Hoping to Win Back Customers, Chipotle Continues to Give Away Millions of Burritos

Freebies appear to be drawing diners back to the chain, but the tactic is hurting the company’s bottom line.

(Photo: Aranami/Flickr)

Mar 20, 2016· 1 MIN READ

Willy Blackmore is TakePart’s Food editor.

The problems plaguing Chipotle since last fall—namely, E. coli and salmonella—are potentially fatal, not only to humans but to the company itself. The outbreaks may be a thing of the past, but the chain is now dealing with a related issue that could affect both its image and business: empty restaurants.

“It was kind of eerie, and we’d hear this from customers. They would walk by a restaurant that was always busy, and now there’s no line whatsoever,” Chipotle CFO Jack Hartung said Wednesday at the Bank of America Merrill Lynch Consumer and Retail Tech Conference, according to The Associated Press.

Sales at the chain were down 15 percent in the last quarter of 2015, before the Centers for Disease Control and Prevention said the potentially deadly food-borne outbreaks were over and while concerns over norovirus were still lingering. But with Chipotle’s crisis moving out of the kitchen and into the courts, the risk of getting ill from eating one of its burritos, according to all available evidence, is no different than that from eating a Big Mac or a Whopper.

To lure customers back, Chipotle is continuing with what has proved to be its most successful tactic in the wake of the food-safety crisis: free food, and lots of it.

When the chain offered “rain check” coupons for a free burrito on Feb. 8, as stores closed down nationwide for food-safety meetings, 5.3 million people downloaded the freebie, according to the AP—more than twice as many as Chipotle expected. More than half the coupons have already been redeemed. The chain has also mailed between 6 million and 10 million free entrée coupons to consumers, with a total of 21 million planned. The coupons will expire in mid-May but may be followed by “buy one, get one free” offers or other incentives as the year continues.

A recent survey conducted by investment banking firm William Blair & Co. found that consumer sentiment began to rise after the rain-check coupon offer, which “suggests that Chipotle’s recovery process has begun,” as analyst Sharon Zackfia wrote.

But winning back customers is proving costly. All that free food is putting a dent in the bottom line, even with the chain’s co-CEOs having their 2015 pay essentially cut in half. According to the AP, Chipotle is expecting to lose $1 per share for the first quarter of 2016, its first loss since it went public a decade ago.