coming in the first place.

The investment firm downgraded Chipotle’s shares and cut their target stock price from $450 to $400, saying that “current valuation reflects an overly optimistic outlook regarding Chipotle’s path to recovery.” They do not expect Chipotle to recover the sales lost from the salmonella, norovirus and E. Coli outbreaks until at least 2018.

One curveball to these predictions may be the news that Chipotle has applied for a trademark on the name “Better Burger,” indicating they have plans to recoup the losses in another way. It’s a strange move considering the number of existing burger chains, and there’s no word yet from Chipotle on how they plan to market themselves in this arena.

To read more, click here and here.

The Financial Toll of Chipotle’s Troubles

Now that the saga of Chipotle’s food safety issues, stock market tumbles, and attempts to win back loyalty are finally dying down (or so it seems), it’s reasonable to ask: what exactly was the cost of that widely publicized downfall? When a company sees a 25% drop in shares, and a 14% decrease in sales in one quarter, what does it actually cost the executives behind the brand?

In Chipotle’s case, it meant about a 50% decrease in profits for the two CEOs, Steve Ells and Monty Moran – or 15 million dollars each. While that is a steep hit, it’s worth keeping in mind that the two are among the highest paid executives in America, each reportedly earning more than the heads of McDonalds, Starbucks and Panera combined prior to 2015. So it stands to reason that Ells and Moran will weather the storm – even if the company’s struggles continue.

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Fast Casual + Hawaii = Wisefish Poké

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In a true sign of the chain’s enduring influence even in it’s downfall, you can now find a “Chipotle of” nearly every cuisine, from salad to curry to falafel and back again. So the opening of fast casual “Chipotle of Hawaiian” Wisefish Poké yesterday should come as no surprise to anyone, although poké itself might be a dish non-Hawaiians are less familiar with.

Traditional poké is a raw fish salad extremely popular in Hawaii. It’s most commonly made with yellowfin tuna but also available with salmon, octopus or shellfish and dozens of seasoning combinations. At Wisefish you can construct your own bowl from bases of rice, zucchini noodles or mixed greens and toppings like crab salad, wasabi-avocado cream, and citrus-ponzu sauce. The fish is responsibly sourced from vendors like Greenpoint Fish & Lobster Co, and aims to be un-selfconsciously fresh and healthy. All told, this seems like a great moment for a concept like Wisefish: fast casual bowls are as popular as ever, and mainland Americans have already fully embraced raw fish. Poké provides just enough of a twist to get the lunch crowd out of their usual routine.

Check out Wisefish Poké at 263 West 19th St.and read more here.

Competitors See Opportunity in Chipotle’s Troubles

The Chipotle food-safety saga has been impossible to ignore for the last few months, as everyone from hungry college students to Wall Street traders are forced to reckon with the chain’s downfall. For other fast-casual and fast food restaurants, however, the news is an opportunity to snatch some new guests. As we wrote earlier, Sweetgreen has already earned the moniker “the new Chipotle” to some, and they’ll undoubtedly benefit at least somewhat from the Mexican chain’s decrease in sales. Others are hoping that they can improve their image by highlighting food safety practices – and surreptitiously reminding everyone that they haven’t caused any norovirus outbreaks recently.

Canadian chain Freshii is twisting the knife by offering half-priced Mexican food while Chipotles everywhere are closed for an all-hands meeting and regroup. They claim that this is to “help consumers through these dark hours,” and that “the least [they] could do was look after their customers while Chipotle paused to recalibrate.”

White Castle, while not a direct competitor of Chipotle, has decided now would be a good time to launch a website devoted entirely to advertising their food safety practices. The website is unambiguously named http://www.WhiteCastleClean.com, and it showcases their commitment to “promoting food safety, cleanliness and transparency.”

Chipotle meanwhile is struggling to recover while their stocks are in free-fall. CEO Steve Ells has made repeated statements about their new food safety practices, and promised that they will release any information about the source of the outbreaks last year. This Super Bowl, they are offering $50 currency card and a limited-edition gift from the makers of Tabasco sauce to anyone who uses their catering service.

To read more, click here and here.

 

Papa John’s Goes “All Natural” With Ingredients

works-ingredients.jpgPapa John’s, whose motto of “Better Ingredients, Better Pizza” you likely know even if you’ve never touched a slice, is making moves to uphold that promise by removing a host of artificial ingredients from its pizzas. “We closed out 2015 announcing our commitment to serve chicken raised without antibiotics and are ringing in the New Year artificial-flavor and synthetic-color free,” said Sean Muldoon, Papa John’s Senior Vice President of Research and Development. This might lead one to wonder what made the ingredients “better” before the change, but to its credit Papa John’s is the first national pizza chain to make a move like this.

It’s unclear whether going all-natural will help Papa John’s recover from a season of poor sales and falling stocks, but it seems like management is banking on the consumer demand for transparency (or at least the appearance of transparency) in ingredients that once helped Chipotle rocket to the top. Hopefully they can do so on a national scale without the same food safety issues that plagued the Mexican chain.

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