Struggling restaurant chain Chipotle Mexican Grill Inc. is considering changes that could turn the burrito franchise into a fast-food venture. With profits down, company brass is looking at running more commercials that drive traffic rather than celebrate the brand, adding breakfast items and installing drive-through windows.
*Struggling Chains
Restaurants like Chipotle are increasing advertising and adding menu items. McDonald’s recently announced it would increase its Dollar Menu advertising. The first Chipotle opened in 1993. McDonald’s began investing in Chipotle in 1998 and was the largest shareholder from 2000 until it spun off the chain in 2006. Chipotle has grown to more than 1,350 locations, according to a recent article in BusinessWeek.
*Not Pivoting
Sales growth started to slow for Chipotle during the second quarter. Sales at stores open for at least 13 months increased 8 percent in the second quarter and 4.8 percent in the third quarter. Hedge fund manager David Einhorn recently said Chipotle’s valuation was too high and that it will face challenges from Taco Bell.
*Beef Controversy
Taco Bell hasn’t stolen many of Chipotle’s customers, and menu overlap is not significant, said Peter Saleh, a New York-based analyst at Telsey Advisory Group. Taco Bell has pushed through a controversy over the quality of its beef, and its recent Cantina Bell menu has helped improve sales.
However, growing sales at smaller burger chains could pose a threat to Chipotle. Sales at Smashburger increased 72 percent last year, and Five Guys Burgers and Fries profits went up 33 percent, according to Chicago-based researcher Technomic Inc.
