Chipotle Mexican Grill is serving up some deals this summer.
The Mexican burrito chain – which kicked off the year with dismal sales due to food safety concerns – on Monday unveiled a promotion that will kick off July 1 and continue through the end of September, an event it is calling “Chiptopia Summer Rewards.” Chipotle (CMG) said that unlike competitive offerings, the program rewards those that make multiple visits to the company’s restaurants. Most rewards programs are based on the total amount a customer spends.
Under the program this summer, Chipotle has three status levels: Mild, Medium and Hot. For example, to trigger the first “Mild” reward, a shopper would need to visit Chipotle four times in a month and make a qualifying purchase of $6 or more during each visit. They would then be rewarded with a free entree.
The idea of this promotion is to boost traffic. That metric was problematic in the first quarter of 2016, when revenue tumbled 23% to $834.5 million due to a 21% drop in transactions. A prolonged E. coli outbreak, which spread across a handful of states and generated major national headlines, is why Chipotle finds itself in a bit of a defensive position these days. The company already got promotional earlier this year, with the latest move indicating more needs to be done to get shoppers back into the restaurants.
Chipotle’s handling of the E. Coli crisis was broadly criticized, first handling the initial news of the outbreak with terse statements to the press, then blaming the media and the U.S. Centers for Disease Control and Protection’s (CDC) for their reporting of the story. Ultimately, Chipotle took more ownership by promising new food safety standards and eventually going promotional and spending more on advertising to help the brand recover.
Will all that work? Chipotle reports second-quarter results on July 21, which is when investors will get a clear sense of how promotions are potentially helping boost demand. Wall Street analysts are predicting a steep drop in net income and a roughly 12% decline in sales from year-earlier levels, though those trends would be an improvement from what was reported in the first quarter.
