A few months ago, Chipotle (CMG) went viral on social media for all the wrong reasons. The Mexican fast-food chain faced major criticism from its customers for serving “skimpy” food portions in burrito bowl orders, sparking a viral TikTok trend.
Some TikTok users alleged they would receive larger proportions of food at Chipotle if they filmed employees making their orders. This alleged “hack" caused a frenzy at Chipotle locations across the country as customers participated in testing out this theory.
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Chipotle later denied the practice, insisting portion sizes were “generous” at its restaurants.
Related: Chipotle test confirms customers’ suspicions about portion sizes
Weeks later, Wells Fargo analysts released a study which confirmed that portion sizes at Chipotle restaurants do indeed vary significantly. The analysts visited eight Chipotle locations in New York City, and found some of the locations served burrito bowls that weighed 33% more than what they received at others.
Then-Chipotle CEO Brian Niccol later confirmed during an earnings call in June that 10% of the company’s restaurants had “outlier portion scores,” and that those locations will undergo training.
Chipotle shareholder sues the company for being 'misleading'
As a result of the controversy, Chipotle is now facing a class-action lawsuit (filed on Nov. 11) from one of its shareholders for allegedly “misleading” investors about its portion sizes.
The shareholder claims that investors suffered “significant losses and damages” as the controversy over portion sizes caused Chipotle’s stock price to fall by 7.86% on Oct. 30.
“Chipotle’s portion sizes were inconsistent and left many customers dissatisfied with the company’s offerings; in order to address the issue and retain customer loyalty, the company would have to ensure more generous portion sizes, which would increase cost of sales; and as a result, defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times,” reads the lawsuit.
In the lawsuit, the shareholder alleges that Niccol’s statement in an interview with Fortune magazine in May, where he said that the company wants to “give people big portions that get them excited about the food,” were “materially false and misleading” since “portions had in fact gotten smaller in many cases.”
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The shareholder also alleges that Chipotle “understated” how difficult it would be to compete in a “highly competitive” industry and convince its customers of the “overall value proposition of its menu” since it was providing them with inconsistent portion sizes.
Chipotle vows to crack down on portion sizes at restaurants
The lawsuit comes after Niccol stepped down as Chipotle CEO on Aug. 31, and later assumed the role as Starbucks CEO on Sept. 9.
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Scott Boatwright, who later replaced Niccol as Chipotle CEO, stated during an earnings call on Oct. 29 that the company has made progress on providing customers with consistent and generous portions at its restaurants.
“Portioning is a core equity of ours in the organization, and we are committed to ensuring that we give the right portion to every guest that walks into the building,” said Boatwright. “We've seen strong improvement, even through our social channels, of people posting big burritos, big bowls and really excited about (the) portioning they're getting in the Chipotle brand.”
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