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Is Chipotle Making McDonald's Mistake?

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Chipotle Mexican Grill (NYSE: CMG  ) has a plan to boost its moribund comps.

The fast-growing restaurant chain will be adding premium margaritas -- handmade with Patron silver tequila, triple sec, agave nectar, and fresh lime -- to more than half of its restaurants next week.

These drinks won't be cheap, priced between $6.50 and $8 apiece. 

The allure may be obvious. Average ticket prices could head higher as customers trade up from sodas and beers. However, McDonald's (NYSE: MCD  ) also thought that it could boost sales and woo new customers by adding premium beverages. It hasn't exactly worked out well lately. Comps turned negative in October for the first time in a decade, and customer complaints are growing. 

Is Chipotle biting off more of this tequila worm than it can chew?

In this video, longtime Fool contributor Rick Munarriz wonders if Chipotle's new product may result in confusion and slow-moving lines. There's also the fear that Chipotle's value proposition gets blurred. What do you think? Check out the video, then chime in with your thoughts in the comment box below. 

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Read/Post Comments (9) | Recommend This Article (1)

Comments from our Foolish Readers

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  • Report this Comment On April 23, 2013, at 8:17 PM, alassocc wrote:

    The main problem with McCafe is that their stuff is not only overpriced but it is so artificial and it doesn't taste that great! I think you guys are jumping early on the gun!

  • Report this Comment On April 23, 2013, at 9:40 PM, fearjess wrote:

    Seriously? Chipotle offering one kind of margarita is going to clutter up their menu and cause mayhem and delays? I don't know if it was the Patron margarita specifically, but I dined at a Chipotle a few months back that offered margaritas (a test run?), and I got one out of curiosity. The only extra steps that it took was to check my ID and grab a jug out of their refrigerator to pour me a glass (which at around $6.50 was a very reasonably priced alcoholic drink).

  • Report this Comment On April 23, 2013, at 9:41 PM, cityperson wrote:

    We have a Chipotle in are area and most of the time it is empty of customers. If i were one of the investors, I would be looking for another investment.

  • Report this Comment On April 23, 2013, at 11:00 PM, cbeans wrote:

    I do not think Chipotle and McDonalds can really compare.... Chipotle is more expensive and slightly more 'real' in terms of food quality. Also...Booze sells. End of story . Sad but true. It will likely boost business. People may buy breakfast things from McDonalds and thus include coffee drinks...but for the most part, people dont think Burger, Fries, and Latte. I am getting indigestion just thinking about it! People do, however, like a margarita with their burrito.

  • Report this Comment On April 24, 2013, at 12:48 AM, madscientistdave wrote:

    @cbeans, McDonalds used to OWN Chipotle, hence the comparison. Plus, McDonalds wasn't necessarily looking to have their burger customers upgrade to a latte, they were also looking to pull in drink-only customers who maybe didn't want to spend top dollar at Starbucks (or perhaps people like me who don't particularly like Starbucks but who might want a latte). it wasn't the concept that failed IMO, it was the execution. I'm sure they tested it to death, but sometimes tests are designed to confirm an idea, not to validate it. Huge difference.

  • Report this Comment On April 24, 2013, at 12:49 AM, ThinkRetail wrote:

    I live in Texas and I see chains like Taco Cabana, Fuzzy Tacos offering a margarita for a resonable price. I have always viewed Chipotle as a kind of fast casual place. If all the tables were full nightly with people sipping many tables will you turn..when you have no wait staff. Secondly, I would not go there and stand in line for another margarita. I do not want a top shelf margarita at Chipotle. If they increase seating to justify..the happy hour crowd that is not eating and just drinking..I think they need to stay true to thier core values unless margaritas are a happy hour item, at a value...not top shelf to drive additional business. I notice even taco bell is changing its menu contantantly to drive revenue...When is the last time I heard of Chipotle having anything other then burittos, tacos and bowls. There are many in Texas that beat them at thier game that are growing exponentially. Look at Torchys Tacos based in Austin if your wanting an investment or maybe Twisted Root Burger Company.

  • Report this Comment On April 24, 2013, at 1:26 AM, greybuscat wrote:

    If they've been successful with beer, and if they manage to keep it form affecting the ordering system or causing long lines, there's no reason to think it would harm them.

    It's not like anyone's dining experience is changed by not ordering one.

    And who wants the kind of customer that would be offended by something that doesn't affect them?

  • Report this Comment On April 24, 2013, at 1:50 AM, 5thofmayevryday wrote:

    Two different costumer goups here. Would expensive margaritas fly at Taco Bell ? NO. At Chipolte you pay a little extra for better food than most fast food restuarants so the costumer base probably will splurge for a little better drink. This is like comparing Wal Mart shoppers to Whole Food shoppers. ( Well not that big of gap but you get my point )

  • Report this Comment On April 24, 2013, at 8:29 AM, dmichael66 wrote:

    The Chipotle near me has been selling margaritas made with Sauza Silver for several years now and very reasonably priced ( under $5 ).

    My only complaint is that they come in a plastic cup and a salted rim is not an option. Otherwise they are pretty good to the point that I usually get one when if I eat in.

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CMG $413.81 Up +3.65 +0.89%
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