Chipotle Mexican Grill is being sued for allegedly skimping on portions.
The class action suit was filed with a federal court in Santa Ana, California on behalf of investors who purchased Chipotle stock and options between Feb. 8 and Oct. 29, 2024.
The suit claims that the fast-food chain kept mum about increasing "unhappiness" among its customers because of inconsistent portion sizes.
The lawsuit alleges that the company made false and/or misleading statements and/or failed to disclose that: Chipotle's portion sizes were inconsistent and left many customers dissatisfied with Chipotle's offerings and Chipotle would have increased costs to ensure more generous portion sizes.
The suit alleges that on July 24, 2024, former Chipotle CEO Brian Niccol acknowledged that portion inconsistency was an issue at Chipotle and that it had caused customers to feel justifiably unhappy with Chipotle.
Niccol revealed that Chipotle would have higher cost of sales in the third quarter of 2024, partially due to giving customers more generous portions. This news hit Chipotle's share prices.
During Chipotle's third quarter of 2024 earnings call, Scott Boatwright, who was interim CEO at that time, stated that costs were up, partially driven by "higher usage as we focused on ensuring consistent and generous portions."
Two products identified in the suit were rice bowls and burritos, Reuters reported.
The lawsuit was filed only hours after Boatwright's designation as an "interim" CEO was removed.
The press release of Chipotle on Boatwright's appointment as CEO and member of the board noted that the company went through a "robust and thorough process" before its board of directors appointed him.
