chipotle crisis management case study

How Chipotle Regained Customer Trust After the E. Coli Outbreak in 2015

On the heels of a 2015 food safety crisis involving an E. Coli and norovirus outbreak , Chipotle struggled to regain consumer trust. After the fast-casual restaurant chain closed 43 locations in Washington and Oregon, federal officials declared the outbreak over in February 2016, but the brand did not recover easily. 

Profits fell 44 percent and shares were down by 40 percent in 2018 as consumers reeled from the foodborne illness scandal, which ran counter to the company’s mantra of sourcing fresh, high-quality ingredients. 

Chipotle launched an enhanced food safety program , which included DNA-testing ingredients before they’re shipped to restaurants, changes to food prep and handling practices, and offering paid sick leave to disincentivize sick employees from working. 

The brand had always been declarative about sourcing fresh ingredients since its 1994 founding in Denver, CO, way before “ethical supply chain” and “quick-service restaurant” were ever used in the same sentence. But it was time for Chipotle to play up not only the purity of the ingredients, but how the food is made – in-house, fresh, using proper culinary techniques, unlike most QSRs that rely on frozen ingredients. 

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Before, Chipotle’s marketing strategy was to flood the market with “promo and BOGO-type offers” which, according to CMO Chris Brandt “did not drive traffic. Chipotle had not been driving traffic for the last two years.”

The company decided to double down on its unique value proposition: fresh ingredients and restaurant-style food prep techniques that defied categorization as a QSR or a fast food chain, putting Chipotle in what Brandt calls “a category of one.” 

“When you see the bags of onions and crates of avocados and romaine lettuce coming in, and the team uses culinary skills to prep that stuff for the opening before lunch – it is an amazing thing to see.” 

After a PR crisis of career-ending proportions, Chipotle sought to be transparent with its customers. The restaurant chain changed its tagline from ‘As Real As It Gets,’ which Brandt felt was too sales-y, to ‘For Real.’ The marketing team tapped Oscar-winning director Errol Morris ( The Act of Killing) to spend two weeks in Chipotle’s kitchens filming a docu-style commercial. To go with its new down-to-earth tagline, 'For Real,' the company launched a campaign called 'Behind the Foil' to take consumers behind the curtain and into Chipotle's kitchens. 

Morris hung around restaurant workers asking them questions while they worked, and also captured footage of the farmers that do business with Chipotle. 

“Our job isn’t to export people and take you to this adland where everything is perfect and inspiring,” said Kirks-Hay, who worked with Brandt and Morris on the ad concepts. “It’s actually to transport you back to the restaurant, because if we can show the raw true differences that Chipotle has then surely it will stand apart from everyone else.” 

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As part of the 'Behind the Foil' push, the brand showcased all 51 of its ingredients on a billboard in Times Square, ran a two-hour live feed on its Facebook page from the kitchen of a restaurant in Irvine, CA so fans could watch employees chop peppers and onions and stir the ingredients for pico de gallo, and hosted a spelling bee at the 2019 Scripps National Spelling Bee.

(Image credit: Chipotle)

Chipotle reps asked kids to spell complex ingredients found at other restaurants, like carrageenan and dimethylpolysiloxane along with one simple, real ingredient from Chipotle. 

The turnaround appears to have worked. In July, the New York Times reported that the chain’s stock had reached a high of $759, “surpassing the mark it set in August 2015, not long before the crisis began” under the helm of new CEO Brian Niccol. Similarly, Money.com reported in May that Chipotle had become the second-highest performing stock on the S&P 500. 

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In addition to furthering its strategy of becoming more culturally relevant through ‘Behind the Foil’ and celebrating the LGBTQ community, the brand has ramped up its digital customer experience by partnering with DoorDash to offer delivery at 95 percent of its chains. 

“We’re lucky that at Chipotle half of our consumers are Gen-Z and Millennials, so they really want to access the brand via digital,” said Brandt. “A secret weapon that Chipotle had even in the early days was they built a second make line in the back [...] and we’ve turned that into a digital make line.”

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How Chipotle Overcame Disaster

Table of contents.

Serving all things Mexican, Chipotle Mexican Grill is a household name in the U.S. But did you know that this mega fast-casual chain was merely born in 1993 – less than 30 years back?

Originating in California, Chipotle Mexican Grill serves tacos, burritos, salads, and more. Its founder calculated that the business needed to sell 107 burritos a day to remain profitable. Within a month, however, the burritos were flowing off the rack, with more than 1000 sold every day!

As the pioneer of "fast-casual dining", this food chain has had an exhilarating journey, full of ups and downs. However, it has managed to create a name for itself with over 2,700 branches, second only to the Mexican food mammoth, Taco Bell.

A few statistics that depict the size and stature of Chipotle Mexican Grill are as follows:

• Nearly 6.0 billion USD in annual worldwide revenue in 2020.
• A net income of 355.8 million USD in 2020.
• A share price of 1,374.2 USD in 2020.
• 2,768 total restaurants, including 149 in New York alone.
• Around 88,000 employees .

From a staggering rise to a complete slump and then a boom again, the business cycle of Chipotle Mexican Grill has been fluctuating throughout. However, its journey and the crucial decision-making behind it remains nothing less than inspiring.

Do you want to know how Chipotle rose to the fame it has today? Munch on a burrito and read on as we take you back to the ‘90s, and eventually get you caught up with the company’s progress today.

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The Birth of a Burrito Empire

The story of Chipotle Mexican Grill, commonly known as Chipotle, began with its food-loving founder – Steve Ells.

Passion For Food Bears Fruit

Ells had always been a foodie. As soon as he realized his love for food could mean much more for his career, he went on to pursue the culinary arts at the Culinary Institute of America.

When he graduated, he put his passion into action by working as a sous chef in Stars restaurant under the famous Jeremiah Tower. However, during his work, he observed the growth of taco stands and burritos in San Francisco by the day.

By 1993, he realized he did not want to work for anybody but instead open his own restaurant. Leveraging his observation into opportunity, he knew just what he needed to generate capital – a Mexican-food business.

Ells Opens The First Chipotle in Denver

Considering San Francisco was full of taquerias, Ells decided to move to Denver, Colorado. There, the food wasn’t as popular yet and therefore there was a gap in the market and less to no competitors.

Ells took a loan worth USD $85,000 from his father and opened the Chipotle Mexican Grill in what was formerly an ice cream parlor at East Evans Avenue.

However, since the loan was not enough to create a high-end restaurant, this enterprise was to be merely a side hustle for Ells, a stepping stone on his journey to his restaurant in the U.S. – or so Ells had thought.

1000 Burritos A Day!

Ells had a plan from the beginning. He calculated the need to sell 107 burritos every day to be able to generate enough profit that he could repay his father’s debt.

Therefore, the selection of the location for Chipotle had been carefully thought out. The business was located near the University of Denver, making students a prime target audience.

As Ells states, the initial sales were about $240, and then they began to grow by the day as the deliciousness of the burritos traveled through word of mouth. Then, come September, the opening of the University for the fall semester resulted in a massive turnover.

Consequently, after one month only, Chipotle was selling 1000 burritos a day, and generating unforeseen profits! This also meant Ells was able to repay his father in a few months.

Takeaway 1: Be Vigilant For Entrepreneurial Opportunities.

Many can argue that the establishment of Chipotle was merely by chance. The founder, Ells, desired to open a high-end restaurant. But the lack of funds meant only a small, Mexican-food business could initiate and prosper. Regardless of the dire financial circumstances, Ells kept his eye on his final goal, the restaurant, and in the meantime, grasped a viable business opportunity that came his way – Chipotle.

From the get-go, he had a financial plan drawn and knew just enough cash flow required to turn profitable, repay liabilities, and generate capital over time to materialize his dreams of a high-end eatery. Through observation and vigilance, Ells was able to create a thriving burrito business, that he did not know would turn into so much more, had he not taken the leap.

The Golden Arches Offer A Boost

In San Francisco, Ells had seen wondrously high prices on slim, unfulfilling burritos, and strived to make his food different. The company served delicious, large-sized burritos, made using the best, fresh ingredients, and most of the items still remained under $5 (Yes, really!). Perhaps this was what was working for Chipotle because it began expansion soon after the first location took off.

The Tally of the Stores Begins

Since the first store had generated a high cash flow, Ells decided to expand to a second store using the money, merely two years later.

Consequently, in 1995, Chipotle had transformed from a standalone eatery to a now-budding chain of Mexican food. A year later, a third store was added to the list, funded by a Small Business Administration (SBA) loan. Ells father, upon seeing the success of the business, decided to reinvest in his son’s business with a stake of $1.5 million.

As the stores and the business continue to garner acclaim and investment, Ells began to rethink his plans for a high-end restaurant. Although he had decided to use the cash flow from his first store’s profits to open the restaurant, he now realized Chipotle to be his golden opportunity to succeed.

The Golden Arches Enter The Picture

While the first funding of Chipotle was from Ells’ father, who gave the money based upon a simple, one-page financial plan; Ells knew he had to think big now.

Since Chipotle was his newfound way to success, he began drafting a business plan and vision to guide the business. Shortly after, a Board of Directors was also created, which facilitated in generating an additional $1.8 million.

In 1998, Chipotle branched outside Colorado for the first time, opening in Kansas City, Missouri. However, the highlight of the year was when this Mexican eatery caught the eye of fast-food giant McDonalds, which decided to undertake minor, partial ownership in the company.

While initially, the investment was quite small, by 2001, Mcdonald's was the largest investor in the company. By 2005, it had a 90% share in Chipotle, having invested roughly $360 million in the company over its tenure of 7 years.

Nonetheless, Ells maintained the reins of the company as CEO and took this help from the fast-food giant as a blessing in disguise. The firm made use of targeted locations, McDonald’s strong distribution network, and quality of suppliers to ensure Chipotle’s food remained top-notch while the pricing remained unburdening for the mass market.

Shortly after, in 1999, another Chipotle store opened up strategically near the University of Minnesota, in Minnesota.

McDonald’s financial investment and Ells’ strategies and delicious food had enabled the business to grow from a local chain of 16 restaurants in 1998 to a national Mexican food brand with 500+ restaurants in 2005!

Chipotle Goes Public

In early 2006, the management at McDonald’s realized that Ells’ vision for Chipotle and their own did not align. In addition, they wanted to focus on its core operations and decided to divest all its non-core diversifications, including Chipotle, as well as Boston Market, and Donatos Pizza. McDonald’s decided to sell its share in Chipotle to the public.

However, this was not a low point for Chipotle. In fact, it was far from that. Seeing the company's success and expansion, the demand for the stock was soaring. Consequently, the share price for Chipotle was raised twice, before finally making its initial public offering (IPO) on 26th January 2006.

The response was unpredicted and overwhelming, to say the least. On its first day at the stock market, the stock of Chipotle rose by a whopping 100%, becoming the best IPO in the U.S. in the past six years.

From an IPO of $22, the stock price had doubled when it opened on the first day to $45 and closed at $44 the same day. As McDonald’s slowly divested operations from Chipotle, by the end of the year, the company was ruling the stock market and had a wide public share.

Takeaway 2: Leverage The Best Possibilities

The investment by McDonald's was a knight in shining armor for the budding Mexican food chain. Instead of resisting change or the idea of different management, Ells and the Chipotle staff welcome the merger with open arms.

Strategically, Chipotle utilized the resources and opportunities of McDonald’s to its best potential. Since the fast-food giant had long been in business, it had a vast network of suppliers and distributors, as well as researchers that understood location analytics to determine market niches and suggest expansion.

By leveraging the many advantages of McDonald’s, Chipotle was able to grow exponentially, from stores in the double digits to hitting triple digits! Once the merger came to an end, Chipotle also welcomed the idea of going public and boosted its share price following prevailing high demand – realizing the potential of public support!

The Company Grows

By the late 2000s, Chipotle streak of expansion had become unstoppable. They opened their first Chipotle Mexican Grill outside the U.S, in Toronto in 2008.

Chipotle’s Success: Food With Integrity

While many would consider such rapid growth to be unsustainable, Chipotle ensured the food, and its quality was never compromised. Therefore, while the queues at their store may have been long and kept the customers waiting, each delicacy was prepared carefully and surpassed quality control. In fact, Chipotle had a motto that emphasized on good food; it was called “Food With Integrity”.

Ells had observed the American fast-food industry and saw that food quality was directly proportional to the time taken to produce it. Therefore, as most in the industry intended to become quick servers, they also lost out on quality.

Chipotle, on the other hand, was committed to serving fresh, ethically produced, and naturally grown food. This, as they state their unique selling proposition (USP) to be, makes their meat taste better than that of competitors, giving Chipotle an edge in the industry.

This positioning continues until today as seen on their campaign "Human Nature":

Recession Strikes

After going public, the company was doing well. The expansions continued, and the share price even went as high as $150 in mid-2007. Unfortunately, when the Great Recession struck, its shocks were also felt by Chipotle, whose share price went as low as $36.86 in 2008.

As consumers continued to spend less and less on restaurants, the company understood such troublesome times required a new strategy. Therefore, in January of 2009, the then COO, Monty Moran, was promoted to become co-CEO with Steve Ells. While Moran retained his position as President also, the slight executive restructuring paved well for the company.

As Moran pumped up the operations, Ells continued to tackle the food side of the business with his entrepreneurial prowess and vision. Consequently, while Chipotle had ranked 9th on the list of fastest-growing restaurant businesses in 2009; it attained the 3rd rank on the same list merely a year later. The restructuring plan had worked.

