Chipotle Mexican Grill Inc (NYSE:CMG) has been sued by its own shareholders after failing to disclose the number restaurants which cut portion sizes before the chain was forced to backtrack on the move.
Shareholders filed a proposed class action in a California federal court on Monday, arguing the chain had failed to recognize growing disdain over inconsistent portion sizes.
Customers had taken to social media to complain, shareholders highlighted, prompting margins to take a hit in second and third-quarter figures as it moved to repair the damage.
Around US$6.5 billion had been wiped off Chipotle’s market value after a third-quarter update on October 30, which showed below-expected revenue of US$2.79 billion.
Chief executive Scott Boatwright and predecessor Brian Niccol had pointed to “generous portions” at the chain’s 3,600-plus restaurants.
The lawsuit said shareholders were seeking unspecified damages for those who bought into the company between February 8 and October 29.