Aug. 30, 2012 at 2:22 PM ET
Never mind two cents: Customers gave Chipotle Mexican Grill an earful over the chain's practice of rounding checks up or down to the nearest nickel.
After an investigation by the Newark (N.J.) Star-Ledger's consumer watchdog, Chipotle revised its policy of rounding up or down to the nearest nickel at "a small number of restaurants in a few of our highest volume markets," as characterized by spokesman Chris Arnold in an email. He said affected markets included New York, New Jersey and the Washington, D.C. area.
As of August 1, Arnold said those restaurants only will round down in customers' favor, and a notification has been added to the bottom of each receipt. Arnold said Chipotle didn't profit when the rounding went both ways. "We never benefitted in any way other than making lines move faster," he said.
"I think if they were rounding up ... and weren’t disclosing it, it might be actionable by a state attorney general under unfair and deceptive practices laws," Ed Mierzwinski, consumer program director with Public Interest Research Group said via email.
Getting customers in and out as fast as possible is a huge priority for fast-casual restaurants in general and Chipotle in particular, as it contends with a slowdown in growth and sales that missed expectations last quarter.
Chipotle blamed the economy for the 8 percent increase in same-store sales that disappointed investors, but some analysts challenged that assertion. "Are the peak hours approaching capacity issues that would somewhat limit the traffic growth going forward or transaction growth going forward?" Merrill Lynch's Joe Buckley asked on the company's conference call last month.
Co-CEO Montgomery Moran said this wasn't the case. "Even in our busiest restaurants, we're not having a problem ... getting people through the lines." Moran said restaurants processed an average of six transactions per hour more during peak times in the second quarter.
Mierzwinski said, "I don't really see an issue" now that the rounding benefits diners, but NPD Group restaurant industry analyst Bonnie Riggs said she didn't see much benefit to the practice, either.
"It boggles my mind where they’re coming from on this," she said. "It just doesn't seem like doing that with the check is going to allow you to drive that much more traffic."
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