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Chipotle’s Biggest Problem Isn’t What You Think It Is

What would you say Chipotle Mexican Grill's (NYSE: CMG) biggest problem is?

Most people would probably answer that it's the burrito maker's unfortunate string of food-safety incidents that have cropped up intermittently over the past two years. Others might say it has to do with the rising price of avocados, which cuts into Chipotle's margins. I've even heard it argued that this was a factor in the chain's decision to roll out queso dip.

Yet, I would argue that Chipotle's biggest problem right now is neither of this. I would argue that its biggest problem has instead to do with two especially potent behavioral biases: recency bias and confirmation bias.

A Chipotle location in Bethesda, Maryland. Image source: Chipotle Mexican Grill.

The recency bias holds that people give more weight to recent events when making decisions than they give to things that happened further back in time.

In Chipotle's case, this explains why one of the first things that most people seem to associate with it are the food-safety incidents. Long gone are the days when everybody lauded its customer and environmentally friendly approach to sourcing and serving fresh, and often local, ingredients in its restaurants.

Some of this is fair, of course, as you wouldn't want to eat at a chain that didn't serve safe food. But just look at all the things Chipotle has done to improve food safety over the past 18 months, and you'll see that there's no reason to be more concerned about eating at one of its locations than at, say, a Taco Bell or McDonald's.

In fact, one could argue that the opposite is true. After all, much of the food that's made at Chipotle is prepared in front of customers, limiting opportunities for malicious contamination, as it's probably safe to say happens all the time at other fast-food joints -- especially those with drive-thru windows.

A person eating a burrito bowl from Chipotle. Image source: Chipotle Mexican Grill.

The confirmation bias goes hand in hand with this. It holds that people more readily seek out and absorb information that confirms or is consistent with an existing opinion of theirs.

This explains why there are so many articles being written by media outlets right now about Chipotle's food-safety issues. Readers click on them. And the reason readers click on them is because they fuel readers' existing perceptions of the chain.

Holding all else equal, I'd bet money on the fact that a headline about another outbreak at a Chipotle location would garner double, triple, quadruple the page views of a headline about the fact that the chain doesn't use artificial ingredients in its food.

Statistically speaking, the latter is way more interesting and impressive. Yet, it's the former that'd get more clicks. And one reason for that is because of confirmation bias.

In short, the problem isn't with Chipotle's food. It's safe. I'd eat there today, and bring my kids, if my wife didn't already have plans for how I'll be spending my evening (mowing the lawn, preparing for out-of-town guests, and other horrible things).

Its problem is grounded instead in perceptions. And when you consider the power of behavioral biases, there's certainly something to be said for the cliche that perception is reality.

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John Maxfield owns shares of Chipotle Mexican Grill. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.