Chipotle (CMG) Loses Most Popular Mexican Restaurant Tag

Per an annual survey from Harris Poll, Chipotle Mexican Grill, Inc. CMG is no longer the favored brand among fast-casual Mexican restaurants.

Notably, the Harris Poll amasses opinions regarding restaurant brands and Chipotle failed to retain its leading spot after topping the polls for the past three years.

Poll Results

Harris Poll surveyed over 97,000 U.S. consumers for their views on over 3,800 brands. Notably, Moe's Southwest Grill, a Tex-Mex chain, secured the first position for ranking the highest in terms of familiarity, superiority and purchase consideration.

Moe's Southwest Grill is owned by the same company that operates shopping mall mainstays Auntie Anne's and Cinnabon. It is a big win for Moe's Southwest Grill as it has nearly 650 outlets compared to Chipotle's over 2,000.

Notably, the three other restaurants that outranked Chipotle were Yum! Brands, Inc. YUM owned Taco Bell, Jack in the Box Inc.’s JACK subsidiary Qdoba and Baja Fresh.

Gelogis

Reasons Why Chipotle Was Unseated

Chipotle’s performance has been largely damaged by the food-safety issues it has faced in the recent past.

CHIPOTLE MEXICAN Price

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The restaurant chain has been reeling under the negative publicity related to the E. coli outbreak, which began in Oregon and Washington at the end of last October and later spread to 12 states. Also, in Dec 2015, a norovirus outburst at a Chipotle outlet in Boston's Cleveland Circle affected around 136 diners, including 30 students of Boston College.

Meanwhile, though the negative media hype cannot be ignored, the fact that Chipotle is forced to pull shutters down on a store as soon as it is reopened has been very damaging. This is largely because of contaminated food and the continuing effect of the E. coli outbreak.

Meanwhile other restaurants have been working on providing customers with healthier food and innovative menu options in the fast casual restaurant space, intensifying competition for Chipotle.

Notably, Qdoba rolled out a new taco menu last year while Taco Bell has been doing well, especially in the U.S., over the past few quarters on the back of strong sales in the breakfast category. Moe's Southwest Grill has also gained popularity on the back of its build-your-own tacos, quesadillas and burrito bowls. Chipotle, on the other hand, lags behind on the menu innovation front.  
Our Take

The fact that Chipotle has been using healthy ingredients has been its marketing strength despite the high prices. With food-safety issues still looming large, Chipotle has its back to the wall.

Though the company is leaving no stone unturned to gain back customers through the adoption of new food safety protocols, offers for free burritos, buy one get one deals and a few menu innovations, it will take some time for the fast casual restaurant operator to witness a turnaround in its business.

Chipotle was featured recently in Dave Bartosiak's Trending Stocks where he discussed the recent changes among the food industry. 

Chipotle currently has a Zacks Rank #3 (Hold). A better-ranked stock in the sector is BJ's Restaurants, Inc. BJRI with a Zacks Rank #2 (Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report YUM! BRANDS INC (YUM): Free Stock Analysis Report CHIPOTLE MEXICN (CMG): Free Stock Analysis Report BJ’S RESTAURANT (BJRI): Free Stock Analysis Report JACK IN THE BOX (JACK): Free Stock Analysis Report To read this article on Zacks.com click here. 

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