Will Chipotle recover from outbreaks and a criminal probe?

Discussion
Source: chipotle.com/update
Jan 07, 2016
George Anderson

It wasn’t that long ago when analysts were pointing to Chipotle Mexican Grill as the restaurant chain that everyone was looking to emulate. That’s not the case anymore after multiple outbreaks of E.coli and norovirus have sickened customers and brought the chain the type of press that drives sales to other restaurants.

Same-store sales at the chain’s restaurants fell 14.6 percent in the fourth quarter. The quarterly decline was the first for Chipotle as a public company.

To potentially make matters worse, Chipotle acknowledged that it is the subject of a federal criminal investigation related to a norovirus outbreak at one of its restaurants in Simi Valley, California. According to reports, 234 customers and employees fell ill in August after being exposed to a sick worker who wasn’t sent home. The company has acknowledged that internal protocols in place since 2008 were not followed in the Simi Valley case.

Chipotle and the U.S. Attorney’s Office for the central district of California, which is working with the Food and Drug Administration’s (FDA) Office of Criminal Investigations, declined to comment on the investigation.

What is your assessment of Chipotle’s response to the various outbreaks that have hit its restaurants over the past year? Do you expect the chain to rebound from negative press surrounding these incidents?

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Braintrust
"There’s a formula for this kind of PR crisis. The greater the denial at the front end, the longer the term of penance for brand recovery on the back side. Chipotle was pretty quick to fess up about the problems they were facing, so the brand should come back in time."
"Taking out full-page apology ads won’t fix Chipotle. Fortunately, the chain has a deep reservoir of public good will, and if management acts quickly they might be able to save their brand."
"The Chipotle issue has raised the larger issue of the overall food safety of food products and highlights the importance of clean supply chains and the subsequent traceability. While customers may forgive acts of omission they tend to think differently when it comes to acts of commission."

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18 Comments on "Will Chipotle recover from outbreaks and a criminal probe?"


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Ron Margulis
Guest
4 years 2 months ago

There’s a formula for this kind of PR crisis. The greater the denial at the front end, the longer the term of penance for brand recovery on the back side. Chipotle was pretty quick to fess up about the problems they were facing, so the brand should come back in time.

Max Goldberg
Guest
4 years 2 months ago

Taking out full-page apology ads won’t fix Chipotle. Fortunately, the chain has a deep reservoir of public good will, and if management acts quickly they might be able to save their brand. Management needs to acknowledge that they have a major problem and detail the steps it will take to correct the situation. Then they need to keep the public informed about their progress and, when things are fixed, offer a free food day.

Warren Thayer
Guest
4 years 2 months ago

Ron totally nailed it for me. ‘Nuff said.

Adrian Weidmann
Guest
4 years 2 months ago

Chipotle provides a healthy choice with fresh “salad bar” ingredients. Their popularity and growth outpaced their appetite to maintain the food safety and handling requirements for this array of ingredients. The investigations will undoubtedly find that the cause behind these outbreaks were due to lax hygiene and food handling practices by employees. The managers at each of these locations must demand and maintain the highest hygiene practices and processes.

Chipotle will rebound from these events and most likely be one of the safest places to eat for a period of time. As consumers, we have a very short memory. Unfortunately that’ll be true for people on both sides of the counter! Perhaps Robert Irvine and Marc Summers should ambush some fast food restaurants for their Food Network series Restaurant Impossible? Or have Chipotle’s CEO, Steve Ells sample his own food after watching the preparation process in Undercover Boss?

Mohamed Amer
Guest
Mohamed Amer
4 years 2 months ago

There is no easy way to deal with Chipotle’s food safety debacles. The company remains strong with its core customers but any growth in same-store comps will be further out than the company wishes.

Expect a marked turn around in their performance by the end of this year and eventually reflected in their share price next year. Until then there’s a lot of tough supply chain and process work to be done as well as active and continuing PR campaigns.

Jerry Gelsomino
Guest
4 years 2 months ago

While Chipotle is right in not discussing the current criminal probe, I believe they have made a mistake in not conducting regular communications with their loyal fans. The goal in a reputation crisis is for the organization to take control of the communication agenda. According to Doorley & Garcia, they should:

  • Tell it all;
  • Tell it fast;
  • Tell them what you’re doing about it;
  • Tell them when it’s over;
  • Get back to work.

The company’s promise/brand of “food with integrity” needs to think about their future.

W. Frank Dell II
Guest
4 years 2 months ago

To date Chipotle’s response has been on target. It closed more than the affected stores, cleaned the stores, etc. I expect the chain to rebound but with changes. I expect elimination of local suppliers. Large suppliers will be required to test product before delivery to Chipotle shops. It will take about two years to get back on the growth train.

Richard J. George, Ph.D.
Guest
4 years 2 months ago

Chipotle has always been out front in terms of issues (eliminating GMOs from most of its menu) and in its transparency with the outbreaks that have hit the chain. Consumers will shy away until the food safety issues have been resolved. However, the Chipotle issue has raised the larger issue of the overall food safety of food products and highlights the importance of clean supply chains and the subsequent traceability.