Diversifying Chipotle

While the business was growing, Ells and Moran had understood that to ensure renewed consumer interest, they had to continue improving the cuisine, restaurant format, and overall ambiance. Consequently, the next few strategies formed a way to diversify the business plan and distribute the stakes in multiple holdings.

In December 2010, Chipotle, in keeping with its mantra of Food with Integrity , hired Nate Appleman, winner of Rising Star Chef and named “Best New Chef” by a prestigious magazine. Appleman diversified the menu of Chipotle by bringing his own spark and developing a distinct, updated cuisine.

However, this was not enough. Sales slowed and the management feared tumbling share prices. Thereafter, in September 2011, Chipotle made an unprecedented move – it opened Shophouse Southeast Asian Kitchen.

This was an Asian-inspired chain of restaurants with the same underlying concept of Food with Integrity and fast-casual dining. The restaurant opened up in Washington D.C. Unfortunately, the progress for Shophouse was not as expected. While Chipotle had grown at a magnanimous rate, opening as many as 150 branches a year, Shophouse was only able to grow to 14 locations throughout its tenure.

The brand was finally closed down in 2017, as Chipotle understood it to be an anchor on total company earnings without providing much substance in return. Some also think that the strategy that worked for Chipotle – quick but quality burritos – does not work for every cuisine and therefore did not work for Shophouse’s success.

Takeaway 3: Slow Growth Requires Strategic Decisions

Chipotle’s success, albeit quick, was the result of a series of strategic decisions. To stand out amid competition, it embraced the idea of natural, ethically-produced ingredients, paving the way to a food ideology – Food with Integrity .

When the economic situation worsened, Chipotle had to make other strategic decisions like restricting the executive management and diversifying their business by creating Shophouse and hiring popular chefs. While all risks did not pay well, the intent behind them was clear: Risks yield progress, and eventually progress yields profits.

Outbreaks Cause A Stir

While Chipotle diversified, restructured and grew, the next year – 2015 – was a great one for them. The share price of Chipotle Mexican Grill skyrocketed to reach an unprecedented, all-time-high figure of $758.61. From what began with a single share trading for $44 had grown magnanimously in size and stature by more than 17 times. Yes – 17 times! Unfortunately, the high point was short-lived.

The Norovirus Outbreak

In August 2015, a norovirus outbreak occurred in Simi Valley, California. It was traced to a Chipotle restaurant where 18 employees and 80 customers had reported becoming simultaneously sick. It was found later that a kitchen manager was sick with the virus. However, worked full shifts for 2 days before being sent home, thereby becoming a cause of the spread.

While health inspections continued, the restaurant was allowed to operate. Unfortunately, the bad publicity caused by the outbreak was enough to deter customers from piling in through the doors as they usually did. Some newspapers reported the affected to be roughly 100, while The New York Times stated the number of victims to be twice than what was reported i.e., 207.

When the cause of the outbreak was confirmed, it was even speculated that the number of meals that the ill manager might have come into contact with could be as high as 3,000!

Salmonella Outbreak

Roughly at the same time as the Norovirus outbreak, there was a Salmonella outbreak in Minnesota that impacted as many as 17 Chipotle restaurants in the Minneapolis area. About 64 were affected.

The Chipotle team immediately got on the case to deter the spread, and soon, the source was traced back to contaminated tomatoes brought in from Mexico and used in Chipotle food. This was a sign for the Chipotle management to tighten their quality control and improve food checks throughout the process.

E.Coli Outbreak

It seemed that as soon as the business gained a grip on one outbreak, another came barging through the door. In October 2015, 22 people reported becoming sick after they had consumed food from various Chipotle locations in and around Washington and Oregon. Considering the wide radius of the spread, the cause was found to be a Shiga toxin-producing E.Coli bacterium.

Having been through the ordeal with the Norovirus and Salmonella outbreak, Chipotle knew it had to be proactive this time. Therefore, while the results of the investigation and the source of the bacterium were still pending, the company closed its 43 restaurants in Washington and Oregon.

However, as the number of affected increased to 52, with as many as 20 requiring hospitalization, the impact had been done. By November, the Chipotle stock price had dropped by 12%.

As more and more people reported to have eaten at Chipotle right before falling sick, the bad media attention was worsening the situation for the company. While the management tried its best to deal with such exogenous variables.

One decision was to hire a consultant that emphasized quality control and suggested new and useful ways of improving their food safety. Moreover, Chipotle’s food safety program was also frequently reviewed by the FDA and CDC to ensure adherence to food quality standards and regulations.

Another Norovirus Outbreak

Just as Chipotle was trying to escape the aftermath of the August Norovirus outbreak, another one in December jolted it from the core. Unfortunately, this one was purely due to endogenous factors.

A mega-lunch was prepared and packed at Chipotle and sent to Boston College. Thereafter, reports of sick students continued to come in, and as many as 80 students, including members of the college's basketball team, were thought to have contracted the virus.

The restaurant was closed, and it was found through the investigation that the meat on the serving line was maintained at a temperature below the one prescribed. To make matters worse, an employee had been sick that day and his manager, knowingly, let him work in the packing of the lunch – thereby disrupting health codes.

Although the sick employee, as well as the manager, were fired, there was a great public outcry against Chipotle. Consequently, the sales of the company deteriorated quickly. From a company that made $475 million in net income in 2015, Chipotle made merely $22.9 million in 2016.

The Founder Resigns

Although food safety policies were put in place and quality was being thoroughly checked for control, there was another norovirus outbreak in 2017. The stock price went down by 10% further for Chipotle.

It seemed that while policies were designed, their implementation lacked stringency. As predicted, the water eventually boiled down to the management of the company, which was headed by Moran and Ells.

Realizing that their response to the outbreaks had been belated, and the occurrence of such health hazards at Chipotle too many times was more than just a coincidence, Moran stepped down from his position as Co-CEO in December 2016. Eleven months later, Ells followed suit and resigned from being CEO.

Takeaway 4: Promote Accountability

Chipotle is a pure case of a company that has been harmed too many times by external factors, some of which it lacked control over, such as the tomato contamination.

However, instead of shying away from the issue or dusting it under the mat, Chipotle fulfilled its role of responsibility towards its clientele by becoming proactive each time. Stores were closed upon the slightest hint of an outbreak, quality control personnel were hired, and those at fault were dismissed.

In the entire scenario, the company also accepted responsibility for the havoc caused. The stepping down of Moran and Ells, especially, was a depiction of them both understanding their failure to maintain the position assigned to them, and thereafter deciding to pass it to a newer, fresher, worthy choice.

Chipotle Makes A Comeback

2015-2017 might have seemed like bad years for the company (as they were), Chipotle has made a full recovery! In fact, its net annual income had reached its older high standards by the end of 2017, having generated $176 million in net annual income.

Therefore, the story of Chipotle Mexican Grill is one of rising to success, failure, and then retaining their successful position yet again. Its comeback hinged on a few key strategic decisions taken in the tenure post-2016.

Improving Food Safety

In February 2016, all stores of Chipotle were closed nationwide for a staff meeting concerning food safety.

As a new head of safety was hired, a few practices were made necessary:

- Employees need to wash their hands every 30 minutes.

- The Mexican food staples i.e., jalapenos, avocados, and onions will be immersed for 5 seconds in hot water to kill any kind of germs or bacteria that may be lingering on the surface. In addition, there will be at least 2 witnesses to the act, to ensure implementation.

- Food ingredients are to be pre-treated through Pascalization. 

The stronger and more stringent safety protocols were not only implemented but advertised too, to reestablish goodwill with the target audience and assure customers that Chipotle was doing its utmost best to ensure circumstances like the outbreak do not happen again.

Aggressive Marketing

As the bad publicity yielded less and fewer sales, the management of Chipotle decided to improve its marketing to regain the lost goodwill.

While free food was distributed, the company focused on never-before-seen, heavier advertising. They began to broadcast nationwide commercials, a marketing tactic they had not undertaken in the past 5 years.

Consequently, sales improved and the same stores with the outbreaks showed immense consumer response in 2017, with as much as a 17.8% revenue increase in the first quarter.

As Ells had also stepped down from the position of CEO, following Moran, the empty seat was filled in February 2018 by the very qualified Brian Niccol.

Niccol had been CEO of Taco Bell earlier, the biggest competitor of Chipotle Mexican Grill, and therefore knew everything about the industry, as well as competitor tactics. One of his first orders of work was to relocate the headquarters of Chipotle from Colorado to California – nearer to its competition.

By June 2018, the company also decided to close any stores that seemed to be weighing it down. Consequently, 65 under-performing Chipotle locations were closed. By March 2020, Ells had also resigned from his seat as chairman and left the board of directors. However, his spirit of food remained alive through the legacy he had created and the Food with Integrity motto he left behind.

Embracing Technology

Progress had always been a given for Chipotle. Therefore, as the company entered the 2000s, it decided to leverage the updated tech for its own benefit. By 2005, customers could order online through the website or fax and therefore, proceed to the front of the queue at Chipotle for their pre-ordered food. By 2009, the company had released an application for iPhone users to order and pay for food. Another app, now compatible with Android, was released in 2013 to ignite consumer interest.

Chipotle Today

The company continues to innovate with menu options, rolling out queso and tofu-based "softritas" after successful trials. Today, Chipotle has shown how it has become a newer, improved version of itself by connecting with its clientele more often.

For example, a mock photo of cilantro soap trended on Instagram in 2021 as humor by haters of the herb. The marketing team encapsulated the moment by working alongside production to release a real, live, non-food item to its menu – none other than Cilantro Soap. Surprisingly (and hilariously), the soap was sold out a day post its release!

The entire management of the company continues to keep an eye on prevailing trends, ready to bring about any new change as and when needed.

Takeaway 5: Adapt To Changing Times

While Chipotle began as a company that held onto its values and had a set of rules – including a menu – the changing times signified how the company adapted to effective demand to achieve consumer satisfaction.

Whether this meant hiring food safety protocol instructors in crisis, implementing an unconventional marketing strategy (for them), hiring a new CEO, embracing technology, or adding new menu items; the company’s management was ready to take the plunge.

Perhaps this is why Chipotle has managed to regain its position as a frontrunner in the industry, behind only Taco Bell, despite numerous outbreaks and impaired goodwill.

Summary and Takeaways

Steve Ells wanted to build a fine dining restaurant. Instead, opportunities led him to create a burrito empire that jolted the world with fast, casual Mexican cuisine.

What makes Chipotle different from the rest is that all the restaurants of Chipotle are company-owned. There are no franchises, and each store remains steadfast to the Ells legacy and ethos – Food with Integrity . 

Growth By Numbers

Chipotle’s journey can be gauged through a glimpse at its statistics.

Strategic Takeaways

As a success story with multiple rises and falls, Chipotle’s journey is nothing less than inspiring for an enterprise aspiring to take its place in the market.

Here are 5 key points we can take away from Chipotle’s story:

• Ideas Stem From Observation

The story of Chipotle Mexican Grill began with a simple observation; Taquerias doing well in San Francisco, and the lack of them in Colorado. While what Ells really wanted was to begin a high-end restaurant, he understood the Mexican-food business to be one with high potential. Therefore, Chipotle was established with meager capital, but the ability to do tremendously well based upon observed demand – and so it did.

Throughout its journey, Chipotle's management has been observant of trends, ready to jump on the bandwagon and adapt. The addition of the recent Cilantro Soap was another example of just how vigilant they remain of their target audience and its wants.

• Greet Opportunities With Open Arms

In order for businesses to grow, they need to be vigilant for opportunities and embrace potentially fruitful ones with open arms.

Chipotle has especially been known to make the best out of current circumstances, opportunities, and threats. When McDonald's purchased a minor stake in the business, Chipotle was ready to understand and utilize their distribution and supply chain networks, as well as market research abilities, for their benefit.

When McDonald's sold its ownership in Chipotle, the company greeted the change by welcoming public ownership. Diversification into the Asian food industry via Shophouse was another way of following up on potentially profitable ventures.

• Do Not Be Afraid To Make Difficult Decisions

Although Chipotle was not well-known for taking risky decisions, the circumstances and market conditions propelled the management to venture beyond its safety net to make tough decisions.

Whether this meant restructuring the executive management to make Moran Co-CEO, having to own up to the health outbreaks, or Ells resigning altogether – the company made the decisions with complete confidence.

Chipotle also hired a competitor’s CEO, Brian Niccols, in its series of difficult decisions to gain an edge over the competition and refine its consumer tactics with someone proficient and aware of the Mexican food industry by their side.

The company also progressed by experimenting with new menu options; an act that was seldom undertaken by Ells as the founder wished to emphasize food quality and retain the same, original taste.

Chipotle proved that while difficult decisions may be unconventional and sometimes against the company’s established legacy (such as original menu items), success cannot be achieved without a little risk-taking.

• Uphold Goodwill – Always.

With its mantra of Food with Integrity , Chipotle has always kept its brand reputation as a foremost priority. This is why, whenever any circumstance led to defamation or diminished goodwill, the company made it their top priority to regain consumer trust and confidence.

With the Salmonella, E.Coli, and Norovirus outbreaks, the company’s image was close to being shattered. However, as Chipotle owned up to their mistakes, immediately called staff meetings for food safety protocols, and implemented new policies; the consumers were made aware of their efforts to prevent such an incident from happening in the future.

The resignation of Ells and Moran was another way of the company declaring to its clientele that their consumers, their health, and wants remain the guiding light of Chipotle.

