Damon Vickers, a private fund manager in Seattle, totally disagrees with legendary short-seller David Einhorn’s view of battling Mexican fast food joints Taco Bell and Chipotle.
This morning, Einhorn took at stance against Chipotle, saying that it’s due to increased — and more direct — competition from Taco Bell.
Vickers presents Einhorn’s points, and his counter-arguments in an email:
“Chipotle’s biggest challenge is Taco Bell”
This is ridiculous, Taco Bell has been around for years. Chipotle grew in part due to its quality and Taco Bell’s lack thereof.
“Taco Bell’s prices are cheaper than Chipotle”
Taco Bell is cheaper but so is pink slime vs. real hamburgers. Customers pay more because they want quality. It’s the same reason someone buys at Whole Foods vs Safeway.
“Only 30% of customers prefer Chipotle vs Taco Bell’s Cantina”
Another ridiculous statement… By in large the two customer bases are different. A customer who buys at Chipotle does so for quality reasons and health reasons. A customer who buys at Taco Bell does so because it’s cheap — only.
“Chipotle has an inability to raise prices”
Chipotle has the same ability or inability as any retailer regarding pricing. The statement that customers wont pay higher prices for quality… is false. I guess Whole Foods Market should close their doors and go home. People WILL and do pay for quality. This quality is something Taco Bell does not have, and regardless of the pretty pictures that fast food companies put on their ads… it’s still garbage at the checkout.
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