1

Megan Turlik
Quinn Ritter
Johnny Martucci
Melvin Ackah
Abe Macklin
Busx 301

Chipotles Recent Problems

Introduction

Chipotle is one of the most popular places for Americans to get quick, healthy food. The

first Chipotle store was opened up in 1993. Steve Ells, an American businessman is the founder,

Co CEO, and chairman of Chipotle Mexican Grill.

It is a different type of fast food restaurant category. Fast food that isnt actually Fast

Food. Chipotle is not like McDonalds or Burger King. It falls more into the fast food dining

category of Panera, or Noodles and Company. You can sit down and have an enjoyable meal and

not feel like you are eating grease.

Chipotle is known for using high quality raw ingredients, classic cooking techniques,

and distinctive interior design. Not only are the ingredients fresh and high in quality but the

environment is clean and has modern interiors. Chipotle is also known for its simple menu. You

get to explore your options with different ingredients by choosing from a burrito, burrito bowl,

and taco salads.

Chipotle has expanded since its establishment in 1993. Starting with one store it has

reached 2,010 stores in 2015. This also means that from 2014 to 2015, Chipotle amazingly rose

by over two hundred stores in one year (Statista). This company has had extreme growth in such

a short period of time which is remarkable.

 2

Chipotle has had a lot of successes. Over the past years its dedication to providing

exceptional service to customers brought them to being one of the most popular fast food

restaurants in the country.

Through this paper though, the recent E-Coli problem will be examined. The effects that

this health issue has on Chipotle will be looked at closely. Then the way that Chipotle as a

company addresses this situation through business communication methods will be described.

The written apologies, and actions that Chipotle takes to redeem themselves and solve this

problem are discussed and analyzed. Chipotle wants to show how important their status and

reputation is to them and prove to their customers that they can win them back.

The Problem

The big issues for Chipotle began back at the beginning of 2016 when reports surfaced of

people getting sick after eating in their restaurants. These reports were primarily in the north

eastern U.S in the Boston area but quickly more and more incidents popped up all over the

country. After some investigation, E-Coli was determined to be the source of these people getting

sick and this sent a shockwave through the entire company.

E-Coli is a bacteria which lives naturally in the intestines of animals. This bacteria can

cause serious illness for people who come into contact with it or ingest it. If someone has been

exposed to E-Coli they will likely find themselves to be dehydrated, vomiting, fatigue and

possibly have a fever (US FDA). Initially, Chipotle thought that the cause of these outbreaks was

a result of their local providers and suppliers. But after some research into their own restaurants,

it was clear that their own store locations were to blame.

What made this outbreak even worse for Chipotle is that it could have been completely

prevented. All restaurants have safety standards and guidelines so that foodborne illnesses dont
 3

occur but Chipotles were very much lacking. Had Chipotle employees been preparing the food

correctly, using proper sanitation and cooking techniques, it is unlikely that anyone would have

gotten the illness. It quickly became clear to customers and Chipotle management that their

current cooking and cleaning techniques were not getting the job done. Once customers became

aware that safety standards were not being met, it drove them away. Chipotle has some of the

most loyal customers in the industry but even the most loyal could not bring themselves to

patronize the restaurant at that time. Restaurants have an obligation to serve safe and quality

foods and when that obligation is not met, it can be very hard to recover.

In the wake of the outbreaks, at least 55 people were affected by E-Coli and 43 Chipotle

restaurants were shut down for some length of time. Chipotle has faced similar issues in the past

such as the salmonella scare that was a result of bad produce. However, Those other incidents

were microscopic to the size and scope of this E-coli outbreak. Customers stayed away, and

investors began to bail on this company. Both in the restaurants and the stock market, Chipotle

was being deserted and it was up to them to fix their mistakes.

Fallout

The E-Coli scare caused a huge fallout for Chipotle, with some of their lowest losses ever

and the closure of restaurants nationwide. An outbreak that affected 55 people across 11 states,

caused Chipotles first sales decline since the company decided to go public in 2006. According

to executives, Chipotle only make $68 million in profits in the last three months of 2015

(Gillespie). This is a huge drop profit as compared to the previous years in Chipotles history.

The E-Coli outbreaks drove many customers away from Chipotle stores for a good

amount of time which is why their profits took a huge dive. According to YouGovs Brandindex,
 4

consumer perception of Chipotle dropped in a fashion that equalled that of General Motors in

2014 when they were accused of covering up ignition switch failures and held large scale recalls

of their vehicles (Marzilli).

