Can hamburgers help turn around Chipotle's bruised reputation?
After making a name for itself by selling a better burrito, Chipotle is tackling a much more competitive restaurant trend -- high-end hamburgers.
The company's first burger joint, Tasty Made, is set to open in the fall in Lancaster, Ohio. With it, Chipotle will draw on the game plan it's banked on for years: a simple menu -- hamburgers, french fries and milkshakes -- using what it expects will be fresher ingredients than its large-chain rivals, including fresh beef instead of frozen patties and buns that are preservative-free.
With Mexican food, Chipotle has been a relatively niche player, standing out by offering what was perceived as a more upscale product than chains like Taco Bell. But the fast--food hamburger market is hard to overlook for a business that's tried to stay on the fast track like Chipotle. Burgers remain one of the most popular meals in the country — last year, about 14% of restaurant visits included a hamburger order, according to NPD Group (by comparison, hot dogs orders happened at about 1.5% of visits). But unlike when Chipotle burst on the scene in the Mexican food category, Tasty Made faces entrenched rivals for upscale, fast-casual burger, including Shake Shack, Five Guys, In-N-Out Burger and Smashburger.
Specific menu options haven't been revealed yet so it's unclear how Chipotle will differentiate itself with its burgers, but spokesman Chris Arnold said the restaurant will have "a strong focus on quality and simplicity." Though he also acknowledged that chains such as Shake Shack and In-N-Out have similar commitments to limited menus and quality ingredients. He declined to share details on possible expansion plans for Tasty Made.
The restaurant has been anticipated for months. Chipotle applied to trademark the phrase "better burger" in March, hinting at plans to expand its restaurant business. At the time, Arnold said that the company has "noted before that the Chipotle model could be applied to a wide variety of foods."
This isn't the company's first foray beyond Mexican fare. Chipotle also operates 14 ShopHouse restaurants that sell Southeast Asian food and is an investor in a wood-fire pizza chain called Pizzeria Locale.
But even as it rolls out new restuarants and concepts, Chipotle has been fighting to keep its Millennial-heavy loyalty following its troubles over food safety issues, Chipotle is working to recover from a bruised reputation after incidents of E. Coli and norovirus last year scared many diners away.
In the most recent quarter, the company reported sales at restaurants open at least a year fell more than 23% from the year-ago period. E. Coli outbreaks at its restaurants last year sickened more than 50 people and led to an investigation by the Centers for Disease Control and Prevention. Separately, some restaurants also had incidents of norovirus.
The illnesses led many customers to decide they didn't want to eat there anymore and Chipotle has been trying to court them back ever since, including by implementing new food safety standards. Those standards, such as blanching certain ingredients to remove bacteria, apply to all of Chipotle's restaurant concepts, Arnold says.