• Innovate To Progress

Businesses that fail to adapt to changing times and instead, remain steadfast on their initial offerings and product portfolio, fail to steer through the cut-throat, competitive world of business. Chipotle understood creativity and innovation to be key to its survival. Therefore, while initially the company was slightly constrained to its original ideas, the years post 2000 were full of innovations and progress.

The company embraced the updating tech to create a website, make applications, and begin taking online orders. Chipotle also understood the opportunities of the digital world and redefined its marketing campaigns to suit current target clientele as well as connect with them through social media platforms. From constantly updating menu items to opening in new and important locations, Chipotle’s innovation continues to prosper.

The success story of Chipotle Mexican Grill is one that occurred by chance.

While Ells wanted to build a high-end restaurant and Chipotle was just a means to an end, the Chipotle story proves that the business world is unpredictable, and new, fresh, observant ideas can take off – regardless of motives.

From one location to over 3000 ones in multiple countries across the globe, Chipotle has achieved a marked presence in the Mexican Food world and continues to impress consumers with its fresh tacos and delicious burrito bowls.

By Cori Hays The Hoffman Agency, Portland-Vancouver

It’s no secret that Chipotle has been in crisis mode for the past few months. Since December, there have been more than 50 cases of E. coli linked to Chipotle restaurants across the United States. The company’s stock fell, the CDC launched its investigation and things weren’t looking good.

With two different strains of this nasty bacteria wreaking havoc, experts expected the public to turn on the beloved Mexican fast-casual chain. However, by applying some strategic PR and crisis management, Chipotle was able to soften the blow.

In my opinion, Chipotle did everything right in this situation.

From the beginning, the company took a hands-on approach to make sure it kept the public’s trust. Once Chipotle’s corporate office caught wind of the E. coli outbreak, it immediately issued a statement, using an apologetic tone instead of blaming the problem on external causes. It continued to issue updates as the CDC’s investigation status changed. By taking the blame and being proactive, the company gained a little favor in the public’s eyes.

But Chipotle’s most impressive move? It voluntarily closed 43 locations in Oregon and Washington — sacrificing profit for customer safety. In addition, the restaurant chain tested more than 2,500 locations for E. coli, working closely and cooperating with the CDC’s investigation. The restaurant chain even adopted new safety measures to prevent future outbreaks.

Crisis management wasn’t the only thing that saved Chipotle. The company’s biggest strengths are its cult-like following and the well-established brand it spent years building.

Being a member of the bandwagon myself, I wasn’t about to let something as silly as E. coli stop me from getting my hands on some guac. Since opening, Chipotle has been committed to putting its customers first and serving the freshest, healthiest foods — offering customers “food with integrity.” It’s known for using organic, sustainably grown and naturally raised ingredients — something you won’t find at any other fast-food restaurants.

Last week, Chipotle announced that it would be closing all of its stores for one day to implement new food safety regulations and answer employees’ questions. This action further demonstrates the company’s proactive approach to resolve the issue and ensure their customers’ safety.

So should any of this E. coli business stop you from eating at Chipotle? Absolutely not, because this well-loved brand isn’t going anywhere. After all, Chipotle customers are “totally willing to throw up a little” for the sake of a glorious, foil-wrapped burrito.

( Source of Feature Image: Mr. TinDC Flickr )

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Lessons Learned from 06 PR Crisis Management Case Studies

In the world of business and public relations, crises are an unfortunate reality that organizations may face. 

These crises can pose significant threats to an organization’s reputation, customer trust, and bottom line. 

Effective crisis management is crucial in mitigating the damage and navigating through challenging situations. 

In this compilation of PR crisis management case studies, we examine notable incidents from various industries and explore how organizations responded to these crises. 

By delving into these real-world examples, valuable insights can be gained to better understand crisis management strategies and the impact they can have on an organization’s reputation and future success.

Let’s dive in six PR crisis management case studies to learn more about this 

Case Study 1: Nike’s Lance Armstrong Doping Scandal 

The Nike’s Lance Armstrong doping scandal is a significant PR crisis that unfolded in the sports industry. Lance Armstrong, a former professional cyclist sponsored by Nike, was accused of doping, which refers to the use of prohibited substances or methods to enhance athletic performance. This scandal had several implications for Nike as a sponsor and faced significant backlash.

The Lance Armstrong doping scandal was a PR crisis for Nike because it directly involved one of their high-profile sponsored athletes. As a result, Nike’s brand reputation and credibility were at stake, as the scandal raised questions about the integrity of both the athlete and the company.

The controversy also had the potential to alienate Nike’s customer base and damage its image as a promoter of fair play and ethical sportsmanship.

To address the crisis, Nike took several PR actions:

• Termination of Sponsorship: Nike made the decision to terminate its sponsorship contract with Lance Armstrong following the doping revelations. This action demonstrated a clear break from the athlete and his actions, signifying Nike’s commitment to maintaining a clean and ethical brand image.
• Public Statements: Nike issued public statements expressing disappointment and concern over the doping scandal. They condemned the use of performance-enhancing drugs and emphasized their commitment to integrity and fair competition. These statements aimed to distance the company from the controversy and reassure the public of Nike’s commitment to ethical practices.
• Collaboration with Anti-Doping Organizations: Nike collaborated with anti-doping organizations, such as the United States Anti-Doping Agency (USADA), to support their efforts in combating doping in sports. This collaboration served to align Nike with the fight against doping and to showcase their commitment to clean and fair competition.
• Transparency and Accountability: Nike took steps to promote transparency and accountability in their sponsorship deals. They revised their sponsorship contracts to include stricter clauses related to doping, emphasizing the importance of athletes’ adherence to anti-doping regulations. This action aimed to demonstrate Nike’s commitment to promoting clean sports and deterring unethical practices.

By terminating the sponsorship, issuing public statements, collaborating with anti-doping organizations, and promoting transparency, Nike aimed to manage the PR crisis caused by the Lance Armstrong doping scandal. These actions were intended to distance the company from the controversy, uphold its brand values, and restore trust among customers and the public.

Case Study 2: McDonald’s “Hot Coffee” Lawsuit

The second PR crisis management case study focuses on the infamous “Hot Coffee” lawsuit involving McDonald’s. In the early 1990s, a customer filed a lawsuit against McDonald’s after suffering severe burns from spilled hot coffee purchased from one of their drive-thru locations.

The incident gained substantial media attention , and McDonald’s initially faced criticism and negative public perception. The company was accused of serving excessively hot coffee and failing to take responsibility for the incident.

However, McDonald’s later adjusted its response strategy, settling the lawsuit and implementing changes to prevent similar incidents. They revised their coffee temperature policies, ensuring safer serving temperatures, and began placing warning labels on their cups.

Additionally, McDonald’s embarked on a public education campaign to clarify the facts of the case and dispel misconceptions. McDonald’s demonstrated a proactive approach to crisis management by taking responsibility, implementing changes, and engaging with the public through education campaigns and media relations

After the “Hot Coffee” lawsuit crisis, McDonald’s took several PR actions to address the situation and improve public perception. 

Here are some of the actions they implemented:

• Settlement: McDonald’s chose to settle the lawsuit rather than engaging in a lengthy legal battle. This decision helped demonstrate their willingness to take responsibility for the incident and mitigate any negative publicity associated with a prolonged legal process.
• Policy Revisions: McDonald’s revised its coffee temperature policies to ensure safer serving temperatures. By adjusting the temperature at which coffee was served, they aimed to prevent future incidents of burns and address concerns raised during the lawsuit.
• Warning Labels : McDonald’s began placing warning labels on their coffee cups to inform customers about the potential risks associated with hot beverages. This step aimed to improve consumer awareness and reduce the likelihood of accidents or lawsuits stemming from burns caused by hot coffee.
• Public Education Campaign: McDonald’s launched a public education campaign to provide accurate information about the “Hot Coffee” case and dispel misconceptions surrounding it. The campaign sought to address any misunderstandings and offer clarity on the facts of the incident, aiming to rebuild trust and restore public confidence in the company.
• Media Relations: McDonald’s engaged with media outlets to share their perspective, highlight the changes made in response to the incident, and emphasize their commitment to customer safety. By actively participating in media relations, McDonald’s sought to shape the narrative surrounding the crisis and convey a more positive image.

Case Study 3: Tesla’s Autopilot Accidents 

The second PR crisis management case study revolves around Tesla’s Autopilot feature and the accidents associated with its use. Tesla’s Autopilot is an advanced driver-assistance system designed to assist drivers with certain aspects of driving.

However, there have been incidents where Tesla vehicles using Autopilot have been involved in accidents, raising concerns about the safety and reliability of autonomous driving technology.

In response to these accidents, Tesla has implemented several PR actions to manage the crisis:

• Emphasizing Driver Responsibility: Tesla has consistently emphasized that Autopilot is not a fully autonomous driving system and that drivers must remain attentive and ready to take control of the vehicle at all times. They have stressed the importance of hands-on driving and have provided guidance to users on how to properly use the Autopilot feature.
• Software Updates: Tesla has made continuous software updates to improve the safety and functionality of Autopilot. These updates have included enhancements to the system’s capabilities, such as improved object detection, collision avoidance, and lane-keeping features. By actively addressing the technology’s limitations and making regular updates, Tesla aims to enhance the safety of Autopilot and prevent future accidents.
• Transparency and Data Sharing: Tesla has been transparent in sharing data related to Autopilot accidents and improvements in the technology. They have released quarterly safety reports detailing accident statistics and comparing the safety of Tesla vehicles with traditional vehicles. By providing data-driven information, Tesla seeks to demonstrate the safety benefits of Autopilot and address any misconceptions or concerns surrounding the technology.
• Public Education and Advocacy: Tesla has engaged in public education campaigns to raise awareness about the capabilities and limitations of Autopilot. They have conducted outreach programs, hosted events, and collaborated with organizations to educate drivers, regulators, and the general public about autonomous driving technology. By actively advocating for the safe and responsible use of Autopilot, Tesla aims to foster a better understanding of the system and promote its benefits.

Through these PR actions, Tesla is working to manage the crisis associated with Autopilot accidents. By emphasizing driver responsibility, making software updates, sharing data, and engaging in public education, Tesla aims to address concerns, enhance safety, and maintain public trust in their autonomous driving technology.

Case Study 4: Nestlé’s Baby Formula Controversy

In the 1970s and 1980s, Nestlé faced a significant crisis related to the promotion of its infant formula products in developing countries. The company was accused of aggressive marketing tactics that discouraged breastfeeding and led to infant health issues due to improper formula preparation. Nestlé faced widespread boycotts, protests, and international pressure. 

The company responded by adopting the WHO/UNICEF International Code of Marketing of Breast-Milk Substitutes, improving labeling, and investing in education programs to promote proper nutrition practices.

During the 1970s and 1980s, Nestlé encountered a severe PR crisis surrounding the promotion of its infant formula products in developing countries. The controversy arose due to allegations of aggressive marketing practices that undermined breastfeeding, resulting in infant health problems stemming from improper formula preparation. Nestlé faced extensive boycotts, protests, and international scrutiny for its actions. 

To address the crisis, Nestlé took several PR actions:

• Adoption of WHO/UNICEF Code: Nestlé responded by adopting the WHO/UNICEF International Code of Marketing of Breast-Milk Substitutes. This code established guidelines to regulate the marketing and promotion of infant formula, ensuring that companies refrain from misleading or aggressive tactics that could discourage breastfeeding.
• Labeling Improvements: Nestlé made efforts to improve the labeling of its infant formula products, providing clearer instructions on proper preparation and usage. By enhancing product labeling, Nestlé aimed to promote safe and appropriate feeding practices for infants.
• Education Programs: Nestlé invested in education programs to promote proper nutrition practices and raise awareness about the benefits of breastfeeding. These programs aimed to educate healthcare professionals and mothers in developing countries about the importance of breastfeeding and the appropriate use of infant formula when necessary.

By adopting the WHO/UNICEF Code, improving product labeling, and investing in education programs, Nestlé aimed to address the concerns raised during the crisis, promote responsible marketing practices, and support breastfeeding as the optimal infant nutrition method. These PR actions aimed to rebuild trust and mitigate the negative impact of the controversy on the company’s reputation.

Case Study 5: Facebook’s Cambridge Analytica Scandal. 

The Facebook Cambridge Analytica scandal was a significant PR crisis for the social media giant.

The scandal involved the unauthorized access and misuse of personal data of millions of Facebook users by the political consulting firm Cambridge Analytica.

This breach of trust and privacy had far-reaching implications and raised concerns about Facebook’s data handling practices, user privacy, and the potential influence on elections.

The Cambridge Analytica scandal was a PR crisis for Facebook due to the following reasons:

• Breach of Trust: The scandal undermined the trust that users had placed in Facebook to protect their personal data. The unauthorized access and misuse of user information violated the expectations and privacy of millions of users, leading to widespread outrage and concerns about data security.
• Negative Public Perception: The scandal received extensive media coverage, resulting in a tarnished public perception of Facebook. Users and the general public questioned the company’s commitment to user privacy, its handling of personal data, and its overall ethical standards.
• Regulatory Scrutiny: The Cambridge Analytica scandal triggered investigations by regulatory authorities worldwide, including the U.S. Federal Trade Commission (FTC) and the European Union. The regulatory scrutiny further escalated the crisis, potentially exposing Facebook to legal repercussions and hefty fines.

