Moe’s pulls ahead in burrito battle

Moe's at the top of the food chain
Moe's at the top of the food chain

Moe's Southwest Grill dethroned Chipotle as the most popular Mexican-inspired food brand, according to a new Harris Poll out this week. Analysts say this is yet another sign of lingering customer scrutiny for Chipotle as it slowly recovers from foodborne illness outbreaks.

Moe's, with less than half of the amount of franchises as Chipotle, was named "Brand of the Year" in Harris' fast-casual Mexican restaurant category. Meanwhile Chipotle, the former three-year title holder, did not make the top four. It ranked below Moe's, Taco Bell, Qdoba and Baja Fresh, according to the annual poll published Thursday.

The survey comes after E. coli outbreaks were investigated by the U.S. Food and Drug Administration, the U.S. Department of Agriculture's Food Safety and Inspection Service and public health officials in multiple states. The link to foodborne illnesses sent sales slumping and the stock down 44 percent since the first outbreak was reported in October.

Food quality is the heart of Chipotle's brand and identity, which analyst Nick Setyan, senior vice president of equity research at Wedbush Securities, says made the fast-casual chain especially vulnerable during the outbreak.

"I think they're probably more susceptible than any other restaurant out there to such a crisis," Setyan told CNBC's "Power Lunch" on Friday. "I do think there's probably a higher percentage of customers that aren't coming back on a permanent basis."

Setyan has an "underperform" rating on the stock with a $400 price target. The stock is down more than 15 percent year to date, trading near $404.50 Friday. Sales per restaurant may not reach "pre-crisis" levels until late 2018 or early 2019, Setyan said, as Chipotle's traffic has ended up in other restaurants.

"If you're next to a Chipotle, you're benefiting," Setyan said. "It doesn't matter if you're a Panera or a Habit Burger or whatever brand it may be, traffic has been going pretty evenly to other competitors."

A Moe’s Southwest Grill burrito
Source: Moe’s Southwest Grill

Moe's is one of those beneficiaries, though the company's Bruce Schroder did not say if it had directly benefited from Chipotle's downturn. He did say, if nothing else Chipotle's issues have forced Moe's to stay on top of food quality.

"We've been doing everything we can to continue to have great service, to have vigilance around our food," Schroder told CNBC Friday. "We're constantly reminding our consumers that they have a great option in us."

Moe's has 650 locations, versus Chipotle's 1,900, and added 70 more restaurants last year.

"Competitors have a big jump on us, but this is validation that we're on the right track and that we offer a great alternative," he said. "We'll continue at that pace and try to attract a lot of great new owners into our system as franchises."