SEC Calls Out Chipotle For Trying To Claim $4M In Profit From Free Burritos Promo

It's been a strange year for Chipotle Mexican Grill and it doesn't seem to be getting any better.

The popular chain survived the aftermath of a norovirus outbreak, then forced to close down every store amid health inspections, and then gave millions of dollars worth of free burritos away to keep people interested. We also can't forget about the rewards program, "Chiptopia" or the animated film, "A Love Story," which was nearly swept under the rug.


Now the Securities and Exchange Commission is getting involved, according to Bloomberg. In a written letter, dated July 1, addressed to Chipotle Mexican Grill, the SEC responded to Chipotle's letter which addressed the effect the coupons for free burritos — which totaled $4 million — had on Chipotle's sales.


On June 22, Chipotle wrote the SEC looking for a way to make it seem like spending — or wasting — $4 million on free burritos for customers was positive for sales.

Chipotle's initial inqury to the SEC read:

"In light of the significant promotional activities begun in the first quarter of 2016, such as coupons issued for free products, please revise your revenue recognition policy to describe your accounting for such promotions and sales incentives."

Just to be clear, giving away free food or product — just in order to stay relevant — is never a good look if you're looking to positively impact your sales. Furthermore, the amount of money that product could have generated by being rightfully sold, will probably never be seen again.


The SEC responded gracefully, but basically told Chipotle they were trippin'.

"The amount of the accrued liability for free food offers was approximately $4 million as of March 31, 2016We do not recognize any revenue on free food coupons issued to or redeemed by customers," the SEC letter read. It continued: "We will revise our accounting policy in future filings to describe our accounting for our promotions and sales incentives beginning with our next 10-Q filing, to include additional disclosures similar to the following: The Company recognizes revenue, net of discounts and incentives, when payment is tendered at the point of sale."

Each week, the future of Chipotle is looking more and more bleak.