While customers may forgive acts of omission they tend to think differently when it comes to acts of commission. In the criminal probe, according to sources, it appears that the illnesses in California were caused by a employee who had the highly contagious virus but wasn’t sent home from work. Obviously, Chipotle is not the victim in the case but in fact the potential perpetrator. If the criminal investigation and federal probe continue to have news viability it will be harder for Chipotle to rebound.

Gene Detroyer
Guest
4 years 2 months ago

When you wear a white hat, you have to make sure it doesn’t get dirty. But if you have ever tried to keep a white anything clean, you know its tough. The answer is to clean the dirt before it becomes a stain. Chipotle seems to be doing that.

As my colleagues have stated: don’t hide it … don’t deny it … fix it. The customers will respond appropriately.

J. Peter Deeb
Guest
4 years 2 months ago

Managing food safety across myriad suppliers, outlets and workers is a monumental task. The protocols and processes for executing the safety must be outlined to all players and harsh internal penalties should be the norm; whether it be discontinuing suppliers, replacing managers and line workers or insuring that management at the corporate level inspects, inspects and inspects! I believe Chipotle can recover if they make food safety their number one priority, are transparent in their communications to the public and are diligent in a no-tolerance approach to violations.

Shep Hyken
Guest
4 years 2 months ago

It appears that Chipotle is taking responsibility. When there is a crisis that warrants an apology, the process is to acknowledge the situation, apologize (as appropriate), fix it or discuss the fix, be accountable and do it fast. Chipotle seems to be operating through this process. What concerns me is the criminal investigation. The public will accept a “freak accident/incident.” Negligence is another story. I don’t know what the investigation is about, but that can be far more harmful than the E.coli outbreak.

Going back to the early 1980s, one of the best case studies is how Tylenol handled the tainted medicine situation where the bottles were tampered with. That was classic and the benchmark for how to handle that type of crisis, which is similar to the E.coli outbreaks.

Tom Smith
Guest
4 years 2 months ago

I just had my 2,500th burrito bowl in almost nine years yesterday. Needless to say I follow Chipotle very closely and have found them to be very responsive to me as a customer who offers many observations and suggestions.

Steve Ells, Mark Crumpacker and the rest of the Chipotle management team have consistently walked the “food with integrity” talk and I am confident they will rectify this situation. My understanding is they still have not found the source. Given how closely they manage their restaurants, they’re all company owned, so this appears suspicious. It’s interesting that the people that eat the most Chipotle, the employees, have not gotten sick at any of the affected locations. We’ll see if the federal investigation finds an outside entity responsible for these events.

Net-net I see what Chipotle is doing on a daily basis and I see the lines back at lunch time. They have a long way to go but over the long-term (12+ months) I see CMG getting back to pre-crisis levels.

Li McClelland
Guest
Li McClelland
4 years 2 months ago

Had someone told me six months ago that Chipotle would be in this situation, I doubt I’d have believed it. It’s hard to gauge how they’ve handled it because it’s impossible to know what they knew or suspected — and when — and whether they even now have a firm handle on all the problems. But I’ll say this: people are just flat out scared of eating Chipotle food right now. This is not a case of an errant employee, a bad batch of some ingredient, or a criminal celebrity spokesperson. This is their core business and business model at stake. I am really not sure Chipotle can recover from this, or that consumers will forget.

Lee Peterson
Guest
4 years 2 months ago

They have a strong brand halo; they’ll bounce back. Obviously though, they need to fix their issues and let us know how they’re fixing it. In this age of transparency, you’ve got to open up the curtains! But I have confidence, in this case, that they will.

Craig Sundstrom
Guest
4 years 2 months ago

The response has been okay, I guess, but without knowing more about what actually caused the problem — was it negligence?, sabotage?, a random happening that just happened to hit them? — it’s hard to grade their overall performance (I guess my grade would be “incomplete”).

To build on Frank’s comment, I think the fact that the Nation seems to be pursuing two (potentially) inconsistent goals — perfect food safety and small, often amateur suppliers — assures us we will have more such issues in the future.

Jonathan Hinz
Guest
4 years 2 months ago

I can’t say that Chipotle has handled this well, but I just walked by the 5th Ave. Chipotle at lunchtime and it was packed. If there’s anyone more discriminating about a restaurant, it’s a New Yorker.

These guys have brand advocates that will weather the storm with them. I believe they’ll be fine.

Christopher P. Ramey
Guest
4 years 2 months ago

Chipotle will be fine. Americans forgive. We’ll soon be on to our next crisis.

Robert DiPietro
Guest
4 years 2 months ago

Chipotle will rebound from this in no time. They handled the issue proactively and are taking steps to correct it. It is a procedural issue that will take time and reinforcement to really take hold.

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Braintrust
"There’s a formula for this kind of PR crisis. The greater the denial at the front end, the longer the term of penance for brand recovery on the back side. Chipotle was pretty quick to fess up about the problems they were facing, so the brand should come back in time."
"Taking out full-page apology ads won’t fix Chipotle. Fortunately, the chain has a deep reservoir of public good will, and if management acts quickly they might be able to save their brand."
"The Chipotle issue has raised the larger issue of the overall food safety of food products and highlights the importance of clean supply chains and the subsequent traceability. While customers may forgive acts of omission they tend to think differently when it comes to acts of commission."

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