Chipotle hopes these freebies will get customers to bite
Chipotle Mexican Grill (CMG) is working hard to win back customers of all ages. The burrito chain said Tuesday that it will offer two new promotions during the month of September, one for college students and another for families. That's on top of the chain's limited-time Chiptopia loyalty program, which dishes out free entrees after a set number of purchases.
The string of promotions come as the casual dining chain tries to boost sluggish sales and foot traffic in its restaurants, which have yet to recover from a series of high-profile foodborne illness outbreaks last year.
Chipotle's same-store sales plunged nearly 30 percent in the first quarter, when it reported its first quarterly loss as a public company. The company swung back to profitability in the second quarter, but same-store sales declined 26.5 percent.
Chipotle's first new promotion targets mom and dad, by offering them a free kids' meal when they purchase an adult entree. The chain will also give high school and college students who present a valid school ID a free drink with the purchase of an entree.
"It's back to school time and students — particularly high school and college students — have always been such loyal customers, so we thought a promotion directed specifically to them would be a great way to help them ring in a new school year," a Chipotle spokesman said.
Mark Kalinowski, an analyst at Nomura, agreed that Chipotle has historically been "very popular" with students. "They would love to win back more of that business," he told CNBC.
The company received a boost from its Chiptopia program, which ends Sept. 30, during the second quarter. On a call with analysts in July, the chain said it would launch another loyalty program, though it has not yet determined if it will be permanent.
"In general, we'll continue to see Chipotle engage in multiple waves of trying to win back its customers. I think it's going to continue to be a long path back," Kalinowski said.
Yet Chipotle has more to worry about than just customer perception.
Industrywide same-store sales continue to come up short of Wall Street expectations. Restaurants including McDonald's (MCD), Wendy's (WEN) and Ruby Tuesday (RT) have blamed growing consumer uncertainty ahead of November's election and increased competition from convenience stores, grocery chains and meal delivery services for the shortfall.
"What Chipotle really needs is time," Kalinowski said.
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