Be afraid. A concept that could leap tall buildings in a single bound two months ago is struggling today to sit upright on the hospital gurney. Who’d have thought Chipotle Mexican Grill would find itself in need of a rebound? Could anyone have forecast that its cult-like clientele would be so quick with an “Hasta la vista, baby”?
But what a difference 52 victims of an E.coli contamination can make—even if some of them had no connection to the burrito chain. Here’s a quick review of the damage that’s been done by the outbreak and how the chain is striving to right itself.
How bad was it?
From a public health standpoint, the impact of the still unconfirmed E.coli contamination has been relatively moderate. The outbreak was confined to five states, and no one has been sickened since Nov. 10, according to the Centers for Disease Control and Prevention.
The business effects are a different matter. Chipotle revealed in a securities filing on Friday that sales dropped 20 percent in the days after the chain closed 43 units in the Pacific Northwest, and stayed at that depressed level “for the ensuing few days.” Comps rebounded to a mere 9 percent decline, but the chain acknowledges that declining customer visits could drive down fourth-quarter same-store sales by as much as 11 percent.
What’s the hard cost so far?
In addition to the lost sales, Chipotle anticipates spending $6 million to $8 million on food-safety safeguards and reassurances to the public. Those measures include the replacement of food at some stores; the retention of a third-party expert to bolster safeguards; and stepped-up testing.
Not included are legal fees or settlements. At least three victims of the E.coli outbreak have filed lawsuits.
What’s Chipotle doing about it?
By all accounts, the chain has been a model partner to health authorities. After shutting 43 stores in the affected markets, when only 11 were implicated, Chipotle canned all suspect ingredients, sanitized the units, stepped up food-safety testing across all 2,000 U.S. restaurants, and brought in experts to strengthen processes and training. It is now conducting DNA testing on produce to isolate suspicious batches, and is periodically checking all supplies on the shelves of units to make sure they remain safe.
Chipotle has also been transparent. It has been posting frequent updates on its website, including additional cases that came to light.
It also pledged to become the safest chain in the industry.
And what was the danger?
Authorities have been unable to say with any certainty. They’ve not found the source of the contamination, and not all of the victims ate at a Chipotle.
In contrast, health officials were able trace the source of an almost simultaneous E.coli outbreak to a particular Costco ingredient in a matter of days. The first instances of Chipotle-related sicknesses came to light in mid-October.
Is that Chipotle’s lone problem?
Nope, say analysts and activists.
At least one has noted that Chipotle did not roll out its mobile ordering-and-payment system in November, as it’d indicated at one point. Another observed that increased throughput at lunch, a crucial reason to the phenomenal sales increases of a year ago, is starting to plateau.
And the chain is still facing a lawsuit filed by consumer watchdogs who contend there are more genetically modified organisms getting into Chipotle’s food than the chain has alleged in its marketing programs.