Chipotle Encounters Setbacks on Its Road to Recovery

October 26, 2017

In 2015 the popular burrito chain Chipotle faced a crisis so large that some wondered if the company would ever recover. Towards the end of the year, stories about norovirus outbreaks originating from Chipotle restaurants became national news. People were shocked to learn how this supposedly safe and sustainable place to eat had poisoned hundreds of people with tainted produce. Soon Chipotle’s stock price dropped and its sales plummeted, leading many in the company to worry that its reputation had been damaged permanently.

But by the beginning of summer 2017, the situation at Chipotle seemed to be reasonably under control. Besides staying clear of any norovirus-related news, the company also finally introduced queso to its menu. Executives hoped the cheese based-dip would lift sales since customers had long been clamoring for the stuff. And according to Chipotle’s most recent quarterly report, the company mostly got its wish. The introduction of queso immediately generated an increase in sales and continues to be popular with customers who have tried it. However, this small victory couldn’t make up for all the other bad news contained in the company’s third-quarter report.

Chipotle says sales fell below expectations due to a number of factors. First of all, the company had to deal with the skyrocketing price of avocados, forcing it to charge more for guacamole. Then a series of hurricanes led to the closure of hundreds of stores. Worst of all, though, another outbreak of food poisoning flared up from a location in Virginia and made more than 135 customers sick. Chipotle found itself back in the national news for all the wrong reasons, once again sending its stock price plummeting and straining its reputation. In order to set the company back on the road to recovery, CEO Steve Ells says Chipotle will avoid opening new stores in order to focus on improving quality at existing locations. He also wants to make some leadership changes and add new items to the menu, like frozen margaritas and desserts. Only time will tell if his efforts can get Chipotle back to its pre-2015 state.

 

Questions:

  1. Do you think Chipotle can recover from this latest series of setbacks?
  2. Are new menu items like queso Chipotle’s best option for winning back customers?

 

Source: Heather Haddon, “Chipotle’s Shares Fall as Sales Come Up Short,” The Wall Street Journal, October 24, 2017. Photo by Atomic Taco.

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