Coming back after a major company-wide crisis isn't easy nor is it cheap, even for a company as successful and once beloved as Chipotle. Yesterday on a call with investors the burrito chain admitted that its recent public health disaster has cost it, both in dollars and in customers — but fueled by recent free burrito giveaways, the company seems optimistic it's headed in the right direction.
The response to said burrito offer was much bigger than Chipotle expected: Company executives estimated that 2.5 million free burrito coupons would be requested, but in fact that number was a whopping 5.3 million, with 14,000 people requesting a coupon every minute. The company has proclaimed that campaign a "successful" venture, with about 67 percent of the coupons being redeemed thus far.
But giving away all that free food is, of course, cutting into Chipotle's bottom line. Hartung says the company has also experienced bigger losses than he expected as of late due to food waste. Unpredictable traffic patterns in stores means more food is being thrown out, and lots of food was also used to train employees on the new, safer food preparation procedures.
Nonetheless, Chipotle plans to give away even more free food in a continued effort to get customers back into stores. In addition to the free burrito campaign, the Associated Press notes the company has also mailed out "6 to 10 million" free entree coupons, with a total of 21 million planned. But going into summer those might turn into buy-one-get-one deals instead, which would certainly give more of a revenue boost.
Giving away free food certainly costs money, but Chipotle knows empty restaurants look bad and discourage customers from coming in. Case in point:
Chipotle at 12:48 pm (and no it isn't closed) pic.twitter.com/MoxRgA0bL2— Rob Pflieger (@rob_pflieger) March 16, 2016
The idea behind the free food giveaways is, of course, that folks coming in to redeem coupons will then return as paying customers — and to that end, it sounds like it's been successful so far: "People are coming in for a free burrito, we’re earning their trust, and they’re remembering what they liked about Chipotle, and coming back and spending money with us again," said Chipotle chief financial officer Jack Hartung.
But all that will take time, and in the meantime, the company is expected to report big losses for the first sales quarter of 2016, with same-store sales down 26 percent in February. As a result, its co-CEOs Steve Ells and Marty Moran have both taken major pay cuts — but weep not for them, as each still took home around $14 million each last year.