YouGovs Brandindex asks consumers if they have heard anything about a brand through

ads, news, or word of mouth and if it was positive or negative. The scores range from 100 to

-100 with zero being a neutral point. On November 1st, which was the day after the first E-Coli

reports made the news, Chipotle held a score of 8 on the BrandIndex. On December 11th, the day

after Chipotle CEO Steve Ells nationally televised apology, Chipotle fell from 8 to -26 and a few

days later on December 18th the dropped even further in the ranks to a score of -40 (Marzilli).

The Chipotle brand was losing credibility quickly because the outbreaks were making national

headlines.

Chipotles stock prices also took a turn for the worse, with a 24 percent dive in the two

months following the first E-Coli outbreaks (Derousseau). Many of their shareholders were lost

trust in the company because their promises of guaranteed fresh food and their methods of

achieving this fresh food goal failed them. The overall fallout of the E-coli outbreaks were

devastating for Chipotle the company had never dealt with an issue such as this and by their

response you can tell that they never want to again.

Verbal Response

The CEO of Chipotle, Steve Ells wrote an open letter to address the public about

Chipotles recent issues of food contamination. Mr. Ells stated the effects that the E Coli

outbreak had nation wide Sickened 52 people and a norovirus outbreak that sickened
 5

approximately 140 people at a single Chipotle restaurant in Boston (Steve Ells). Mr. Ells sent

out his deepest of apologies to those affected by this outbreak and on behalf of Chipotle. As a

chef himself he never wanted to see his food and restaurants to be thought of as an unsafe

environment. Mr. Ells went on to say what exactly the company is doing at their restaurants and

within their corporation to solve these issues. Showing transparency of the company to the public

is powerful, especially when you show results as Chipotle restaurants are starting to come back

to their original state of strong operations.

Yet Mr. Ells did not stop there with addressing the public of the issue. Steve Ells was on

Good Morning America live and started off with an apology to those who are sick because they

are the ones dealing with tough issues not him. Steve spoke of closing the restaurants and testing

all of the food ingredients and cleaning surfaces but not finding any source of E Coli which is

quite startling as they were unable to find the exact source. Ells is assured that when they reopen

it will be the safest place to eat due to the new practices that will be put into place. Mr. Ells

avoided saying anything about how this incident has hurt his business or finances to show that he

is truly there for the consumers. When asked about how the stock prices are falling tremendously

and how that has affected him, Mr. Ells response was That is not what we are thinking about

now, we are thinking about the safety and quality of our ingredients.

Steve Ells had a strong apology and he came across very meaningful when interviewed

on Good Morning America and wrote a sincere open letter. In the letter and in interviews he

preaches how he now wants the brand to be known as the leader in food safety. This is a big

promise to make but he does seem to be very determined in doing so as they are looking into

getting even better quality ingredients for their food. Steve Ells is not just saying that Chipotle

will be the safety leader in the food industry and leaving it as a mystery as to how he will go
 6

about this, he explains what they are doing to make it happen. Mr. Ells stated they are starting at

their farms; he is hiring food safety experts to investigate every inch of his process. From farm to

supply chain, to every single restaurant Chipotle is implementing a high-resolution sampling and

testing of their ingredients to prevent contaminants from getting into their restaurants. With all

new procedures, practices, and training for their restaurants and employees, this has never been

done before in the food industry so I do believe that Chipotle can successfully become the leader

in food safety. With that being said it can take years to come to achieve that and they are taking it

step by step to improve themselves.

The stock has not yet completely made a comeback from where it was but it is doing

fairly okay for an incident this major. Although shareholders are not completely happy with

Chipotle as a lot of investors have already backed out of the stock. If Chipotle didnt have bad

luck, it may not have any luck at all (Retailwire.com). In most recent news yet again Chipotle

had a case of norovirus in one of their restaurants in Billerica, MA. One of their employees

contracted the virus and the Chipotle location was immediately shut down after hearing wind of

this. No customers have contracted an illness as they put forth further investigation into the issue.

Chipotle has certainly learned from its past by immediately closing the restaurant and sending in

cleaning crews to sanitize the location was the right move as Chipotle was praised for its

response to this incident. As many people assumed that this would never occur again after all the

steps Chipotle is taking to prevent it from ever happening, this newly found information can be

startling for customers and shareholders.

