Chipotle Mexican Grill (NYSE: CMG) is trying to increase market share by drawing the attention of college students, offering them rewards points redeemable for free food.
Everybody loves free food, of course, especially college students who might be on a tight budget or encouraged by their parents to eat in their dorms.
Chipotle has many loyal fans, including consumers who are happy to pay additional charges when they order food through a delivery app. Digital sales through delivery apps or online accounted for 35.5% of total food and beverage revenue during the second quarter. That’s little changed from 35.4% in the first quarter.
Layoffs and inflation, partly induced by tariffs, have led consumers to cut their discretionary spending, such as eating out or having their meals delivered.
While Chipotle reported its second-quarter revenue rose 3% from a year earlier, thanks to the opening of new restaurants, its same store sales dropped 4%.
Chipotle opened 61 company-owned restaurants in the second quarter, with 47 locations that included a “Chipotlane,” its drive-through lane for digital orders.
But shareholders have not been happy lately. The stock sank 16% during the past six months and 19.8% during the past year. Still, long-term investors have done ok: shares rose by 72% over the past five years.
College students could be next group of loyal fans
Targeting college students to be Chipotle’s next large group of loyal eaters could be a smart move. The U.S. has 19.3 million undergraduate students, according to the Education Data Initiative.
Chipotle’s new program gives 12 points for every $1 that a college student spends. It’s 10 points for other rewards members. An entrée costs 1,600 points. When students sign up for the program, they receive 1,000 bonus points.
The new members will get special offers linked to unspecified milestones. The hefty rewards will likely to attract many hungry college students who are eager to take a break from school food, get off campus or hang out with their friends.
Winning a diner’s loyalty isn’t easy, as consumers can be fickle or look for the best deal.
Some fast-casual restaurants saw overall revenue decline in the second quarter, including Wendy’s (NASDAQ: WEN), Yum Brands (NYSE: YUM), Pizza Hut and KFC. McDonald’s (NYSE: MCD) reported that its (https://www.barrons.com/market-data/stocks/mcd?mod=article_chiclet)same-store sales rose 2.5%. It said loyalty program members come to the restaurants more than twice as much as non-members.
Chipotle has some twists on its program for college students. It has partnered with retailer Urban Outfitters (NASDAQ: URBN), selling home goods items that students can add to their dorm rooms. The products look like Chipotle’s food. One item is a $99 throw blanket that resembles a foil-wrapped burrito.
Chipotle’s move to become the next big trend among college students appears to be working well so far and is likely to translate to additional food purchases.
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