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Why Would Chipotle Give Away 9 Million Free Burritos?

Why Would Chipotle Give Away 9 Million Free Burritos?
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Following the success of a February free burrito giveaway, Chipotle Mexican Grill, Inc. (NYSE: CMG) has announced that it will be sending out 21 million free entre coupons via snail mail. The giveaway is part of a public image campaign to re-gain customers that the company lost during several food safety incidents during the past year.

At an investment conference this week, Chipotle management said that a previous text coupon campaign has helped the restaurant regain about a third of the sales it had lost from the food safety scares. Shareholders are hoping that the snail mail campaign will help even more in Chipotle’s recovery process.

Related Link: Street Mixed On Chipotle's Poor Sales, Encouraging Comps

Management said it expects to give away roughly 9 million free burritos via the two campaigns combined. At an average price of $7.10 per burrito, the promotions will cost the company roughly $62 million. However, the company is banking on the idea that getting customers back in the restaurant will be far more lucrative for the company in the long term.

Chipotle’s stock, which had been one of the top-performing stocks in the entire market in recent years, was hit hard by the food safety headlines. The stock remains down 28.9 percent over the past year, but it is now up 0.6 percent so far in 2016.

Disclosure: the author holds no position in the stocks mentioned.

Image credit: Mike Mozart, Flickr

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