To manage the crisis, Facebook implemented several PR actions:

• Apologies and Acknowledgment: Facebook’s leadership, including CEO Mark Zuckerberg, publicly apologized and acknowledged the mishandling of user data. They took responsibility for the breach and expressed their commitment to addressing the issue and regaining public trust.
• Transparency and Communication: Facebook increased transparency by providing regular updates and sharing information about the steps taken to address the issue. They communicated openly about the changes made to data privacy policies, user controls, and third-party access to data.
• Stricter Data Controls: Facebook implemented stricter data controls and restrictions to enhance user privacy and data security. They made changes to the platform’s data access policies, limiting third-party developers’ access to user data and enhancing user consent mechanisms.
• Cooperation with Authorities : Facebook cooperated with regulatory authorities during investigations, providing information and engaging in discussions to address concerns related to data privacy and security. They worked to comply with regulatory requirements and implement necessary changes.
• Ad Campaigns and Educational Efforts: Facebook launched ad campaigns and educational efforts to raise awareness among users about data privacy, security settings, and the importance of informed consent. These initiatives aimed to empower users with knowledge and tools to control their privacy on the platform.

Through these PR actions, Facebook aimed to regain public trust, address privacy concerns, and demonstrate a commitment to user data security. The company recognized the severity of the crisis and took proactive measures to improve data practices, enhance transparency, and communicate openly with users and regulatory authorities.

Case Study 6: Chipotle’s Food Safety Crisis

The Chipotle food safety crisis was a significant PR crisis for the popular fast-casual restaurant chain. The crisis occurred in multiple instances between 2015 and 2018 when several outbreaks of foodborne illnesses, including E. coli, salmonella, and norovirus, were linked to Chipotle restaurants. This series of incidents resulted in numerous cases of customer illness, negative media coverage, a decline in sales, and a loss of customer trust.

The Chipotle food safety crisis was a PR crisis for several reasons:

• Public Health Impact: The outbreaks of foodborne illnesses associated with Chipotle restaurants posed a direct risk to public health. The safety and well-being of customers were compromised, leading to severe illnesses and potential long-term health consequences. The crisis heightened concerns about food safety practices within the company.
• Media Attention and Reputation Damage: The outbreaks received extensive media coverage, which amplified the negative impact on Chipotle’s reputation. The media reports highlighted the incidents, their scale, and the potential causes, contributing to a loss of customer confidence and damaging the company’s image as a provider of fresh and safe food.
• Legal and Financial Ramifications: The food safety crisis resulted in legal implications for Chipotle, including lawsuits from affected customers and investigations by regulatory authorities. The financial consequences were also significant, with a decline in sales, decreased stock value, and increased costs associated with implementing food safety measures.

To address the crisis, Chipotle took several actions:

• Crisis Management Team : Chipotle established a dedicated crisis management team to lead the company’s response efforts. This team coordinated communication, implemented food safety protocols, and collaborated with external experts and authorities to address the crisis effectively.
• Enhanced Food Safety Practices : Chipotle implemented comprehensive food safety measures and protocols to prevent future incidents. This included increased testing of ingredients, improved employee training on food handling and safety, and stricter adherence to hygiene standards throughout the supply chain.
• Communication and Transparency : Chipotle adopted a proactive approach to communication, providing regular updates and being transparent about the actions taken to address the crisis. They publicly acknowledged the issues, apologized to affected customers, and shared information about the enhanced food safety practices implemented.
• Rebuilding Trust: Chipotle launched marketing campaigns and initiatives aimed at rebuilding trust with customers. These efforts focused on emphasizing the company’s commitment to food safety, showcasing the steps taken to address the crisis, and reinforcing the brand’s core values of sourcing high-quality ingredients.
• Collaboration with Experts: Chipotle collaborated with food safety experts and external consultants to gain insights, conduct thorough audits, and receive guidance on best practices for food safety. This collaboration helped strengthen their efforts and demonstrate their commitment to continuous improvement.

Key Take Aways from PR Crisis Management Case Studies

Here are five key takeaways from the PR crisis management case studies mentioned earlier to effectively manage a PR crisis:

Swift and Transparent Response

It is crucial to respond quickly and transparently when a crisis occurs. Acknowledge the issue, take responsibility, and communicate openly with stakeholders, showing a commitment to addressing the problem. In the age of instant communication and social media, news and information spread rapidly. By responding swiftly, an organization can take control of the narrative surrounding the crisis. It allows them to provide accurate information, address concerns, and shape the perception of the crisis before it gets distorted or amplified by external sources.

Prioritize Stakeholder Trust

Rebuilding trust with stakeholders, including customers, employees, and the general public, should be a top priority. Focus on actions and initiatives that demonstrate accountability, transparency, and a commitment to resolving the crisis. When stakeholders trust an organization, they are more likely to continue supporting it, even during challenging times. Prioritizing stakeholder trust can help maintain customer loyalty, employee commitment, investor confidence, and the support of other key stakeholders.

Proactive Communication

Maintain open lines of communication with stakeholders throughout the crisis. Provide regular updates, share accurate information, and address concerns promptly. Proactive communication helps control the narrative and minimizes the spread of misinformation.During a crisis, stakeholders may feel anxious, confused, or fearful. Proactive communication allows organizations to reassure stakeholders by providing updates, clarifying the situation, and offering guidance. It helps alleviate concerns, dispel misconceptions, and provide necessary information to help stakeholders make informed decisions.

Public Education

Public education is an effective way to build trust and credibility with stakeholders. By providing educational resources and transparent information, organizations show their commitment to keeping stakeholders informed and empowered. This builds trust, strengthens the organization’s reputation, and fosters a positive perception among stakeholders. By investing in public education, organizations demonstrate their commitment to the well-being and interests of stakeholders. This helps foster loyalty and support even beyond the crisis, contributing to ongoing positive relationships.

A dedicated PR Team

A dedicated PR team brings specialized expertise in crisis communication. Their knowledge and experience ensure that the organization’s response is strategic, effective, and aligned with the overall PR goals. Consistent and coordinated messaging is crucial during a crisis. A dedicated PR team ensures that all communication, both internal and external, is aligned and consistent. They develop key messages, train spokespeople, and oversee communication channels to ensure that accurate and unified information is disseminated to stakeholders and the public.

Final words 

The case studies discussed provide valuable insights into the various challenges faced by organizations and the PR actions they took to manage their crises.

Learning from these PR crisis management case studies, organizations should develop robust PR strategies, establish crisis response teams, and regularly review and update their protocols. By being prepared and proactive, companies can minimize the impact of a crisis and emerge stronger on the other side.

Remember, managing a crisis is not just about damage control; it is an opportunity for growth, learning, and demonstrating resilience. With careful planning, decisive actions, and a commitment to transparency and improvement, organizations can navigate PR crises successfully and emerge with their reputation intact

About The Author

Tahir Abbas

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More From Forbes

Chipotle's e. coli crisis: p.r. experts say it's handling it right.

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E. coli is one item that nobody orders off the menu. But sometimes, like bad customer service, you get it, anyway.

So far, the tally of customers who have become ill from eating at Chipotle Mexican Grill restaurants in the Portland, Ore., area and several counties in Washington State from Oct. 14-23 stands at 37 people.

It was scary news for consumers, of course -- E. coli is a bacterium that can cause bloody diarrhea, dehydration and even kidney failure --  but the headlines are also frightening for business owners whose trade is in food. If you work in the food industry, here are some lessons from Chipotle's crisis.

Chipotle Mexican Grill is temporarily closing more than 40 restaurants in and around Washignton and ... [+] Oregon, as health officials investigate an E. coli outbreak.(Photo by Steve Dykes/Getty Images)

Chipotle will survive this. That was the consensus among the experts I consulted.

"The popularity of Chipotle is like a speeding train," says Mario Almonte, of Herman & Almonte PR , in New York City.  The E. coli outbreak is just a small bump on the tracks that will jar the train a little but not cause it to jump the track or affect its speed," he predicts, saying that every brand has goodwill momentum, "meaning that they are so beloved by their customers that sometimes even major controversies don’t affect its popularity."

He offers up Chick-fil-A as example of that. "The company’s anti-gay stance hasn’t affected its popularity," he says.

Rebecca Brooks, founder of Alter Agents , a market research firm in Los Angeles, is equally confident that Chipotle will withstand this, and was effusive about the company's transparency.

“Chipotle has proven time and again they are willing to sacrifice profit in support of their mission for healthy, sustainable food," she says.  "When they took carnitas off the menu because they couldn't get the right suppliers to fit their criteria, the company didn't lose any money and strengthened the respect of their customers.  This E.coli outbreak is being handled with the same proactive, people-before-profits mentality.  It is right on brand.”

Aaron Kwitteken, a Forbes.com contributor, isn't impressed so far. In a recent Forbes.com blog post , he wrote of Chipotle: They have a whole section of their website devoted to “responsibly raising the bar,” and yet there is nothing about this latest food safety snafu posted anywhere on their website or social media channels. Bupkis. Sure, they have been responding to customers on Twitter and Facebook, but none of their outbound, proactive communication deals with this issue. Most of their time online during and since the outbreak has been spent promoting their “boorito” for Halloween. Can you say, tone deaf?"

Still, even if Chipotle isn't being as transparent as Kwitteken would prefer, they aren't hiding their corporate heads in the sand. They're issuing statements to the media, voluntarily closing their restaurants in Oregon and Washington and recently hired two food safety consulting firms to assess and possibly strengthen their food safety precautions, according to USA Today .

"This openness is what consumers today expect and demand from brands," says Maggie O'Neill, managing director and partner of Peppercomm , a communications and public relations company in New York City. "Working on recalls over the years – from cars to washing machines – we have seen that consumers are apt to forgive and forget if the company is direct and open, fixes the problem and renews a commitment to be better."

She says that if Chipotle continues doing what they've been doing, "I imagine the lines continuing to stretch out the doors as usual."

Other companies infected with E.coli have also lived to tell the tale. Of course, aside from goodwill, it probably helps when you're a deep pocketed company with the money to throw at the problem and improve how you manage your food supply so this sort of thing never happens again. Nevertheless, any food business owner can probably take some measure of relief in noting that this isn't exactly the first company to experience an E.coli crisis.

The most infamous E.coli outbreak was in 1993, when 708 people were infected with the pathogen at 73 Jack in the Box restaurants in California, Idaho, Washington and Nevada. Of those 708 people, 171 people were hospitalized and four children died.

In more recent years, Taco Bell wrestled with the E.coli problem in 2006 when 71 people were infected with the bacteria.

Supermarkets and the food companies that serve them have seemed to fare much worse than restaurants. Over the years, we've seen E. coli-related recalls from products like California-based National Selection Foods company's prepackaged spinach ( in 2006, 205 people sickened ) and Nestle Toll House Cookie dough ( in 2009, at least 66 people sickened ). In 2010, 38 people from five states came down with E.coli after eating cheese sold at Costco .

As you're likely well aware, all of the companies mentioned are still in business and thriving.

How E. coli gets into the food system. It's been pretty well drilled into everyone's minds that a well done burger is better than one that is rare, and in a way, that's part of the problem, says Doreen Tracy, an assistant professor of nutrition and dietetics at Seton Hill University in Greensburg, Pennsylvania.

"When we think of E.coli, we usually think of under-cooked ground meat as the source," Tracy says. "But more and more E.coli outbreaks have been traced back to fresh produce."

So while you may be smart enough to realize this isn't just about meat, you want to make sure any of your employees fully understand how the bacterium spreads. You could do everything right, but hire one person who doesn't quite get it, and then you've got trouble.

And how does E.coli spread?

It's gross, but it really comes down to animal poop.

"Since E.coli is found in the gastrointestinal tracts of cattle and other ruminant animals and in infected humans, anything that comes in contact with feces from these animals or humans has the potential to become contaminated," Tracy says. "Fresh produce can become contaminated by contact with infected hands, tools, containers, equipment, or other animals. We know that E.coli in meat is destroyed by cooking to proper temperatures but fruits and vegetables eaten fresh are not cooked. For this reason preventing contamination of fresh produce is key."

What can a business do? If you're buying food, you're dependent on having a reputable supplier, Tracy says.

Meanwhile, if your company has a kitchen, and you have staff preparing food, the edict to wash food is there for a reason. Sure, it's common sense, but Tracy says, "Wash hands properly and often, especially after handling raw meat. Third, avoid cross contamination by properly sanitizing work surfaces, utensils and containers."

And if E.coli does turn up in your business, especially if your company doesn't have all of that goodwill, be transparent about the problem with the public and spend whatever money you need to, to make your food supply safe, public relations experts will tell you.

Because that goodwill, even for a Chipotle-beloved business, isn't indefinite, according to Almonte, who says: "Even the best brands have their threshold of controversy, when customers begin to hesitate in their support. And the controversy doesn’t have to be a major one – or even justified.  Public perception could do a lot to sink the brand."

And it's understandable why the public would become nervous with food. People are happy to spend money on good food, but they do want to pay with money -- and not their lives.

