Posted: June 01, 2009
State of the state: Restaurants
Chipotle tests lower-priced menu optionsBy Mike Taylor
Despite a 22.7 percent revenue increase in a year that clobbered other restaurant chains, Chipotle Mexican Grill announced on April 1 a trial run of a new menu in its Denver-area restaurants featuring smaller portions and cheaper prices.
An April Fool’s joke? No, but fans of Chipotle’s giant burritos can be excused for wondering if the Denver-based chain is messing with a good thing after a year in which it opened 136 new restaurants to bring its total to more than 830 stores and generated $78 million in profits. Through April 15, Chipotle's stock price was up 17.9 percent for the year.
“We have found that many of our customers don’t recognize the variety that exists within our menu, and that customers are sometimes unsure what to order,” said founder and Chairman Steve Ells in the April 1 press release. “With this menu, we are communicating the nature of variety more clearly, while still making great food affordable and accessible.”
The menu changes include some new entrée options, smaller-sized offerings at lower prices (dubbed the “Low Roller” menu) and a new kids’ menu. The Low Roller menu includes soups starting at $2.99, single tacos for $2.25 and side salad for $2.95. By comparison, Chipotle’s Classic Burrito sells for $5.95 and its Carnitavore (pork) burrito sells for $6.35.
Chipotle spokesman Chris Arnold said there's no timetable for how long the Denver-area menu test will run before Chipotle either scraps it or adopts it at restaurants beyond Denver.
"We're looking to see how the new menu works for us operationally and what customers like and don't like," Arnold said. "We put up the menu and we'll see how things go, and that includes the idea of rolling this out to other markets or even nationally. For now, we've made no plans to do anything with it beyond Denver. Maybe we'll decide the best thing for us is to keep the menu we've had. Maybe we'll learn that things like the kid's menu would be a really good idea and something we can replicate in other markets, or maybe we'll learn that the whole thing should go everywhere. So we're keeping the whole universe of options on the table as we go through this test."
Chipotle has used its home base of Denver to test other new wrinkles in the past. In late 2007 it tried out the more healthful brown rice at some local Chipotles before reverting back to the old standby white cilantro lime rice.
"We found through the test that customers preferred the white rice by pretty significant numbers," Arnold said.
Chipotle isn’t alone in its offering of more economical options. Another Denver-based quick-serve chain, Quizno’s, launched a New Lower Prices campaign in January and followed that up in late March with Toasty Torpedoes, sandwiches prepared on extra-long, extra slim bread for $4 at participating locations. “We realize almost everyone is feeling the pinch in today’s economy,” said Rebecca Steinfort, chief marketing officer for Quizno’s.
I’m all for lower prices. But I’m a fan of simplicity, too, and of quick-serve restaurants that do one or two things and do them well. That seemed to be Chipotle’s calling card and what’s kept me going back time and again. We’ll see how the expanded menu works out.
The one knock on Chipotle I’ve read – and it’s not the worst one as problems go – is that its noon lines can be rather long in high-volume business districts where everyone eats at the same time. It doesn’t seem that an expanded menu, with more for the employees to learn and more for customers to mull over, will do anything to speed the customers through those lines.
Arnold dismissed the notion that Chipotle was venturing far from the simplicity that has been one of its hallmarks along with naturally raised meats.
"We really aren't making anything that we weren't making before," he said. "Really, all we've added to the line is soup and some variations of that. Side salads - we were already doing the salads so making a side salad isn't really difficult. And we've always made tacos so doing individual tacos isn't all that difficult.
"A lot of our customers don't really understand the full universe of things available within the old menu," he said. "The new menu is designed to show the variety a little bit better than the old one was."
That's a relief to hear. Wouldn't want Chipotle going the route of Starbucks - at one time merely coffee shops, and great ones at that. And then, to continue fueling growth, the Wall Street darling little by little drifted from the coffee business, adding CDs, sandwiches, carrot cake, kitchen accessories, books.
Too often when I went in Starbucks to grab a cup of coffee, I’d find myself in line behind someone who seemed to be doing his or her Christmas shopping, in front of the cash register.
Here’s hoping Chipotle remains mindful of what has made it great. And that, sometimes with menus, less is more.
Mike Taylor is the managing editor of ColoradoBiz. He writes about small-business money issues and how startups are launched. E-mail him at email@example.com.