Chipotle Mexican Grill has heard the internet’s complaints about its portion sizes, and it is working to address them.
A systemwide review by the 3,500-unit fast-casual burrito chain revealed that more than 10% of its restaurants were scoring poorly on portion size with customers, CEO Brian Niccol told analysts during an earnings call Wednesday. Chipotle is now investing in retraining employees at those “outlier” locations to make sure they’re putting the right amount of ingredients in burritos and bowls.
Chipotle also sent a chainwide message reinforcing the importance of generous portions, which has long been one of its calling cards.
“We don’t want to take something that’s been a positive for all these years and have it turn out to be a negative because of someone’s social media comments,” said CFO Jack Hartung.
Chipotle’s emphasis on portions is more than fluff. Executives estimated that the initiative will contribute 40 to 60 basis points to its cost of sales for the current quarter, which are expected to increase to about 31%, from 29.4% in the second quarter.
But Niccol said that the efforts already appear to be having an impact, citing improved consumer scores and social media posts.
He also emphasized that for the vast majority of the chain, portion size has not been an issue. And he reiterated that restaurants were never directed by the company to serve customers less food.
Chipotle’s portions have been in the spotlight following a rising tide of social media posts accusing the chain of being stingy, even as Niccol insisted publicly that nothing had changed. The issue picked up steam in May when influencer Keith Lee posted a negative review, and continued in June after a Wells Fargo analyst weighed 75 identical burrito bowls from eight Chipotles and found that the results varied widely.
The chain is taking those perceptions seriously. “We collectively said, look, we do not go back one inch on that equity of generous portion sizes,” Niccol said.
At the same time, customers’ fuss over portion sizes seems to be having little impact on Chipotle’s actual performance. In the second quarter ended June 30, same-store sales rose 11.1% year over year on a traffic increase of 8.7%. Chipotle has been one of the few chains to report positive traffic this year as consumers cut back on restaurant visits due to rising prices.
The return of Chicken Al Pastor helped drive customer orders, and an ongoing focus on training and throughput allowed restaurants to meet the demand, executives said. The quarter also included National Burrito Day on April 4, which was Chipotle’s best sales day ever, both overall and digitally.
Restaurant-level margins also increased, by 140 basis points, to 28.9%. And Chipotle opened 52 company-owned restaurants and one franchised location overseas.
“The quarter was really spectacular,” Niccol said. “When we look at brand metrics, they've never been stronger.”
However, the chain hinted that the remainder of the year could be more challenging. Same-store sales slowed to around 6% in June and July, with executives citing holidays, weather and a summer season that has become more unpredictable since the pandemic. They also mentioned an impact from “a recent technology outage,” an apparent reference to last week’s CrowdStrike crash that caused widespread problems with Microsoft Windows.
For the full year, Chipotle is projecting same-store sales growth in the mid- to high single-digit range. That would indicate a slight slowdown is on the way after the chain posted same-store sales growth of 7% and 11% in the first two quarters of the year, respectively.
Still, the Newport Beach, Calif.-based chain has much to feel good about amid a very tough environment for restaurants. Executives said internal data shows Chipotle is gaining market share every month, and that it has seen little impact from the fast-food meal deals that have abounded this summer.
On the contrary, Niccol said, Chipotle’s value scores are improving, and it has seen sales growth across income brackets.
Investors found a lot to like, too: Chipotle stock was up more than 4% in after-hours trading Wednesday.
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