April 2, 2009 / 9:22 PM / 9 years ago

Eyeing bigger sales, some U.S. restaurants go small

LOS ANGELES (Reuters) - Chipotle Mexican Grill Inc, known for its premium-priced burritos using meat from naturally raised animals, is testing a “Low Roller Menu” and other downsized, lower-priced selections to boost traffic.

The move from the upscale quick-serve chain comes as restaurants such as Outback Steakhouse, T.G.I. Fridays and Quiznos use similar tactics to tempt penny-pinching consumers, who are spending less on meals away from home amid the worst U.S. recession in decades.

Chipotle, which until only recently could raise prices with relatively little resistance from customers, is testing the new menu in Denver-area restaurants. It features “Low Roller” items such as single tacos and soup and salad sides, a kids’ menu and new additions such as Chicken Pozole soup and a Carnitavore burrito bowl.

Company founder and Chief Executive Steve Ells said the menu highlights variety “while still making great food affordable and accessible.”

Analysts say the move, which was preceded by successful promotions such as T.G.I. Fridays’ “Right Portion, Right Price” menu, attacks on two levels. It targets cash-strapped consumers who might need lower prices to justify a visit to a sit-down restaurant, as well as diners such as Baby Boomers and women who are looking for smaller portions.

BORN OF NECESSITY

“It’s a strategy born of necessity,” said Bob Goldin, executive vice president at restaurant consulting firm Technomic.

The Cheesecake Factory Inc, which like Chipotle is known for ample portions, has unveiled a 16-item small plate menu with offerings such as Hand-Battered Onion Rings and Ahi Tartare priced from $3.95 to $6.50.

“It’s a great value for folks who may not have as much money to dine out as they used to,” said Mark Mears. “At the Cheesecake Factory, we don’t really do anything small, so the portion sizes are actually pretty generous.”

Fast-food chain Burger King Holdings Inc is selling mini hamburgers called BK Burger Shots in two-pack and six-pack packages priced at $1.39 and $4.09, respectively.

Quiznos recently unveiled a $4 “Toasty Torpedo” sandwich that is smaller than the $5 Footlongs being sold by rival Subway. [nN31405109]

Elsewhere, P.F. Chang’s China Bistro Inc last year rolled out $2 mini desserts such as banana splits, “Great Wall of Chocolate” cake and apple pie.

Chipotle’s new items are priced from $2.25 to $6.35, versus a current low entree price point of around $6, William Blair & Co analyst Sharon Zackfia said in a client note.

“Net-net, we suspect the inclusion of more affordably priced options could enhance Chipotle’s value positioning,” said Zackfia, who said the strategy is not without risk since it could convince some people who would have come anyway to trade-down to less-expensive options.

“If it’s a dud they will stop doing it,” said restaurant consultant Malcolm Knapp. “The real risk is to sit on your hands and hope for the best. That does not work.”

Editing by Andre Grenon

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