Actions Taken by Chipotle

 7

Chipotle took many steps to ensure food safety and regain the loyalty of their internal and

external stakeholders. Beginning with the supplier Chipotle started the process of High

Resolution Testing. This testing was a two step process starting with testing the process before

harvest. A large sample of the product is taken from each ingredient before it is harvested if any

one product comes up contaminated then the whole crop will not be harvested. After the harvest

the product is cleaned and tested again before being sent to a central kitchen. Instead of sending

the ingredients directly to the restaurant, Chipotle now cleans and cuts all of their ingredients in

a central kitchen.(Chipotle) This allows Chipotle to provide uniform food safety for their

ingredients and still keep their goal of providing locally grown products to their customers.

In the restaurant itself Chipotle has taken additional steps to ensure their food is the

highest quality. First Chipotle has started a process known as Produce Blanching. Produce

Blanching involves boiling produce such as lemons, limes, jalapeos, onions, and avocados in

water for five seconds. (Chipotle) By doing this Chipotle is able to significantly reduce the

amount of bacteria found on their ingredients. Chipotle has also decided to marinate its chicken

at night when all other ingredients are put away to avoid cross-contamination.

Chipotle in addition to its regulations on food has also decided to steps to ensure their

employees are following correct safety protocol. The restaurant is now the first in its industry to

offer their employees paid sick leave. Sick leave is a very big step as many employees might

come in if they are feeling ill out of fear of termination or loss wages. Chipotle can now lessen

this practice and put their consumers at less risk of getting sick. Chipotle has also decided to

change its inspection program. Every chipotle will now be inspected every week by field

managers trained in food safety protocols. Along with this Chipotle corporate executives will be
 8

coming down to perform annual inspections on the restaurant. Chipotle has also agreed to have

random inspections done by independent restaurant health experts. Finally regular inspections by

local governments to ensure chipotle can release information on the food safety of each

individual restaurant. (Chipotle)

To help fund all these changes to Chipotles current policies the restaurant has decided to

suspend corporate bonuses.(Gara) The restaurant hopes this will show their internal stakeholders

that these additions will not come at a cost for them. In addition in order to regain the loyalty of

their external shareholders Chipotle has given multiple promotions to their customer. These

promotions included a free entree via text message,through the mail, email, and through social

media.(Peterson) By targeting multiple platforms for their promotions the restaurant was able to

reach a wide range of demographics. The goal of these promotions were to show customers that

even though there was an outbreak there restaurants are now safe to dine in.

Given the actions Chipotle has taken so far it is safe to say that their image restoration

strategy is corrective action. Their CEO issued a public apology showing that Chipotle does in

fact take full responsibility for what transpired at their restaurants. Along with this apology

Chipotle explained exactly what the initial problem was why it happened. By removing the

contaminated items and adding more food safety protocols Chipotle is ensuring that this problem

will not arise again in the future. Getting rid of corporate bonuses and adding free promotions

will help show internal and external shareholders that the company is sincere about their apology

because their corrective actions are not coming at an expense to them.

 9

Works Cited

Center, Food Safety, and Applied Nutrition. FDA investigates multistate outbreak of E. Coli O26
infections linked to Chipotle Mexican grill restaurants. Center for Food Safety
and Applied Nutrition, 1 Feb. 2016. Web. 14 May 2016.

Anderson, G. (n.d). Will latest news make Chipotle shareholders feel all better or sick?
http://www.retailwire.com/discussion/will-latest-news-make-chipotle-shareholders-feel-
all-better-or-sick/

Derousseau, R. (n.d.). 4 Truths After the Chipotle E. Coli Outbreak. Retrieved from
http://money.usnews.com/investing/articles/2015-12-18/4-truths-after-the-chipotle-e-coli-
outbreak

Gillespie, P. (n.d.). Chipotle earnings tank after E. coli scare. Retrieved May 09, 2016, from
http://money.cnn.com/2016/02/02/investing/chipotle-earnings-e-coli/

Marzilli, T. (n.d.). Chipotle's perception drop equals GM's. Retrieved May 09, 2016, from
https://today.yougov.com/news/2015/12/18/chipotle-perception-drop-equals-gms/
 10

Chipotle. (n.d.). A FOCUS ON FOOD SAFETY. Retrieved May 17, 2016, from
https://www.chipotle.com/foodsafety

Gara, A. (n.d.). Chipotle Suspends Exec Bonuses After Outbreaks Of E-Coli, Norovirus.
Retrieved May 17, 2016, from http://www.forbes.com/sites/antoinegara/2016/03/11/chipotle-
mexican-grill-suspends-exec-bonuses-after-outbreaks-of-e-coli-norovirus/#20f7cdab3d31

Peterson, H. (2015). CHIPOTLE: We're taking 'aggressive steps' to attack E.coli. Retrieved May
17, 2016, from http://www.businessinsider.com/chipotle-statement-e-coli-outbreak -2015-11