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Chipotle Mexican Grill, Inc.: Supply Chain in Crisis (A)

• By: Syvia Banda , Elizabeth Sadler , Bradley Wise & James S. O’Rourke
• Publisher: The Eugene D. Fanning Center for Business Communication, Mendoza College of Business, University of Notre Dame
• Publication year: 2016
• Online pub date: January 04, 2017
• Discipline: Public Relations , Quality Management , Supply Chain Management
• DOI: https:// doi. org/10.4135/9781526406781
• Keywords: crisis , Escherichia coli , food , food safety , restaurants , supply , supply chains Show all Show less
• Contains: Content Partners | Supplementary Resources | Teaching Notes Length: 5,114 words Region: Northern America Country: United States of America Industry: Food and beverage service activities Originally Published In: Banda , S. , Sadler , E. , Wise , B. , & O’Rourke , J. S. ( 2016 ). Chipotle Mexican Grill, Inc.: Supply chain in crisis (A) . 16-05 (A). Notre Dame, IN : The Eugene D. Fanning Center for Business Communication, Mendoza College of Business, University of Notre Dame . Organization: Chipotle Mexican Grill, Inc. Type: Indirect case info Organization Size: Large info Online ISBN: 9781526406781 Copyright: © 2016. The Eugene D. Fanning Center for Business Communication, Mendoza College of Business, University of Notre Dame More information Less information

Teaching Notes

In late 2015, Chipotle Mexican Grill experienced a large-scale food safety crisis. The company’s restaurants were identified as the source of an E. Coli outbreak that affected 14 states and led to more than 20 hospitalizations. Known for its Food With Integrity initiative, and having experienced a decade of explosive growth, the company’s livelihood was being threatened by the design of its own supply chain. Customers were scared, and the issue had attracted the attention of investors, regulators, and the national news media; Chipotle needed to respond.

For part B of this case, click here .

“I trusted they were providing me with ‘food with integrity.’ We fell for their branding.” 1

—Chris Collins; Customer of Chipotle’s E. Coli infected food

On Saturday, October 31, 2015, Oregon health officials announced that more than 20 individuals were infected by the E. Coli bacteria as a result of consuming Chipotle Mexican Grill (Chipotle) food items. Specifically, 22 people contracted the illness that included eight hospitalizations. In the coming days, it would be announced that victims were from multiple states including Washington and Oregon, and that the specific source was undetermined. As a direct result, in early November 2015, Chipotle Mexican Grill, Inc. temporarily closed 43 restaurants located throughout the Pacific Northwest. 2

Over the next few months, the E. Coli outbreak spanned 14 states and ultimately led to 60 cases and 22 hospitalizations. The Centers for Disease Control (CDC), the U.S. Food and Drug Administration (FDA), and the U.S. Department of Agriculture (USDA), along with state public health officials, launched an investigation to better understand the situation and to identify the specific source or sources of the bacteria. 3

Ultimately, the investigation concluded that two outbreaks occurred involving the Shiga toxin-producing Escherichia coli O26 (E. Coli) – a rare strain of the bacteria. The first outbreak reported cases from October 19, 2015 to December 1, 2015 and spanned 11 states including: California, Delaware, Illinois, Kentucky, Maryland, Minnesota, New York, Ohio, Oregon, Pennsylvania, and Washington. The second, smaller outbreak, occurred from November 18 – 26, 2015, and spanned three states including: Kansas, North Dakota, and Oklahoma. 4

The investigation could not identify a specific source of the E. Coli as a result of Chipotle’s cooking practices. Given Chipotle’s method 6 of mixing of multiple ingredients and food items during preparation, the study could not conclusively determine a specific contamination source.

E. Coli is bacteria that is commonly found in the intestines of humans and animals. Most E. Coli strains in fact, are normally harmless and requisite to the normal digestive process. However, some E. Coli strains are pathogenic and cause illness, such as diarrhea and other gastrointestinal maladies. 7 Specifically, E. Coli O26 infections present with watery and/or bloody diarrhea along with abdominal cramps. To confirm diagnosis, stool samples are captured and tested to confirm the presence of E. Coli O26. 8

E. Coli is transmitted through contaminated water, food, or affected animals and humans. More specifically, E. Coli enters a supply chain through ingredient sourcing. The manure from an affected animal is used as fertilizer on a crop, which is then harvested and sold to suppliers of restaurants. 9 If the ingredient is not handled appropriately or treated to kill E. Coli bacteria, it is possible for the ingredient to then make it into the food at the retail locations. Government entities test and regulate crops for E. Coli to prevent affected crops from moving through the supply chain. 10

Anyone who comes into contact with or consumes the bacteria is at risk of infection. More precisely, anyone with suppressed immune system, young children, or the elderly are especially susceptible. 11

Chipotle Mexican Grill, Inc.

Chipotle Mexican Grill, Inc. (Chipotle) was founded by Steve Ells in an effort to provide high quality food, classic cooking techniques, and a distinctive interior to customers. This business model adapted features from the quick service restaurant industry (QSR) and defined a new category, Fast Casual (FC).

Chipotle’s value proposition is “Food with Integrity.” This tagline encompasses its business operations to show that food served fast does not have to be “fast food.” The menu offerings are sourced from high quality ingredients from local and regional suppliers and prepared by hand on-site in the retail locations. Chipotle believes there is a connection between how food is raised, prepared, served, and consumed by the consumer. And finally, Chipotle is engaged in corporate social responsibility initiatives (CSR) through its Chipotle Foundation. 12

Company Timeline

In 1993, Steve Ells opened the first Chipotle in Denver, CO. Three years later, Bob and Barbara Ells – Steve’s parents – raised $1.3M from friends in Chipotle’s only private offering to date. Chipotle grew to 13 stores within five years. In the same year, 1998, McDonald’s offered an initial $50M investment in Chipotle, which remained autonomous from McDonald’s corporate strategy. 13 Chipotle did not adopt the drive-thru concept or the franchise business model, and created a sanitary and welcoming retail presence through its design and friendly employees.

In 2004, McDonald’s moved Chipotle to its distribution center in Portland, Oregon. Here, there is a contrast between how McDonald’s manages its produce and Chipotle’s approach to supply chain. McDonald’s procures its ingredients from a few large suppliers, which are then packaged and sealed in mass quantities and shipped to retail locations. In contrast, Chipotle ships produce to its retail locations for preparation and storage on-site.

On January 26, 2006, Chipotle issued an Initial Public Offering under the ticker, CMG, with an initial share offering of $22/share. For 90 minutes, the stock wouldn’t open and effectively doubled on its first trade at $44/share. 14 Thus, McDonald’s divested its majority ownership stake and the official relationship was extinguished. Chris Arnold, Communications Director at Chipotle, notes “I would think of it in terms of McDonald’s being the rich uncle and Chipotle as the petulant nephew.” 15 In the graph below, Chipotle and McDonald’s percent change in weekly share price is juxtaposed since the initial public offering to demonstrate Chipotle’s exponential growth in comparison with McDonald’s relative steady state.

Figure 1. Percent Change in Weekly Stock Price: Chipotle vs. McDonalds 16

In 2013, Chipotle was the first national restaurant chain to inform the public about the presence of GMOs in its food. In April, 2015, the company officially banned GMOs in its ingredients. 17 Currently, Chipotle operates around 2,000 stores, each averaging $2.4M in revenue a year. 18

Chipotle also owns ShopHouse and Pizzeria Locale, two portfolio brands attempting to capture market share in the FC sector within the QSR restaurant industry. 19

Fast Casual Restaurant Industry

Fast Casual (FC) is a diverging market segment of the quick service restaurant industry (QSR), which includes restaurants such as McDonalds, Taco Bell and Burger King.

The FC market emerged in the early 2000s. Panera Bread is widely recognized as the restaurant brand to revolutionize the industry and differentiate its business model from other QSR restaurants. FC restaurants traditionally appeal to adults with discretionary income to spend and to parents who are looking for a quick yet healthy meal for their children. After the financial crisis in 2008, Chipotle experienced noted growth due to a rebound of consumers’ purchasing power and a shift in consumer focus to “fast food” that was fresh, healthy and sustainably sourced. 20

Figure 2. Fast Casual vs. Quick Service Restaurant Industry Growth 21

Likewise, the FC market segment tends to have differentiating characteristics from its QSR counterparts. The table below breaks down these characteristics in a comprehensive manner from farm to fork.

Government Regulation

Three principal government entities regulate food safety in restaurants in the United States: the Centers for Disease Control (CDC), the United States Department of Agriculture (USDA) and the United States Food and Drug Administration (USFDA). 23

In 2011, President Obama initiated industry-wide food safety initiatives. These reforms were the most comprehensive overhaul of policy in over 70 years. The President’s Food Safety Working Group (FSWG) established performance standards for poultry suppliers and required nutrition labels on single-ingredient raw protein items.

Additionally, a “test and hold” policy ensures that ingredients tested for E. Coli and other bacteria are not released until the results confirm that the produce or ingredient is safe. The Public Health Information System, a modern and comprehensive database, aggregates public health trends and compliance violations in one central system from the 6,100 + plants the Food Safety and Inspection Service (FSIS) regulates. These initiatives are communicated to the public through the Food Safe Families consumer education campaign under the auspices of the Ad Council, FDA and CDC. 24

Government Intervention at Chipotle

The CDC, USDA and FDA investigated the 2015 E. Coli outbreak at Chipotle and determined that STEC O26 E. Coli was present in the food served in retail locations. These public health investigators utilized PulseNet, a national database system, to identify and connect the various countrywide outbreaks. This DNA fingerprinting is performed on E. Coli, which has been isolated from affected individuals through the process of pulsed-field gel electrophoresis (PFGE).

Investigators also used whole genome sequencing (WGS) in an effort to prove or disprove a connection among the various patients. Samples were taken from Chipotle’s restaurants, distribution channels, and customers, but as discussed previously, the results did not yield a specific ingredient or source that could explain the outbreak. It is important to note that once ingredients have been mixed and cooked together, bacteria cannot be traced back and isolated to determine the affected input source. 25

Food Safety at Chipotle

Chipotle advocates a two-pronged approach for monitoring food safety at the supplier and retail location levels.

Unlike QSR restaurants who use multiple large-scale and bulk suppliers, Chipotle prefers to buy from local and regional suppliers, which increases the number of total suppliers. Additionally, Chipotle engages in high resolution testing, which tests a relatively large sample from a small sample of a specific ingredient. If one piece fails testing, the entire batch is removed from the supply chain. Chipotle also tests ingredients in central kitchens. A batch of tomatoes will enter, be washed, chopped, washed again and then tested. If one piece fails testing, the entire batch of tomatoes fails. 26

Restaurants

Within retail locations, prep cooks marinate chicken and steak at night in an attempt to mitigate cross contamination of utensils and kitchen tops. Produce with skin, such as limes and onions, are blanched to kill bacteria resting on the outer shell. Additionally, each retail location follows strict sanitation practices mandated both by government entities and Chipotle corporate. Chipotle fully complies with audits and inspections. Likewise, the company offers extended sick leave and wellness initiatives to prevent ill employees from coming to work. 27

Supply Chain: Food Sourcing

A supply chain is a network of organizations that work together to convert and move goods from the raw materials stage to the end customer. 28 In a typical supply chain, raw materials are procured and items are produced at one or more factories, shipped to warehouses for intermediate storage, and then shipped to retailers or customers. 29 Food supply chains generally follow this same model, as illustrated in the Figure 3 .

Food supply chains are exposed to several particular risks due to the production methods and short shelf life associated with most foods. Fertilizers containing animal waste may expose food products to pathogens such as E. Coli, which can infect humans if the raw foods are not cleaned properly. Furthermore, many food products require special handling, refrigeration, and expedited delivery due to their eventual spoilage.

The complexities of food supply chains are further compounded when companies introduce progressive food policies in response to modern consumer preference. For example, increasing freshness, removing genetically modified organisms (GMOs), and sourcing ethically raised animal products all require increased use of smaller, more specialized suppliers.

As restaurants procure food products from low-volume sources, the total number of suppliers required to meet total demand increases. Managing these large networks of suppliers exposes companies to ever-increasing risk.

Figure 3. Food Sourcing Process SIPOC

Chipotle’s Supply Chain

Chipotle’s supply chain is constructed around its intent to deliver on the company’s promise of providing customers “Food with Integrity.” 30 As a result of these core operating principles, Chipotle has constructed a highly complex supply chain using a decentralized network of local and regional suppliers. Although this fresh, farm-to-table approach shortens the overall length of the supply chain relative to other restaurants, it also introduces considerable risk into the company’s supplier quality and food production processes.

Melinda Wilkins, director of Michigan State University’s Master of Science in Food Safety program, discussed Chipotle’s challenges and risks at length with Wired Magazine . “The more complicated your supply chain is, the more opportunity you have to introduce problems,” Wilkins said. 31 Wilkins also suggested that Chipotle’s model of offering local ingredients through a decentralized supply chain increased its risk relative to QSR competitors, such as McDonald’s and Taco Bell. 32

Because Chipotle’s business model and value proposition require it to operate a more complex supply chain, supplier quality and internal quality processes become critical to its operations. 33

John Gray, Associate Professor of Operations Management at Ohio State University’s Fisher College of Business, discussed some of these quality related challenges on CNBC’s Power Lunch . Gray pointed out the importance of process controls as well as supplier and employee compliance, saying, “the supply chain of Chipotle is extremely complex – thousands of stores, lots of local suppliers… you really need one hundred percent compliance of every individual throughout the supply chain.” 34 Gray acknowledged that Chipotle has numerous internal processes already in place, but also suggested that, “a lot of these [controls] ‘drift’ with lack of attention.” 35

Marketplace Response

Given the magnitude of the outbreak and the Chipotle brand recognition, many interested parties reacted to the outbreak and subsequent news. An integral component to Chipotle’s business viability and future sales directly results from customers visiting and purchasing meals from corporately owned restaurants.

