Since going public 10 years ago, Chipotle has built its reputation on providing the speed and convenience of fast food but with the freshness and quality of a local restaurant. Americans flocked to the chain and the company saw sales grow and grow, typically by double digits annually.
But this past fall, the chain quickly fell from grace after an E. coli outbreak was traced to Chipotle’s restaurants, sickening 55 people across 11 states. Another E. coli outbreak traced back to Chipotle saw five people in three states fall ill. And then a norovirus outbreak at a Chipotle in Boston sickened 140 people.
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Suddenly, nobody wanted Chipotle. Sales at the chain’s restaurants open at least 13 months plunged 14.6 percent in the last three months of 2015. Profit plummeted 44 percent and overall revenue was down 6.8 percent. Steve Ells, the chain’s founder, chairman and co-CEO, called the quarter “the most challenging period in Chipotle’s history.”
The E. coli outbreaks may have passed, but Chipotle’s challenges aren’t over yet. The company still has to figure out how to regain the trust of its customers and woo them back for more burrito bowls.
Chipotle’s more than 2,000 restaurants were shuttered for four hours on Monday to allow for a “virtual” town hall meeting with all company employees. At the meeting, Ells sought to reassure Chipotle’s more than 50,000 employees and announce steps the company was taking to improve food safety. “People will come back,” Ells reportedly said during the meeting.
To deliver on that promise, another goal of the company-wide meeting was “to get all of the employees clear on what has to happen,” says Allen Adamson, founder of marketing consultancy firm BrandSimple. “In the service business, the most important customer touch point is the employee.”
Aaron Allen, a restaurant consultant, adds that the closure of all Chipotle locations shows consumers — and was intended to show them — how seriously the chain is taking the situation.
The company also used the restaurant closures to give customers a powerful incentive to come back: free food. Signs in store windows invited customers who were inconvenienced by the restaurants’ closings to text the company to receive a coupon for a free burrito. The coupon codes quickly bounced around the Internet.
Adamson says this promotion is a good way to get customers back in the habit of eating at Chipotle. He warns, though, that “promotions alone won’t do it. The company needs to make tangible changes that the customer can see.”
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To that end, how Chipotle survives this crisis may depend on the company’s new food-safety initiatives. In January, Chipotle detailed new procedures, including more stringent inspections of ingredients, changes to food prep and handling, more employee training and paid sick leave so that workers don’t feel pressure to come in when they’re ill. On Monday, the company announced a $10 million commitment to help small farmers keep up with those new food-safety standards so that it can keep sourcing food from local growers. The money will go toward helping pay for more rigorous testing protocols and education.
In total, Chipotle plans to spend $50 million on food-safety initiatives and to inform customers of the steps it’s taking. Consumers can expect a “blitz of Chipotle ad campaigns in the coming months,” Allen says.
Will that be enough? Adamson sees a long road ahead for the company, which he says has been slow to communicate to customers how it plans to prevent these outbreaks from happening again. “Customers want to see tangible evidence and tangible action to give them assurance that the next time they go in they won’t need a Pepto-Bismol after,” he says.
Still, he praises the forward-looking approach. “They’re not fixing what happened yesterday, but setting up a culture to anticipate what else could happen. They’re creating a culture to prevent problems and not just repair problems,” he says.
Prevention is key. “If they have another one of these problems in the next six months, that could spell disaster,” Allen says.
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Avoiding more problems and slowly winning back customers is one thing. Recapturing the explosive growth the chain once had may be a much bigger challenge.
“They were a hot growing brand,” Adamson says. “They’re not just getting back to where they were nine months ago. The real test will be if they can regain momentum.”
