They say you should not kick anyone when they are down, but unfortunately for Chipotle, the burrito giant is doing a fine job kicking itself. The company has been nailed as its sustainability and animal welfare claims have not stood up to scrutiny. Its year-long food contamination nightmare has driven some shareholders to demand that executive pay —which currently is the highest in the restaurant industry — be tied to sustainability performance.
Now Chipotle wants to enter the burger market, as reported by many business news outlets earlier this week. It turns out Chipotle’s legal team has applied for the “Better Burger” trademark, a move that gave the stock a bump towards the end of Wednesday. That bump has since leveled out.
Part of the logic behind this decision is that Chipotle believes its concept can work with burgers. The company has already applied its fast-casual, healthy eating, make-it-your-own business model to a couple newer ventures. ShopHouse, a Southeast Asian-inspired eatery, now has 13 locations in Los Angeles, Chicago and Washington, DC. Pizzaria Locale, the company’s answer to the popular Pieology chain, has grown in popularity in the Denver and Boulder area and is expanding across the Midwest.
Plus, burgers are back, and with a vengeance. After years of declining beef sales across the U.S., beef consumption per capita is set to increase in the U.S. during 2016 for the first time in years. The total size of the U.S. cattle herd, which will increase for the first time in eight years, and the resulting slight decrease in price also is behind this trend.
The popularity of new burger chains further gives Chipotle the hope that it can succeed in this space. Emerging companies including The Habit, Shake Shack, 5 Guys and The Counter have developed their own cult followings. Add Umami Burger and BurgerFi, with their regional loyalties, to the list. There could be more room in this very fractured market, and diet crazes including the Paleo madness have added fuel to this burger fire, but it’s important to remember that bottom line, this is a trend. After all, over 10 years ago when low-carb diets were the rage, the infamous sandwich wrap (do you want it in a spinach, sun dried tomato, or whole wheat tortilla?) was poised to take over fast food America as every city had a wrap joint. Most likely we will see a new fast casual meal phenomenon capturing consumers’ imagination another decade from now.
Market trends aside, the notion of Chipotle taking on hamburgers should worry shareholders as burgers could put the company at risk. The memories over those contamination stories will remain with consumers for a while, and considering the company’s business practices, burgers may not be the best idea. After all, last December a Consumer Reports story outlined that every round of beef—over 450 inspected in all—analyzed found evidence of bacteria that were typical of fecal contamination. Only one of those samples contained the especially dangerous salmonella, but multiply that by tens of billions of pounds annually and, well, that is why some of us stick to veggie burgers. As anyone who remembers Fast Food Nation recalls, ten years after that movie’s release, still, “There’s s— in the meat.” Moving from tortilla to bun at this moment is just not the best timing for Chipotle.
Of course, just because a company applies for a trademark does not mean it will follow through on its plan. Companies apply for them all the time in order to test new branding and marketing concepts. But because the memories of the recent contamination outbreaks are still raw, Chipotle maybe should first get its core business sorted out. Furthermore, the company, if it can overcome its current reputation, still has a lot of opportunities overseas. As any American expat or former foreign exchange student in the U.S. can tell you, it’s hard to find a good American inspired burrito abroad. Australia could be an open market—after all, that is where the company sources most of its “local” beef in the first place.
Image credit: Robert S (Flickr)