Chipotle's $70 million free burrito strategy may finally be bringing customers back to the chain
By Dennis Vu on FlickrCustomers using coupons to get free food from Chipotle are eating at the chain more than twice as much as customers who haven't received a coupon, according to a new survey.
The 41% of respondents in a new survey by investment bank Cowen & Cowen who received a coupon from the struggling burrito chain visited Chipotle an average of 3.8 times over the prior 30 days, reports the Wall Street Journal. In comparison, the 59% who hadn't received a coupon visited an average of just 1.4 times.
Additionally, those who redeemed coupons had a higher perception of the brand than those who did not receive coupons.
The survey was conducted in the first week of April, and included 1,000 people who had eaten Chipotle in the past year.
Chipotle is expected to spend $70 million on free burritos from February to May - about 16% of the company's total sales last year.
Chipotle Facebook
"Free burritos - turns out it works," Chipotle CFO Jack Hartung said of the initiative in March. "It brings people into the restaurants."
However, many analysts have been critical of the strategy.
Chipotle's coupon strategy "is born out of desperation rather than choice," Neil Saunders, CEO of retail-consulting firm Conlumino, told Business Insider.
Chipotle's same-store sales, or sales at restaurants open at least a year, fell 26.1% in February, following a 36.4% drop in January. JPMorgan analysts estimate that the company's E. coli crisis cost it three years of earnings growth, but are optimistic that the worst of sales declines are in the past for the burrito chain.
The company will be reporting its first quarter sales on Tuesday, April 26. The company says it expects a loss of $1 a share for the quarter, compared to a profit of $3.88 a share in the same quarter last year.