Wait a minute. Isn’t that just part of a sentence, as in “Chipotle makes a better burger?” Maybe. Maybe not. It will all depend on how the U.S. Patent and Trademark Office rules in the next 2 to 3 months.
Better Burger’ Already A Thing
Part of the problem is that “better burger” is a widely accepted industry standard, used to describe the offerings of a segment that includes private companies like Five Guys Burgers and Fries, Smashburger and Culvers as well as public fast casual outfits such as Shake Shack (NYSE:SHAKC) and Habit Burger Grill (NASDAQ:HABTB).
Whatever it does, Chipotle can’t seem to avoid controversy.
Chipotload Of Flavor
In the lawsuit, which ended up being settled out of court, Chipotle Mexican Grill claimed Jack In The Box created misleading marketing materials in which the word “chipotle” was printed in all caps in a font similar to that used by the burrito chain.
More Court Time
Trademark cases are not the only reasons Chipotle has found itself in court. In January the company was hit with a subpoena in a federal probe linked to a norovirus case in California last year.
In fact, a wave of norovirus and E. coli outbreaks led to a 5% drop and a 14.6% slide in Q4 same-store sales.
Up Next? A Better Duo?
Now, as Chipotle prepares to argue its right to trademark a two word phrase, it may come up against a problem encountered by Luby’s, Inc. (NYSE:LUBF) and its Fuddruckers Restaurants LLC brand which tried to register the term “Better Buns. Better Burger” in 2012.
The application was turned down because the term was found to be merely descriptive and not unique.
Wall Street Reaction Mixed
All this has left Wall Street cautious with Goldman Sachs’ Karen Holthouse recently downgrading the stock to Neutral and dropping the target from $550 to $500. Holthouse cited the norovirus incident in Boston along with higher than expected promotional costs including coupons for free food.
Holthouse is not alone with CBS MoneyWatch reporting at least 7 analysts have lowered their ratings on Chipotle stock since the beginning of the year. Only 3 analysts have raised ratings.