By Kerri Adams, Editor-at-Large
Chipotle has often been cited as the concept that started the fast casual movement. This Denver-based chain was founded in 1993 and it quickly spread like wildfire.
Consumers could not get enough of the Mexican grill with the open kitchen. It wasn’t uncommon to see long lines stretched outside of the stores with customers waiting for their burrito bowl.
But in November of last year, those long lines were no more. This when Chipotle received major backlash for a number of food safety issues that created a media frenzy.
The Timeline of the Outbreaks
The brand’s first food safety issue occurred on September 11, 2015 when Chipotle restaurants in Minnesota had a salmonella outbreak. 45 cases were traced to tomatoes served by the chain in the area. This was small enough though that the media didn’t have a field day.
On October 31, the brand, whose tagline is ironically “Food with Integrity,” was forced to close 43 of its stores in Washington and Oregon after an E. coli outbreak. This is when the media exploded with stories with headlines like “Chipotle banned GMOs, but it Couldn’t Stop E. Coli” and “I Was Terrified': Oregon Woman Became Severely Ill in Chipotle E. Coli Outbreak.”
The Centers for Disease Control and Prevention also started their investigation on the chain and its sourcing.
The brand was quick to respond to the PR nightmare on both social media and with a press release stating they were taking aggressive action to clear up this issue.
“We take this incident very seriously because the safety of our food and wellbeing of our customers is always our highest priority,” said Steve Ells, founder and Co-CEO of Chipotle in a press release. “We are committed to taking any and all necessary actions to make sure our food is as safe as possible, and we are working diligently with the health agencies.”
On November 10, Chipotle announced that the Pacific Northwest stores would reopen after being sanitized with all food replaced. But 10 days later, three new states were included in the E. coli outbreak– including New York, California and Ohio.
In early December, seven more E. coli victims from Illinois, Maryland and Pennsylvania were added to the list. The Burrito chain also announced new extensive food safety measures which incorporated a high-resolution test of all fresh produce before being shipped to stores. Their goal of the test is to determine the performance of their suppliers and vendors.
Of the nine states effected, only 52 people were reported sick from the E. coli outbreak at this time.
Unfortunately, the food safety issues didn’t stop there. 120 students in Boston reported eating at Chipotle and then had symptoms consistent with the norovirus. The Boston college Chipotle store was temporary closed on December 7 and the chain stated that these cases didn’t seem to be connected to the E. coli outbreak.
In a presentation to Wall Street analysts, the brand outlined a plan to become the “safest place to eat.”
“We have this desire to be the safest place to eat,” said Ells. “We’re serving extraordinary quality ingredients, and that’s been something in place for many, many years now, and we’re best in the world at that. We’re going to be the best in the world at food safety, and we’re taking this very, very seriously.”
Ells then appeared on “The Today Show” on December 10 to publicly apologize for the illness outbreaks.
But following Ells’ apology on December 21, other illnesses connected to the E. coli outbreak were reported in Kansas, North Dakota and Oklahoma.
Two days later, the brand outlined a new plan for cooking methods.
Then Came the Lawsuits and Slump in Sales
In early January, the federal court served Chipotle with a grand jury subpoena for a criminal investigation linked to the norovirus outbreak at the Simi Valley, California store.
Then the chain was sued again on January 8 for allegedly misleading investors about their food safety practices.
In December, the same-store sales dropped 30% which attributed to the 14.6% drop in the 2015 fourth quarter. This was the first time in history that Chipotle saw a decline in sales.
The brand also reported a 29.7% decrease in same-store sales in the first quarter of 2016. The investment firm, Wedbush Securities predicts that the restaurant won’t recover from its sales loss until 2018.
How the Brand Plans to Recover
Steve Ells has repeatedly assured that their food-safety crisis is over, but the road to recovery isn’t going to be easy.
Starting in February the brand started to implement a strategy to win back its customers. The brand launched a free giveaway campaign. 5.3 million users downloaded freebie coupons from Chipotle’s app for a complimentary burrito. 50% of the coupons were redeemed.
The success of this campaign has influenced the brand to continue the giveaways, in March the chain sent 21 million free coupons in the mail.
“We’ve built a long established trusted relationship with our customers,” said Ells to Fortune.com. “While that trust was questioned recently, we’re delighted to see that they’re returning in large numbers.”
The brand doesn’t plan to stop the giveaways either. This summer various buy-one, get-one (bogo) and freebie offers will be available and the restaurant chain just announced its Chiptopia Summer Rewards this Monday.
Through this accelerated rewards program, customers will be able to earn rewards for making multiple paid visits within a month. There are three different levels: Mild, Medium and Hot.
Customers can get to the Mild status by purchasing from a Chipotle store four times a month and they will be given a free entrée. Medium status will not only get free meals, but also $20 in Chipotle merchandise. If a customer gets to the Hot level, they have the potential to get nine free meals and a $240 catering reward credit. Users are even rewarded for registering with free chips and guacamole with their first entrée purchase.
“We created Chiptopia to reward our most loyal customers who continue to support our efforts to cultivate a better world,” said Mark Crumpacker, chief creative and development officer at Chipotle in a press release. “While Chiptopia Summer Rewards lasts just three months, we will be carefully listening to our customers and using what we learn as we consider the design of an ongoing rewards program.”
The promotion starts July 1 and will be three months long.
“Free burritos—turns out it works. It brings people into the restaurants,” said Jack Hartung, Chipotle’s CFO in an industry conference in March.
Although Chipotles C-level executives maintain that the promotions are successful, the price they are paying to regain their market share is high. The brand is sacrificing millions of free product to bring back its loyal following.
The brand anticipates a loss of $1 per share or more for the 2016 January-March quarter.
So far Chipotle is making major moves to recover from the food safety crisis. Do you think this will be enough? Or is the damage already done?
*Chipotle was unavailable to comment.