In Chipotle’s fourth quarter earnings calls, a standard review of financial and business performance held for investors, Mark Crumpacker, Chipotle’s Chief Creative and Development Officer said, “Of those who are customers and who are also aware of the issues, right around 60% have indicated that it would cause them to visit less.” 36 Additionally, it was apparent that consumer perception of the brand has waned drastically. According to the YouGov Brand Index, an index tracking consumer perceptions toward brands, a significant drop off in brand perception occurred after the first news reports of E. Coli contamination. 37

Chipotle’s popularity among consumers and investors made news of the outbreak salient. The story was covered by a variety of news organizations including major television networks, news publications, and digital media websites. Additionally, the issue was channeled to the public via social media. By February of 2016, coverage of the outbreak surged as events continued to unfold and create further complications for the company. Chipotle’s Chief Financial Officer, Jack Hartung, described his frustration with the media in December at the Bernstein Consumer Summit where he said that “the media likes to write sensational headlines” in reference to coverage of the outbreak. 38

Competitors in the Fast Casual space also seemed to gain from Chipotle’s food quality crisis with many, such as Moe’s Southwest Grill, using social media to target customers during times Chipotle was closed. 39 According to Yahoo Finance, Ticker Tags, which monitors the social media universe to showcase trends in the market, concluded that search queries for Qdoba increased in the beginning of November. The results of increased foot traffic in restaurants across the competitive landscape will reveal itself over time through Chipotle’s sales and financial performance. 40

As a result of sickness, Chipotle faces legal action from affected consumers. In November 2015, a customer who contracted E. Coli filed a lawsuit against Chipotle. That customer is seeking financial compensation due to concerns about long-term health. 41 Additionally, in January 2016, a civil lawsuit was filed in New York alleging that Chipotle did not disclose proper information necessary for investors to adequately assess the stock. Specifically, the filing discusses the lack of information about “quality controls” surrounding food safety protocols. The lawsuit claims that Chipotle investors should be awarded damages as compensation for the company’s alleged violation of SEC regulations. 42

Financial Impact

Chipotle’s financial performance suffered as a result of the E. Coli outbreak and the public’s subsequent response. To start, sales suffered during the last quarter of 2015. Specifically, Chipotle’s sales decreased by almost 7% over a three-month period. Steve Ells, Chipotle’s Co-CEO, characterized the period by saying, “[t]he fourth quarter of 2015 was the most challenging period in Chipotle’s history” 43

Additionally, Chipotle reported a 44% reduction in profit during the same time period. 44 Lastly, Chipotle suffered unprecedented erosion in its stock value as the outbreak unfolded. The stock’s value before the outbreak was $747 per share and declined to $480 after the investigation of the outbreak – a decline of more than 35%. Figure 4 illustrates the decline as well as key events in the outbreak to further explain the stock’s performance.

Figure 4. Chipotle’s Stock Performance: October 2015–February 2016 45

Chipotle’s Initial Response

In November 2015, immediately following the initial reports of E. Coli outbreaks at Pacific Northwest Chipotle locations, the firm immediately announced that it would be hiring food safety consultants from IEH Laboratories and Consulting Group in Seattle, Washington. 46 Over the next 30 days Chipotle would continue to reassure the public, announcing that it completed a “deep-cleaning” of its restaurants on November 20, 2015, 47 and announcing its renewed commitment to industry leadership in food safety on December 4, 2015. 48

Coinciding with the company’s food safety announcement on December 4, it also announced through an 8K filing that it had lowered its earnings forecasts for the fourth quarter of 2015 and all of 2016. 49 Less than a week later, Chipotle CFO Jack Hartung blamed aggrandized media coverage and the reporting methods of the CDC for making Chipotle’s situation worse. 50 Fortune magazine writer Phil Wahba criticized the CFO’s comments, stating that his commentary was, “hardly the best way to handle a crisis.” 51

Even as Chipotle began to address and resolve the E. Coli outbreak, new events interrupted its efforts. In mid-December 2015, Chipotle was forced to acknowledge two new incidents. First, the ongoing E. Coli outbreak had expanded to the Midwest, sickening customers from Minnesota to Ohio. 52

The more damaging incident, however, was a new outbreak of Norovirus near the campus of Boston College, which sickened over 120 students. 53 This case garnered significant media attention, as it affected eight of the fourteen players on the College’s men’s basketball team, nearly causing its game against Providence to be postponed. 54 In response, Chipotle closed its Cleveland Circle location in Boston for cleaning 55 and temporarily halted the marketing and advertising efforts it had planned to reassure customers until it could gain control of the situation. 56

In late December 2015 and January 2016, Chipotle took additional actions to reassure its customers, announcing that it would introduce new cooking methods for some foods 57 and that it would close all of its stores for a company-wide food safety meeting on February 8, 2016. 58 Concurrently, media outlets reported that the company had planned a large marketing campaign for February aimed at winning back its previously loyal customer base. 59

The E. Coli STEC O26 outbreak has affected Chipotle’s core operations and future financial viability. In future, it will consider how key stakeholders are affected and will be forced to assess its ability to deliver “Food with Integrity.” Customers and investors will be the ultimate judge of the adequacy of Chipotle’s response to the crisis.

Writing Assignment

Please respond in writing to the issues presented in this case by preparing two documents: a communication strategy memo and a professional business letter.

In preparing these documents, you may assume one of two roles: you may identify yourself as a senior communications manager for Chipotle Mexican Grill, Inc. who has been asked to provide advice to Mr. Ells and Mr. Moran regarding the issues they and the company are now facing. Or, you may identify yourself as an external management consultant who has been asked by the company to provide advice to Mr. Ells and Mr. Moran.

Either way, you must prepare a strategy memo addressed to Mr. Steve Ells, Chairman and Co-Chief Executive Officer, and Mr. Montgomery F. Moran, Co-Chief Executive Officer, that summarizes the details of the case, rank-orders critical issues, discusses their implications (what they mean and why they matter), offers specific recommendations for action (assigning ownership and suspense dates for each), and shows how to communicate the solution to all who are affected by the recommended actions.

You must also prepare a professional business letter for Mr. Ells’s signature. That document may be addressed to one of three groups: investors, customers, or employees, knowing that this will become a public document available to nearly everyone with an interest in this case. If you have questions or concerns about either of these documents, please consult your instructor.

1. Berfield, Susan. “Inside Chipotle’s Contamination Crisis. ” Bloomberg Business. December 22, 2015. http://www.bloomberg.com/features/2015-chipotle-food-safety-crisis/ , Accessed January 4, 2016.

2. “Chipotle closes 43 stores as officials investigate E. coli outbreak.” CBS News. November 2, 2015. http://www.cbsnews.com/news/43-chipotles-remain-closed-as-officials-investigate-e-coli-outbreak/ , Accessed December 1, 2015.

3. “Multistate Outbreaks of Shiga toxin-producing Escherichia coli O26 Infections Linked to Chipotle Mexican Grill Restaurants.” Centers for Disease Control and Prevention. February 1, 2016. http://www.cdc.gov/ecoli/2015/o26-11-15/ , Accessed February 6, 2016.

7. “E. Coli: General Information” Centers for Disease Control and Prevention . February 2016. http://www.cdc.gov/ecoli/general/index.html , Accessed February 12, 2016.

9. “Teaching the Food System: Food Safety Background Reading.” A Project of the Johns Hopkins Center for a Livable Future . February 2016. http://www.jhsph.edu/research/centers-and-institutes/teaching-the-foodsystem/curriculum/_pdf/Food_Safety-Background.pdf , Accessed February 12, 2016.

10. “E. Coli: General Information.” Centers for Disease Control and Prevention . February 2016. http://www.cdc.gov/ecoli/general/index.html , Accessed February 12, 2016.

12. “Food with Integrity.” Chipotle Corporate Website . https://www.chipotle.com/food-with-integrity , Accessed February 3, 2016.

13. Stock, Kyle and Wong, Vanessa. “Chipotle: The Definitive Oral History.” Bloomberg . February 2, 2016. http://www.bloomberg.com/graphics/2015-chipotle-oral-history/ , Accessed February 12, 2015.

17. Masunaga, Samantha. “Chipotle says it’s the first chain to get rid of GMO ingredients.” Los Angeles Times, April27, 2015. http://www.latimes.com/business/la-fi-chipotle-gmo-20150427-story.html

18. “Investor Relations.” Chipotle Investor Relations . February 2016. http://ir.chipotle.com/phoenix.zhtml?c=194775&p=irol-newsArticle&ID=2098750 , Accessed February 6, 2016.

19. Stock, Kyle and Wong, Vanessa. “Chipotle: The Definitive Oral History.” Bloomberg . February 2, 2016. http://www.bloomberg.com/graphics/2015-chipotle-oral-history/ , Accessed February 12, 2015.

20. Ferdman, Roberto A. “The Chipotle Effect: Why America is obsessed with fast casual food.” Washington Post . February 2, 2015. https://www.washingtonpost.com/news/wonk/wp/2015/02/02/the-chipotle-effect-why-america-isobsessed-with-fast-casual-food/ , Accessed February 12, 2015.

23. “Selected Federal Agencies with a Role in Food Safety.” Foodsafety.com http://www.foodsafety.gov/about/federal/ , Accessed February 12, 2016.

24. “USDA Takes New Steps to Fight E. Coli, Protect the Food Supply.” Archived 2011. United States Department of Agriculture . Accessed February 12, 2016. http://www.usda.gov/wps/portal/usda/usdahome?contentidonly=true&contentid=2011/09/0400.xml , Accessed February 12, 2016.

25. “FDA Investigates Multistate Outbreak of E. coli O26 Infections Linked to Chipotle Mexican Grill Restaurants.” Federal Drug Administration . http://www.fda.gov/Food/RecallsOutbreaksEmergencies/Outbreaks/ucm470410.htm , Accessed February 12, 2016.

26. “Food Safety.” Chipotle Corporate Website . https://www.chipotle.com/foodsafety , Accessed February 3, 2016.

28. Kenneth Boyer and Rohit Verma, Operations & Supply Chain Management in the 21st Century (Mason, OH: South-Western/Cengage Learning, 2010), 19.

29. Terry P. Harrison, Hau L. Lee, and John J. Neal, The Practice of Supply Chain Management: Where Theory and Application Converge (New York: Springer Science & Business Media, Inc.), 14.

30. “Food with Integrity.” Chipotle Corporate Website . https://www.chipotle.com/food-with-integrity , Accessed February 3, 2016.

31. Alba, Davey. “Chipotle’s Health Crisis Shows Fresh Food Comes at a Price.” Wired Magazine . January 15, 2016. http://www.wired.com/2016/01/chipotles-health-crisis-shows-fresh-food-comes-at-a-price , Accessed February 6, 2016.

33. Balakrishnan, Anita. “Local Sourcing: Chipotle’s Double-Edged Sword.” CNBC . December 22, 2015. http://www.cnbc.com/2015/12/22/local-sourcing-chipotles-double-edged-sword.html , Accessed February 6, 2016.

34. “Weak Links in Supply Chain.” CNBC Power Lunch, 2015 http://video.cnbc.com/gallery/?video=3000468548 , Accessed February 6, 2016.

36. Krisiloff, Scott. “Chipotle 4Q15 Earnings Call Notes.” Avondale Asset Management. February 3, 2016. http://avondaleam.com/chipotle-4q15-earnings-call-notes , Accessed February 14, 2016.

37. Marzilli, Ted. “Chipotle Perception Drop Equals GM’s.” YouGovBrandIndex. December 17, 2015. http://www.brandindex.com/article/chipotle-perception-drop-equals-gms , Accessed February 9, 2016.

38. Wahba, Phil. “Chipotle is Blaming the Government and the Media for Their E. Coli PR Nightmare.” Fortune. December 8, 2015. http://fortune.com/2015/12/08/chipotle-media-ecoli/ , Accessed December 15, 2016.

39. Alesci, Cristina. “Moe’s chides Chipotle: We’re open all day.” CNN Money. February 8, 2016. http://money.cnn.com/2016/02/08/news/companies/moes-chipotle/ , Accessed February 10, 2016.

40. Duggan, Wayne. “Chipotle’s E. Coli Disaster Was Qdoba’s Gain, New Data Shows.” Yahoo Finance. February 1, 2016. http://finance.yahoo.com/news/chipotles-e-coli-disaster-qdobas-191130518.html , Accessed February 14, 2016.

41. Smith, Aaron. “Chipotle sued by customer who says she got E. coli.” CNN Money. November 4, 2015. http://money.cnn.com/2015/11/03/news/companies/chipotle-sued-e-coli/ , Accessed December 1, 2016.

42. Polansek, Tom. “Chipotle sued for misleading investors over food safety.” Reuters. January 8, 2016. http://www.reuters.com/article/us-chipotle-mexican-lawsuit-idUSKBN0UM2BD20160108 , Accessed January 20, 2016.

43. Stock, Kyle. “Chipotle’s Sales Have Dropped by 10.3 Million Burritos.” Bloomberg Business. February 2, 2016. http://www.bloomberg.com/news/articles/2016-02-02/chipotle-s-sales-have-dropped-by-10-3-million-burritos , Accessed February 13, 2016.

44. Dulaney, Chelsey. “Chipotle, Stung by E. Coli Outbreak, Posts First-Ever Sales Decline.” The Wall Street Journal. February 2, 2016. http://www.wsj.com/articles/chipotle-stung-by-e-coli-outbreak-posts-first-ever-sales-decline-1454449916 , Accessed February 13, 2016.

