These days, it seems we can't go a week (or sometimes, even a day) without an update on two of the nation's most important restaurant chains. Yes, I'm talking about Chipotle Mexican Grill and McDonald's. Both companies are in the midst of turn-around strategies. For McDonald's the company is trying to reinvent itself as a "modern, progressive burger chain." Chipotle, meanwhile, is searching for ways to restore its crown as the king of healthy, fast-casual cuisine.
With the release of the latest quarterly earnings reports, we're given a valuable look into the recent successes and failures of a company. For Chipotle, this last quarter was not very forgiving. Chipotle saw same-store sales drop almost 30% in first quarter 2016, continuing a trend of sales that were down between 25% and 35% over the past few months. The chain is now considering a loyalty reward program, as well as adding new menu items to win back customers. One of the first items the company is considering is chorizo, which was successfully tested in Kansas City in 2015.
The company must act quickly, too, as analyst foresee a future where Panera takes Chipotle's crown. In December, 13.4% of Chipotle customers also visited a Panera location, up from the 11.6% reported in September before Chipotle's widely-publicized public health issues began, according to market analysis firm Placed. The companies share a similar geography, store count and emphasis on clean, healthy eating, which could lead to an increased number of sales for Panera.
It's fair to say that most consumers wouldn't consider McDonald's to be a healthy choice, but the company is working to improve its image when it comes to its ingredients. Last September, the company (along with just about every other food manufacturer, retailer and restaurant) noted it would transition to cage-free eggs. Now, the company is testing a variation of its famous Chicken McNuggets made without artificial preservatives. The company noted it began testing the new recipe in about 140 stores in Oregon and Washington stating in March.
Although McDonald's is looking for new ways to energize its sales on the product side, it's just as invested in improving the customer experience, even pondering potential fast-casual stylings. The company also noted that its "ask, ask, tell" drive-thru policy is resonating with consumers, and even small changes like increasing the font size on customer receipts seem to be paying off. CEO Steve Easterbrook noted there was a 6% improvement in overall customer satisfaction scores when compared to the same quarter in the prior year.
Chipotle and McDonald's represent two ends of the fast food/casual spectrum in the U.S., and it's interesting to see them both working on turnaround plans at the same time. The two chains don't necessarily compete head-to-head, but like all restaurants, they do compete for a share of the consumer's dollar. When it's all said and done, which chain will succeed? I'm not a betting man, but if I had to guess, both companies will likely enjoy a profitable future.
Chris is a business writer and market analyst that focuses on the Markets, Legal and Washington sections of the Food Institute Report. In addition, he assists in compiling data for various Food Institute publications throughout the year. He invites you to contact him via email at email@example.com to talk about anything food-related.
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