Chipotle’s ‘Free Burrito’ Coupons Are Making People Less Scared to Eat There
A free lunch may be all it takes to get people to forget about Chipotle’s E. coli outbreaks late last year.
Sales at the Mexican fast-casual chain declined for the first time ever last quarter as people were spooked by the food scare that sickened more than 50 customers. In response, Chipotle (CMG) launched an aggressive marketing campaign to convince diners to return—including offering free burrito coupons via text message on Feb. 8 while its stores were closed for a food safety meeting.
The discounts, which expired last week, appear to be succeeding in luring customers back, research analysts at William Blair said in a report Thursday. Only 40% of people said they had changed their Chipotle eating habits since the E. coli disaster, down from 43% in January, according to this week’s 800-person survey, which William Blair has conducted monthly since November. Of those respondents, however, 70% say they have not eaten at Chipotle again since the illness broke out, an improvement from the 78% who said so in each of the last two months.
“It appears that sentiment bottomed in January, with willingness to eat at Chipotle increasing after the company’s digital coupon for a free entrée spurred improved traffic in the latter half of February,” the analysts wrote in their report. “Although the percentage of rejecters is still high.” The cohort of people who are “very worried” about Chipotle’s food safety also dropped to 15% in March from more than 20% in January.
The Centers for Disease Control and Prevention declared the restaurant’s health crisis over at the beginning of February, but it cost Chipotle more than $72 million in revenue in the final quarter of 2015, as same-store sales fell nearly 15% from the year before.
Chipotle said last month that the burrito discounts would also cut into its profits for the current quarter, as the company has continued to mail coupons to consumers and offer other promotions in certain markets as well.
In the meantime, investors have been avidly collecting data on customer traffic at Chipotle, even going so far as to analyze satellite photos of its parking lots. Though Chipotle stock is still down more than 28% from when its E. coli crisis began, the shares have risen more than 18% since the end of January, and are up nearly 12% year to date.