Chipotle Defeats Lawsuit Over Portion Size Allegations

Chipotle Mexican Grill has successfully defended itself in a lawsuit alleging that company leaders misled investors regarding the size of its food portions. A federal judge in California dismissed the lawsuit last week, ruling that there was insufficient evidence to support the claims made by investor Michael Stradford. The complaint centered around accusations that Chipotle had reduced portion sizes to cut ingredient costs, a move that allegedly deceived shareholders.

The legal battle began last November, following widespread social media criticism regarding the perceived shrinkage of Chipotle meals, particularly for online orders. Customers voiced their frustrations, asserting that portions had become noticeably smaller. This backlash intensified after a viral TikTok video featuring then-CEO Brian Niccol, in which he insisted that portion sizes had not changed, drew substantial mockery online.

In her ruling, Judge Sherilyn Peace Garnett of the U.S. District Court stated, “The facts alleged do not show Niccol and [food safety officer Laurie] Schalow made a false or misleading statement by denying that the Company had reduced the size of its portions.” She further noted that whistleblower testimonies cited in the lawsuit were deemed as “vague hearsay” and failed to demonstrate that Chipotle systematically decreased its portion sizes.

Despite the favorable ruling for Chipotle, the controversy surrounding its portion sizes gained traction in late 2023 and into 2024 amid rising supply costs leading to what some referred to as corporate “shrinkflation.” In one notable incident, a TikTok comedian and consumer advocate, Ryan Lynch, addressed the issue in a video that garnered over 5.5 million views, stating, “Your portion control is causing people to be very frustrated… and we all are personally taking it out on your employees.”

The criticism was not limited to social media. An extreme case involved a man from Detroit who was sentenced to 12 years in prison for an incident in which he shot a Chipotle employee due to dissatisfaction with his guacamole portion. Many customers resorted to filming their orders being prepared, hoping to ensure they received larger portions, although Chipotle dismissed these tactics as unnecessary.

In July 2023, during an earnings call, Niccol acknowledged inconsistencies in portion sizes across different locations. He pledged to ensure that customers would receive “generous portions” moving forward. “We are reemphasizing training and coaching around ensuring we are consistently making bowls and burritos correctly,” he stated.

Stradford’s legal team argued that Niccol’s acknowledgment of inconsistencies, combined with other commitments made by Chipotle executives, indicated that the company had lied to investors about its portion sizes. They cited claims from “confidential sources” suggesting that between 2020 and 2022, management pressured restaurants to limit ingredient usage to cut costs, thereby impacting portion sizes.

Despite these assertions, Judge Garnett concluded that the allegations did not prove that Chipotle had systematically reduced portion sizes or that its executives had knowingly misled investors. The ruling raises questions about whether Stradford will choose to appeal the decision.

As Chipotle moves forward, the company faces the challenge of addressing customer perceptions regarding portion sizes, especially as it continues to navigate fluctuating ingredient costs and public scrutiny.