45. Nasdaq Interactive Price Chart, Chipotle Mexican Grill, http://www.nasdaq.com/symbol/cmg/interactive-chart

46. Giammona, Craig and Turner, Nick. “Chipotle Hires Safety Consultants to Cope with Health Scare.” Bloomberg Business. November 3, 2015. http://www.bloomberg.com/news/articles/2015-11-03/chipotle-hires-food-safetyconsultants-to-cope-with-health-scare , Accessed February 6, 2016.

47. Arnold, Chris (Chipotle). “Press Release: Chipotle Updates on E. Coli Investigation.” BusinessWire . November 20, 2015. http://www.businesswire.com/news/home/20151120005928/en , Accessed February 6, 2016.

48. Arnold, Chris (Chipotle). “Press Release: Chipotle Commits to Become Industry Leader in Food Safety.” BusinessWire . December 4, 2015. http://www.businesswire.com/news/home/20151204005113/en , Accessed February 6, 2016.

49. Chipotle Mexican Grill, Inc. “8K Filing E. Coli Incident Impact.” Chipotle Investor Relations . December 4, 2015. http://ir.chipotle.com/phoenix.zhtml?c=194775&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkL_mNvbS9maWxpbmcueG1sP2lwYWdlPTEwNjEyNzk3JkRTRVE9MSZTRVE9MiZTUURFU0M9U0VDV , Accessed February 6, 2016.

50. Banjo, Shelly. “It’s Time For Chipotle to Eat Crow.” Bloomberg Gadfly . December 8, 2015. http://www.bloomberg.com/gadfly/articles/2015-12-08/chipotle-e-coli-outbreak-is-a-major-pr-problem , Accessed February 6, 2016.

51. Wahba, Phil. “Chipotle is Blaming the Government and the Media for Their E. Coli PR Nightmare.” Fortune. December 8, 2015. http://fortune.com/2015/12/08/chipotle-media-ecoli/ , Accessed December 15, 2016.

52. Jargon, Julie. “CDC Probes New Chipotle-Linked E. Coli Cases.” The Wall Street Journal . December 21, 2015. http://www.wsj.com/articles/cdc-probing-another-chipotle-linked-e-coli-outbreak-1450730153 , Accessed February 6, 2016.

53. Jargon, Julie. “Norovirus Confirmed in Boston Chipotle Outbreak.” The Wall Street Journal . December 9, 2015. http://www.wsj.com/articles/norovirus-confirmed-in-boston-chipotle-outbreak-1449684009 , Accessed February 6, 2016.

54. Katz, Andy. “All 8 BC players return to practice, game vs. Providence still on.” ESPN . December 9, 2015. http://espn.go.com/mens-college-basketball/story/_/id/14315661/at-least-eight-boston-college-eagles-players-foodpoisoning , Accessed February 6, 2016.

55. “Boston Chipotle Shut Down After 30 BC Students Get Sick.” CBS Boston . December 7, 2015. http://boston.cbslocal.com/2015/12/07/boston-college-chipotle-illness , Accessed February 6, 2016.

56. Jargon, Julie. “Why You Won’t Soon See Chipotle Ads.” The Wall Street Journal . December 25, 2015. http://www.wsj.com/articles/why-you-wont-soon-see-chipotle-ads-1451083903 , Accessed February 6, 2016.

57. Associated Press. “Chipotle tweaks cooking methods after E. coli outbreak.” Chicago Sun Times . December 23, 2015. http://chicago.suntimes.com/business/7/71/1202596/chipotle-e-coli-cooking-methods , Accessed February 6, 2016.

58. Fickenscher, Lisa. “Why Chipotle will close every store for a few hours on Feb. 8.” MarketWatch . January 15, 2016. http://www.marketwatch.com/story/chipotle-to-launch-pr-blitz-to-woo-back-customers-2016-01-14 , Accessed February 6, 2016.

59. Jargon, Julie. “Chipotle Plans Marketing Campaign to Win Back Customers.” The Wall Street Journal . January 13, 2016. http://www.wsj.com/articles/chipotle-plans-marketing-campaign-to-win-back-customers-1452726402 , Accessed February 6, 2016.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Chipotle’s Crisis Management: Road to Recovery

Erik Bernstein February 20, 2017 crisis management Leave a Comment

Can the burrito chain finally call a wrap on its lengthy crisis?

Chipotle Mexican Grill Inc’s ( CMG.N ) sales rose for the first time in five quarters as the burrito chain’s efforts to bring back diners after a series of food safety lapses start to pay off. The company said sales at established restaurants jumped 26 percent in January, putting it on track for its first quarterly increase in six quarters. Reuters

Can you believe that it’s been nearly a year and a half since the E. coli outbreak that sparked a widespread crisis for Chipotle? The company’s been in a sales slump since November 2015, when a serious of food-related illness cases combined with increased competition in the “fast casual” space to put the hurt on the burrito chain that appeared on the fast track to dominance. In the time since Chipotle has spent heavily on advertising and marketing to bring hungry customers back. It’s also made operational changes to improve food safety which, with no additional outbreaks since the original series, appears to be working.

While Chipotle did make public statements early on about its new commitment to food safety, the overall strategy put in place has been tilted more towards helping people “forget” the problem. There are pros to this approach, if you have the ad spend to do it. For example, not rehashing the food safety issue means you don’t bring it to the attention of stakeholders who weren’t aware. You also shorten the time it takes to resume “business as usual”. At the same time, by letting others focus on the issue you leave stakeholders to get info from…well…others. That leaves room for rumor, innuendo, doubt, and even conflicting interests to creep into any coverage they may see.

Thus far it’s working for Chipotle, and with the progress made I’d expect both reputational and financial recovery to continue – barring additional incidents that extend the story of course.

Erik Bernstein www.bernsteincrisismanagement.com

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Chipotle Case Study: Either Manage Risk or Disclose Lack of Risk Management

Steven Minsky | Feb. 9, 2016

Back in 2009, we blogged about the SEC’s decision to require board-level accountability for ERM . This decision was based on the conclusion that inadequate risk management allowed the regulatory failures that ultimately led to the financial crisis. As we wrote in that post, “boards are now required by the SEC to report in-depth on how their organizations identify risk, set risk tolerances, and manage risk/reward trade-offs throughout the enterprise.”

That blog detailed an important ruling: it refers not only to integrated risk management competency at the executive level, but at all employee levels that have an impact on company performance. This perfectly mirrors a risk management mantra – risk should make up a part of everyone’s – not just risk managers’ – job description.

In 2007 , regulators released Sarbanes-Oxley Audit Standard 5 (SOX AS5), which holds management accountable for the risk of misstated company financials. The SEC disclosure rule is similar in the sense that it uses materiality, not specific risks, as a measure of what needs to be mitigated. It differs, however, in the sense that it applies to all risks, not only financial concerns, and does not take into account an organization’s size. In other words, everyone should be concerned with ERM compliance.

This leads to a fork in the road; organizations need to either adopt an effective risk management program or bite the bullet and disclose their ineffectiveness. There is no third option – maintaining ineffective risk management tools   without disclosure is considered negligence, and is easier to prove than fraud is.

Chipotle’s recent fiasco demonstrates the results of poor risk management

According to Business Insurance , Chipotle’s problems don’t end with a host of recent salmonella outbreaks, which have been linked to food sold in numerous branches. The company also “failed to disclose that its ‘quality controls were inadequate to safeguard consumer and employee health,’ according to a civil lawsuit.”

The company is now suffering a major reduction in share prices (“35% since the end of October”), reduced sales (December sales were down 30% in some locations), and a marred reputation that relies upon the appeal of safe, sustainably grown food. The manner in which the company misled shareholders is almost entirely responsible for the civil suit.

Chipotle introduced a great innovation in the food industry: fresh, healthy, locally sourced fast food. However, the company failed to implement the risk management necessary to support that innovation. Enterprise risk management is as much about enabling innovation as it is about facilitating compliance, health, and safety. The check-the-box approach of disclosing the “usual risks” was made unacceptable back in 2010, if ever it was acceptable. Every business innovates, and every business therefore needs to find the unique risks it introduces, get them covered, and disclose them to shareholders.

Had Chipotle’s management implemented an enterprise risk management solution, either of two outcomes would have occurred:

• Food might never have been contaminated, since ERM extends to a robust vendor risk management methodology that helps identify risks associated with a company’s supply chain.
• Even if the outbreaks had still happened, Chipotle would have been able to use enterprise risk management reporting capabilities to evidence its risk program. This would have avoided regulatory penalties, provided evidence of control activities, and guided risk disclosure, all of which would have eliminated liability for non-disclosure of risk.

These outcomes aren’t just possible, they’ve happened before . In 2009, a Morgan Stanley executive was found to have evaded internal controls. The company itself avoided prosecution thanks to the robustness of its internal policies and procedures. Unlike Chipotle, Morgan Stanley “maintained a system of internal controls meant to ensure accountability,” and pointed to these systems when asked about the adequacy of its risk management program.

There is never a 100-percent guarantee that surprises won’t happen. Sometimes, human error and external threats can’t be predicted. What’s important is minimizing the likelihood of those surprises, and ERM software accomplishes just that. At the very least, a robust, well-documented solution provides an easy way for organizations to maintain full disclosure and avoid regulatory action.

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Chipotle Company’s Food Crisis Case Study

Poisoning from food consumed at restaurants is a serious public health hazard. The paper studies the outbreak of food poisoning at Chipotle Mexican Grill in October 2015. There were two outbreaks in the same year. After the food poisoning occurrence, the local and federal authorities tried to ascertain the reason for the outbreak, but the tests they conducted could not confirm the ingredient that caused the illness. The company collaborated with the authorities to ensure that their cooking processes and serving areas are cleaned and infection-free. However, no question was raised about the failed safety mechanism and the failure to implement the regulations that were already in place.

This paper takes a look at the measures taken by the federal and local bodies to help find a solution to the problem. It also studies the regulations stipulated by the authorities to understand what food companies should do to prevent such occurrences. The paper shows that the government response to the outbreak was quick, which helped to handle the situation. However, the whole food safety machinery was not in place, as there were shortcomings in the implementation process. The adoption of the regulations must be made mandatory, and these should be monitored to ensure the rules are properly followed. Based on the research, we recommend that regulators and private organizations should put more stress on the implementation of the regulations, along with formulating more up-to-date laws.

General Overview of Food Quality

The threat of food-borne diseases remains an imminent threat in the twenty-first century. The incidents of food-borne diseases are generally found in a few industrialized countries. Though policymakers believe food poisoning as a cause of death will reduce worldwide, there is little evidence to support the expected downward trend (Newell et al., 2010). According to the World Health Organization (WHO), the global burden of food-borne diseases is unknown (WHO, 2015b). The report by WHO, 1 out of 10 people, falls ill due to food-borne diseases every year due to the consumption of contaminated food or water (WHO, 2015b).

There are more than 200 microbial, chemical, or physical agents that can cause food poisoning (Newell, et al., 2010). In the Americas, diarrheal diseases cause 95 percent of food-borne diseases (WHO, 2015a). The main causes of such outbreaks are norovirus, E. coli , campylobacter, and non-typhoidal salmonella (WHO, 2015a). When there is a report of food poisoning outbreak of two or more people after consuming the same food product, it is termed as a foodborne outbreak by the US food safety department (FDA, 2016a). The public health officials then investigate the issue in order to control the situation and then try to find the pathogens that may have caused the outbreak. Further, proper precautions and policy measures are taken to prevent such outbreaks in the future.

Chipotle Food Crisis

Chipotle Mexican Grill (hereafter referred to as Chipotle) is one of the leading restaurant chains in the US. They specialize in serving Mexican food that is assured to be fresh and healthy. The company was entwined in a food poisoning controversy wherein it had to close down more than forty outlets in the Pacific Northwest in 2015 due to E. coli outbreak (Surowiecki, 2015). The issue aggravated when many other consumers around the country were affected by the food-borne illness. The Chipotle food poisoning issue had spread in many major cities around the US. The case study will look into the issue of food poisoning of 120 Boston College students who ate at Chipotle.

The food poisoning, which is an E. coli bacterial outbreak, has not only affected consumers in Boston but also in California and Minnesota, where the company is facing several lawsuits. Such an outbreak of food poisoning from the food consumed at a leading restaurant chain raises concerns regarding the food quality and safety policy of the government.

Chipotle is a brand that is famous for its reliance on fresh ingredients and food. Such brand positioning helped to ensure the perception of food safety among customers. Further, Chipotle’s branding ensured customers fresh and hand made food, prepared right in front of the customers. The company slogan, “food with integrity”, showed the company’s allegiance to food quality (Chipotle, 2017). However, the outbreak of food poisoning weakens the company’s brand position.

Many US companies like Taco Bell and Jack in the Box restaurant chains reported E. coli incidents in 2005 and 1993, respectively (Surowiecki, 2015). Such situations were handled, and these companies flourished even after such incidents. However, the issue that has not been analyzed is the public policy response of the authorities to the outbreak of such incidents. This paper will aim to understand how the government regulations regarding such outbreaks of food poisoning are handled by analyzing policies in place regarding food quality in the US and worldwide.

