This is from the weekly restaurant finance newsletter The Bottom Line. To get this in your inbox every Monday morning, click here.
Earnings season kicked into high gear last week and there were surprising results from Shake Shack and El Pollo Loco, solid results from Burger King and not-bad results from Starbucks.
But then we come to Chipotle. The fast-casual burrito chain reported roughly flat same-store sales, with slightly declining traffic. And then it turned bearish on the full year. Its stock price plunged.
The fast-casual burrito chain’s share price has lost nearly half its value this year, a plunge not seen since, well, that whole e. coli incident. Investors have been asking all year whether there was something structurally wrong with Chipotle. They now believe there is.
Explanations are not obvious. The company argues that it has a problem with low-income consumers, who are cutting back on dining at a broad set of restaurant chains. It also blames its fellow fast-casual chains, saying that it is lumped with more expensive brands like Sweetgreen and Cava, even though Chipotle is a better value.
It is a good value, but my colleague Lisa Jennings also points out that it charges a lot for sauces. That could make it like an airline that charges for so many extras that it loses its value proposition. Even so, the company has an obvious messaging problem, one that it needs to fix yesterday.
But we also go back to the portion size controversy last year. Social media can be unforgiving, and when it latches onto something, it takes a while for it to let go. Customers these days want a good value for their money, and if they think they’re going to get skimped on portions, then they may be less likely to visit a concept. And if Chipotle is getting lumped in with more expensive options, that could be the reason.
This week’s financial news
I’m having a tough time getting accustomed to this New Age Burger King that doesn’t respond to McDonald’s discounts.
Even Greg Flynn is into 7 Brew.
If Sardar Biglari is Michelangelo, then I’m Shakespeare. Just ask the Steak n Shake X.com account.
Beef. It’s what’s for a much more expensive dinner.
So let me get this straight. Starbucks added workers to its shops, service improved and sales followed? Incredible.
The kids love beverages, just ask Taco Bell.
Hey, remember when convenience was a huge point of differentiation for fast food? Good times.
Number of the week
Here’s Starbucks U.S. same-store sales in recent years. That was a hell of a dropoff. Still, the company’s most recent quarter showed some real progress.
Quote of the week
“We’re a burger chain. There’s a lot of focus even by people outside the chicken category on chicken. But at the end of the day we are always going to be known for our flame-grilled burgers, and we’re going to continue to lean into that.” -Restaurant Brands International Executive Chairman Patrick Doyle, to me, on why Burger King isn’t going whole hog into the chicken wars.
On the blog
I wrote about Big, convenience, Potbelly and Burger King. Check out all my blog posts on The Bottom Line.
On the podcasts
On A Deeper Dive Technomic’s Robert Byrne helped me solve all the world’s problems. Or maybe I helped him. On The Week in Restaurants Lisa Jennings and I talked earnings and stuff.
For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.