Barron's Roundtable panelists provide economic outlook and analyze Starbucks and Chipotle stocks.
Chipotle shareholders are suing the company, claiming they faced “significant losses” due to the alleged portion size reductions that caused an uproar on social media.
A proposed class action lawsuit was filed on Monday on behalf of Michael Stratford. Michael Stradford claimed that the company “underestimated how difficult it would be to compete in a highly competitive industry because it provided customers with highly inconsistent products.” Portion sizes are lacking in some customer opinions. ”
“If our guests disagree with the overall value proposition of our menu, our sales could be adversely affected, which could have an adverse effect on our results of operations,” the lawsuit states.
The lawsuit names former CEO Brian Nicol and former CFO Jack Hartung, who resigned in August to take over Starbucks, as defendants.
Chipotle CEO addresses burrito bowl portion sizes after backlash
The lawsuit claims that customer complaints weren't made clear until this spring, when people “began complaining on social media about inconsistent or missing portion sizes at Chipotle restaurants.”
FOX Business has reached out to Michael Stradford's attorney Lawrence Rosen for comment.
Chipotle CEO Lori Shallow told FOX Business that the company does not comment on lawsuits, but “will vigorously defend our industry-leading real food products.”
Employee prepares Chipotle bowls for customers. (Patrick T. Fallon/Bloomberg via Getty Images/Getty Images)
many social media users – Frustrated by increasingly smaller portions – employees repeatedly asked for additional toppings and began sharing videos of themselves assembling Chipotle bowls. But things changed in May when influential food critic Keith Lee echoed these laments, the lawsuit says.
Chipotle CEO addresses burrito bowl portion sizes after backlash
The suit says Lee is a person who “exercises considerable influence” and boasts millions of followers on TikTok alone.
Chipotle is giving away free burritos for a year to 53 lucky fans who complete the Burrito Vault. (Gina Moon/Bloomberg via Getty Images/Getty Images)
In July, Nicol admitted at a financial results conference that “that inconsistency was a problem'' and that “customers felt understandably dissatisfied with the company,'' and the lawsuit continued.
To turn things around, the company “joined forces and re-emphasized hearty dishes” at all of its restaurants, according to the complaint. Nicol revealed that the company's cost of goods sold will be affected by higher protein costs. According to court documents, the stock price fell on the news.
During an earnings call last month, Interim CEO Scott Boatright told analysts that peoplePost a big burrito or “We're really excited about Chipotle-branded portions in big bowls,” which was “a reversal of what we saw earlier this year.”
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But Adam Reimer, the company's chief financial officer, told analysts the move hurt profitability.
Reimer said the company increased its use of raw materials last quarter as it focused on “ensuring consistently generous portions,” leading to higher costs on some items, especially avocados and dairy products. said he was faced with.
The complaint says the price of Chipotle stock fell on the news.
The complaint alleges that Nicol and Hartung's “fraud and omissions, as well as the precipitous decline in the market value of the company's common stock, have caused shareholders to suffer “significant losses and damages.”
