Chipotle co-CEO rips into fast-food rivals, slams their “short-sighted” strategies

Chipotle Mexican Grill said on Monday that same-restaurant sales rose 19.8% last quarter, which is probably why co-CEO Steve Ells felt confident enough to accuse rival fast-food chains of trading quality for cost savings and creating their own problems by making “short-sighted” decisions.

The burrito chain has quickly grown to 1,700 restaurants by paying a bit more for quality ingredients and eschewing the discounts that fast-food chains have come to rely on. While its shares slipped a bit in after-hours trading after financial forecast that suggested slower growth, it’s clear Chipotle is running away from the pack. The company is planning to open between 190-205 more restaurants next year.

These are sales results that rivals, McDonald’s (MCD) in particular, can only dream of. On Tuesday, McDonald’s is expected to report a 2.9% decline in same-restaurant sales for last quarter (they haven’t risen since last November). Wendy’s (WEN) and Burger King Worldwide (BKW) are doing slightly better than the Golden Arches, but their results still pale in comparison to Chipotle’s (CMG).

Here are some choice words from Ells, who criticized rivals (but did not name names):

On why fast-food chains have only themselves to blame:
“The traditional fast-food sector has traded food quality and taste for low-cost and ease of preparation.”

On perils for fast-food industry of focusing on low prices:
“It has aggressively marketed low prices to entice customers to visit more often, which has resulted in the need to reduce cost by cheapening ingredients and by compromising the overall dining experience.”

“You cannot take shortcuts. We’ve shown that we can spend more on ingredients, not less, and charge a fair price.”

On customers getting more demanding about quality (citing a July survey of fast food customers):
“Despite offering dollar menus and frequent discounts, many of these chains also scored poorly in terms of value. The bottom line: customers want delicious food served quickly an interactive format and they are increasingly unwilling to compromise.”

On Millennials’ preferences:
“They’re more concerned with how food is raised and prepared than previous generations, and are willing to seek out and pay a little more for something they recognize as better.”

On the futility of fast-food chain’s dollar menus:
“The gimmicks that have driven the fast food sector for years – dollar menus, limited time offers and merchandising partnerships– are not producing results like they used to, as consumers simply want better tasting, nutritious food and a more compelling experience, not gimmicks.”

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