Sweetgreen Stock Drops After Chipotle Sues Over Burrito Bowl Trademark Infringement

A lawsuit filed by Chipotle Mexican Grill against Sweetgreen Mexican Grill alleging trademark infringement over the salad chain's new "Chipotle Chicken Burrito Bowl" caused the company's stock to drop 11% Wednesday afternoon.

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In less than a week after Sweetgreen announced its new menu item, Chipotle filed a lawsuit in federal court in California against Sweetgreen.

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Nic Jammet, Sweetgreen co-founder and Chief Concept Officer said in a statement on Thursday that the new bowl’s name was inspired by the use of “bold chipotle spices” in its recipe. As part of its complaint, Chipotle cited that when it heard about the Chipotle Chicken Burrito Bowl, it sent Sweetgreen a cease and desist notice and requested the company to drop Chipotle from its company name. Sweetgreen did not respond to the letter. 

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Besides using a font similar to Chipotle's stylized logo in advertisements, Sweetgreen also occasionally uses the burrito chain's trademarked Adobo Red shade of red in its menu advertising. This product name dominates Sweetgreen's website, making it difficult for visitors to identify Sweetgreen, according to Chipotle.

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A number of times throughout the complaint, Chipotle and Sweetgreen are listed as two of the fast-casual sector's competitors.

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As well as asking the court for an injunction against Sweetgreen, Chipotle has also demanded that Sweetgreen refund Chipotle's profits from its Chipotle Chicken Burrito Bowl, which is currently being sold at Sweetgreen.

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In a statement sent to Trade Algo, Laurie Schalow, Chipotle's chief corporate affairs officer, said that the company didn't usually comment on litigation, but what she did say was that "we're committed to protecting the intellectual property and trademarks that represent our brand.". In accordance with this, we will take appropriate legal action in order to protect our brand and our rights whenever necessary.

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Despite knowing of the lawsuit filed by Chipotle, a Sweetgreen representative declined to comment about the case since it is a pending matter.

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Shares of Sweetgreen have fallen 24% in 2023, dragging down the value of the company by $726 million, as investors fret over Sweetgreen's ability to become profitable in the future.

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However, despite macroeconomic concerns, the Chipotle chain has seen strong sales in spite of the current economic situation. During the same period, the company's stock has risen 22%, giving it a market value of $47 billion, and giving it a competitive edge against its competitors.

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