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Chipotle Is Still Struggling to Lure Customers Back

Free burritos don’t seem to be helping

Chipotle AP

Chipotle is still struggling to woo back customers after a series of E. coli outbreaks last year. According to a new report from Morgan Stanley, a survey of Chipotle consumers found that approximately 25 percent have either stopped going to the chain altogether or reduced their frequency.

25 percent of consumers said they had found other restaurants they liked better.

Analysts say the survey results are evidence "that the sales recovery will remain more protracted than the market believes." Chipotle needs to ramp up its marketing spend if it wants to attract customers, they say. The free burritos are nice and all but so far, they don’t seem to be helping the chain’s bottom line.

33 percent of those surveyed cited food safety issues as the reason for not visiting the fast-casual chain. Nearly a quarter of consumers said they had simply found other restaurants they liked better.

Chipotle has worked hard to salvage its reputation in the wake of its food safety crisis — unveiling a new menu item, short film, and rewards program in an effort to bring customers back. The company has also given out a lot of free food. Interestingly, though, Morgan Stanley’s research suggests that coupons and promotions aren’t likely to have a long-term impact on the chain. More than 80 percent of those using a coupon said they would have gone anyway.

Analysts say the data "suggests the impact of these issues will linger longer than many investors appreciate, and could have a more pronounced impact on the [company’s] recovery."

Relative to its fast casual peers, Morgan Stanley’s data suggests that Chipotle has a higher proportion of customers who have said they are lowering their visit frequency and a lower proportion who say they have increased their frequency. Twenty percent of those questioned said they were lowering their visit frequency to Chipotle, while only 12 percent said they would lower the frequency with which they visit Moe’s or Qdoba.

A separate study, released earlier this week by investment bank William Blair, found that food safety concerns at Chipotle are at their lowest level of 2016. The percentage of customers indicating they are eating less frequently at the chain remains high, though — 45 percent — and those who said they had not eaten at the chain since the outbreaks hovers at roughly 26 percent. When asked what would encourage them to eat at Chipotle more frequently, 59 percent of respondents said: "If no new illnesses are reported at Chipotle for a while."

Shortly after Morgan Stanley released its report (in which the analysts downgraded Chipotle’s stock), the company’s stock was down.

All Chipotle coverage [E]

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