If you’ve noticed shorter lines at Chipotle following several pathogen outbreaks that sickened some 350 people, it’s not your imagination. Sales at the company’s restaurants plummeted by 15% in the fourth quarter and overall revenue dropped 7%, the company reported in its earnings today. Chipotle CEO Steve Ells called it the "most challenging period" in the chain’s history.
On Monday, the U.S. Centers for Disease Control said that the Chipotle’s E.coli outbreak appeared to be over, but things still could get worse for the brand, which now has 2,010 locations. The company announced it was now subject to a broader criminal investigation by the U.S. Department of Justice that is subpoenaing company-wide food safety documents dating back to January 2013.
Over recent months, the company has worked to improve its food safety system to reduce its future food safety risk to "as low to zero as possible." On a call with investors, Ells detailed steps including a DNA testing program for fresh produce and meats, central washing facilities for produce, new cooking and marinating procedures, internal restaurant audits, and crew training programs. In addition, a third-party will audit each restaurant every quarter, with half of managers’ performance bonuses tied to the scores they receive and the other half tied to how they "invite customers back" to their stores.
Before the outbreak, Chipotle was best known for its strong sustainability-focused brand. "None of the changes affect our commitment to Food With Integrity," Ells said, noting it would continue to focus on providing sustainable ingredients and local produce.
To lure customers back, Chipotle—a company that has never focused much on traditional advertising—is getting ready to roll out the biggest advertising campaign in its history starting next week. The slate of outdoor, radio, TV, digital, and print ads over the next few months won’t, however, mention foodborne illness or food safety. The company is also launching its largest-ever direct marketing campaign at the same time.
One thing that is concerning is that the CDC's investigation wasn’t able to determine the source of the 11-state E.coli outbreak. Elaine Scallan, a food safety expert at the Colorado School of Public Health at the University of Colorado’s Anschutz Medical Campus, says that is common in restaurants that serve the same ingredients in many dishes. She notes that, compared to supermarkets, the restaurant and fast food industry is generally less stringent about tracing where each ingredient goes. Chipotle CEO Monty Moran said that Chipotle would be implementing a real-time, bar coded food tracing system for each ingredient in its system.
Will customers come back to Chipotle? Predicting the long-term impact on a business after a high-profile outbreak can be difficult. "Some businesses fail, but some well-branded foods continue," says Scallan. "Maybe they see a dent in profits and sales for awhile, but I think there’s a good chance that they’ll come out the other and, hopefully having learned a lot of lessons about improving their food safety system."