Food Policy Worldwide

European countries were ahead of the US in creating food-labeling laws, but their laws were haphazard. The food policy globally recognizes that safer food is a necessity to save lives. With the increasing danger of microbiological or chemical contamination, it is necessary to build a system that prevents millions of people from consuming contaminated food. Food security has assumed renewed importance after the rise in the food prices in 2007-08 (WHOa, 2015). According to WHO, ensuring the availability of clean, safe, and nutritious food is essential to sustain life and promoting good health (WHOa, 2015).

Unsafe food may cause a range of diseases, from diarrhea to cancer. Thus, it believes unsafe food poses a threat to global health endangering millions of people. A conference on nutrition held at Rome in 2014 emphasized the importance of food safety. WHO believes food safety is the key to ensuring sustainable development goals and for this reason, most governments should actively formulate policies to ensure the safety of public health. The report suggests that governments should frame policies and structures to ensure that food producers, suppliers, and others involved in the food chain operate responsibly.

US Policy History

Every country requires a food law that would safeguard the quality of the food available to the common man. The need for governmental protection of the food quality arose when the administrators acknowledged the incidence of fraudulent and unsafe food being sold in the market. Food regulation in the US dates back to the colonial era. The Congress enacted the first food protection law in 1883 to prevent adulteration of tea (Fortin, 2016).

In 1896, the US government enacted the oleomargarine statute, which aimed to prevent the dairy industry to sell adulterated butter. The US food regulatory regime is historically considered to be more effective and open (Smith & Diack, 2005). The 1785 Massachusetts Food Law aimed to prevent the selling of unwholesome food in the market (Smith & Diack, 2005). The objective was to avoid mislabeling and adulteration of food. The 1906 Pure Food and Drug Act expanded food research and testing (Smith & Diack, 2005).

The aim of the act was to understand the harmful effect the chemical preservatives had on food and public health. In the very same year, the US government passed the Meat Inspection Act. The US Department of Chemistry regulated the Pure Food and Drug Act while the Meat Inspection Act was regulated by the US Department of Agriculture. The Food Drug and Cosmetics Act, passed in 1938 became the standard of the labeling regulation (Smith & Diack, 2005).

FDA brought in further changes in the 1960s in its food regulation policy as it recognized the need for nutrition education. In 1973, the government made labeling food items voluntary, however, delineated a set guideline for the same (Smith & Diack, 2005). However, the policy had to change in the 1980s when the food product manufacturers routinely made nutrient content and disease prevention claims while marketing their product. FDA has enforced a new law in 2011 called the Food Safety and Modernization Act (FSMA). The aim of the act is to establish new food safety standards for domestic as well as imported food. Further, it directs FDA to build a joint food safety network with federal and state authorities to enhance public safety.

Outstanding Federal Policies Concerning Food

The office of food regulation and FDA is constantly revamping the outdated regulations and incorporating new laws. The labeling laws are continually changing. For instance, in 2014 FDA proposed new guidelines for sanitary regulation for transportation of human and animal food. This was designed to protect contamination of food during transportation. The law was proposed in January 2013 and is yet to be implemented (FDA, 2016b).

Two separate incidents of E. coli outbreak at Chipotle occurred in 2015 that had affected a total of 55 people. The incidence of the infection was due to the outbreak of a strain called STEC 026, a Shiga toxin producing E. coli strain. The public health officials in Washington and Oregon detected the first outbreak. The food borne disease surveillance detected the issue. Initially, officials noticed a rise in the number of ill people in the states and on interviewing them, the cause of the illness was determined to be an E. coli outbreak. The first outbreak is believed to have occurred at the end of October 2015. The poisoning then spread to other states such as California, Delaware, Illinois, Kentucky, Maryland, Minnesota, New York, Ohio, Oregon, Pennsylvania, and Washington.

The outbreak affected consumers in 11 different states all over the US. The main issues that the Chipotle food crisis brings forth are – (1) the main cause of food poisoning outbreak, (2) measures that were taken by the company to curtail such mishaps in the future, and (3) measures taken by the local and federal governing bodies to handle the situation and prevent future occurrences. Chipotle claimed to make fresh food for its customers. The paper will try to see what measures were taken after the outbreak and what should be done according to scholarly research in case of such an incident. Based on the gap found between the measures taken and suggested measures, recommendations will be formulated for future occurrences.

This study utilized a number of resources to gather data and information regarding the Chipotle Food Crisis. The study concentrates specifically on the outbreak of E coli incidents in Boston. Using search terms such as “US food policy,” “WHO food policy,” “FDA food code” “Chipotle food poisoning,” and “Chipotle food crisis,” on databases such as EBSCO, United States National Agricultural Library, and Google Scholar, a number of resources were accessed. The search results yielded scholarly, governmental, and general population resources. The study looked into the food poisoning incident outbreak in Boston. These findings were compared objectively to more general literature regarding US food regulation and media interpretation.

Company Level Failure

The company mechanism failed to identify the possibility of contamination of the food served in the restaurants. After the outbreak, Chipotle took many measures to curtail the spread of bacteria and identify the cause of food poisoning. However, it was evident from their actions that no such procedures were in place before the outbreak. This raises serious questions about the company’s safety regulations for preparation of food items prior to the outbreak. This section of the results will show the drawbacks the company had before the outbreak of E. coli.

The first outbreak was detected in Washington and Oregon through the local food borne disease surveillance in October 2015. A total of 55 people were infected with the outbreak. From the people who were available to provide information, it was deduced that the illness occurred from October 19, 2015 to December 1, 2015. Another outbreak was detected in December 2015, with a similar strain of STEC 026 (FDA, 2016b).

Once the outbreak was confirmed, immediate measures were taken by the organization to curtail the spread of the poisoning. The stores (more than 200 in number) were closed voluntarily and the company closely collaborated with the public authorities to solve the situation. The measures that were taken by the company are as follows: (1) microbiological testing to build effective food safety, (2) prepare ingredients centrally, and (3) undergoing regular USDA inspections to ensure food safety (Chipotle, 2017). However, these measures are just reactions to the outbreak. Before the outbreak had occurred, the company had not undertaken any safety measure to prevent food infection.

Chipotle branded their food as farm fresh, aggressively positioning their products against industrialized agriculture. However, the company failed to recognize the safety measures that had to be taken to ensure good and clean food. Though they relied on organically raised vegetables, poultry, and meat, their production process did not adhere to the standard guidelines of the FDA. Their motto was “food with integrity”.

However, their focus was mainly on providing food that was different from the other big food chains like KFC or McDonalds. Chipotle often created commercials that openly slandered these big food chains. However, one good side of such large establishments is that they have a strict policy of food safety in place, which the small and medium operators in the food industry lack. Prior to the outbreak, Chipotle did not exhaustively follow the regulations by FDA or USDA, increasing the risk of food-borne infections.

One of the main issues that existed with the policy of Chipotle’s food safety measures prior to the outbreak was that the company did not have any written regulation that was strictly followed. The raw ingredients shipped to the stores were not tested for bacteria or infection. Further, there was no set procedure for cooking or cleaning of the utensils. It did not have any written rule regarding the process of washing, cutting, cleaning, shredding, and preserving the raw ingredients. Rules that were present for preserving meat and chicken were unclear. There was no internal training for safety measures for the workers prior to the outbreak.

As the outbreak was presumably caused due to the presence of bacteria in meat products, it was necessary to have a properly written procedure to understand how the meat should be processed to make it bacteria-free. Further, written procedure should have been implemented as to how they meat should be preserved.

More specifically, Chipotle failed to follow the policy guidelines of the FDA concerning such outbreaks. FDA guidelines specify that such bacteria are highly contagious and could be transmitted from one infected person to the other. However, in the case of the outbreak at Boston College of 140 students, the infection was transmitted from the nearest Chipotle restaurant. Further, the source was not the food served at the restaurant, but an infected employee who was not allowed to take sick leave. This distinctly shows the company policy of not giving sick employees paid leave and neglect of the FDA guidelines.

Though this system of paid sick leave was implemented after the outbreak, but the damage was already done. Thus, the previous food safety policy and employee sick leave policy could have been the reasons behind the food poisoning incident.

Failure of the Regulatory System

The outbreaks at Chipotle restaurants are related to three different pathogens – norovirus, E. coli , and salmonella (Strom, 2016). Norovirus is a highly contagious, commonly categorized as stomach flu. E. coli and salmonella are more dangerous pathogens that may be lethal if the toxin level in the body in categorically increased by the bacteria. However, the investigation into the food system does not confirm which food items were contaminated that may have caused the outbreak. The investigation undertaken by the FDA provided no conclusive results. Hence, it was impossible to rule out any food item that was and is still being used in the restaurants.

The failure of the FDA to identify the ingredient that was carrying the infection increases the chances of a recurrence. Though measures were immediately taken to decontaminate new ingredients and quarantine all ingredients from the older stock but the element of not knowing what and how it may have occurred keeps the risk imminent.

Clearly, the federal regulations were not followed by the company, which may have caused the outbreak. Though, FDA has not explicitly spoken about the cases wherein the company has failed to comply with the government regulations but the matter becomes evident. The policy in place leaves only 2 percent chance of a virus outbreak. Then, a strict compliance at Chipotle could have avoided the food poisoning incident and more importantly the second outbreak.

The results suggest that both the company and the government machinery failed to identify the potential threat that the food system posed on public health. When the incidents occurred, neither Chipotle nor the government showed any readiness to handle the situation. Moreover, Chipotle did not adopt the government regulations entirely that aimed to ensure food safety before the food poisoning incident.

The lack of implementation of the existing regulations for food safety was one of the main failures of both Chipotle and the FDA. Though the company has adopted FDA regulations and has pledged to cooperate with the local and federal authorities to help solve the issue, their commitment towards food safety before the incident was almost negligible. The obvious question that arises is if Chipotle was using the garb of cooperation to prevent further prosecution. Clearly, the company was facing quite a few lawsuits after the food poisoning outbreak. So this could have been just a means to safeguard their image as a responsible organization.

The following discussion elucidates the policies adopted by the company before and after the break to understand if there was a gap in the adoption of the regulations by the company. The discussion is segregated into two categories – first will deal with the policies suggested by previous research and second, will deal with the measures that were taken by the company and the government in case of Chipotle E. coli outbreak.

Chipotle E. coli Outbreak

The organization also took special measures counter the poisoning issue in the organizational level. Chipotle hired a food safety chief Mansoor Samadpour, the CEO of IEH Laboratories and Consulting Group, to overhaul the internal food safety policy and regulation (Strom, 2016). They investigated the outbreak internally and implemented safety regulations. The company has adopted a policy of supplier intervention that checks all the supplies sent by the vendors (Chipotle, 2017).

This is to ensure that no raw material is contaminated. Further, the company has adopted new, advanced technology to ensure the pathogens are removed, maintaining food quality. Farmers are trained to ensure that the raw vegetables they supply to the restaurant chain are free of any bacteria or pathogen. Further, protocols are implemented to ensure proper handling of the ingredients and sanitization of the restaurant surface. Regular inspections are conducted to ensure food and restaurant safety. The company also implemented an advanced electronic monitoring system to trace the ingredients in the supply chain.

The company aims to bring down the risk of contamination of any of its food items to “near zero” ensuring no such incidents occur in the future (Strom, 2016). For instance, all the lettuce used for making food at Chipotle is now cleaned at a centrally located warehouse. Cheese is also grated centrally and packed in sealed containers. Further, onion, jalapenos, and other vegetables are boiled or blanched and packed before reaching the stores to kill all microbes they may contain (Strom, 2016).

The suppliers who supply meat have to undergo high-resolution DNA testing to remove all contaminated items. To ensure employee safety, the company has adopted the policy of paid sick leaves, a policy that no other food chain has adopted to allow sick employees to recuperate (Strom, 2016). Moreover, the company has decided not to use any genetically engineered ingredients to prepare food. However, the drinks the restaurants serve, still have genetically engineered ingredients (Strom, 2016).

Chipotle has adopted testing methods approved by FDA and USDA for ensuring safe food. They are presently using microbiological testing to build effective food safety processes in order control spread of harmful bacteria in meat, chicken, and dairy products (Chipotle, 2017). Further, they prepare their ingredients centrally, which are then heated at low temperature for a long period after being sealed in vacuum-sealed packages. This process is regularly monitored and inspected by the USDA.

When the local and the federal authorities detected the outbreak, Chipotle voluntarily closed all its restaurants in the infected cities and worked closely with the government consultants to investigate the issue.

Measures taken by FDA

The first measure that was taken was to understand the source of the infection. According to FDA guidelines on E. coli, the main cause of an outbreak of the bacteria is from consumption of contaminated dairy products such as milk or cheese or animal meat. Thus, the government tried to isolate the causes that may have resulted in the food poisoning at Chipotle. Once the authorities identified the outbreak and linked it to the food served at Chipotle restaurants, investigators used whole genome sequencing (this is a highly advanced technique) to identify the DNA strain of the STEC 026 bacteria that had caused the outbreak (FDA, 2016a).

This process isolated 36 ill people from the first outbreak and found that they were genetically related to one another. This showed that the outbreak was linked to the other occurrences in the Pacific Northwest (FDA, 2016). This test was done on the four people from the second outbreak, confirming their linkage. Further, tests were done on Chipotle food, restaurant surface, and utensils to ensure if there were traces of E. coli (FDA, 2016a).

The tests showed there were bacteria left. Then the authorities looked into the health of the employees to ensure none of them was ailing. Further, fresh products such as raw meat, farm produce, and dairy items were further checked before restocking the restaurants. Additional safety procedures and audits were recommended for all the 2000 restaurants that were operational (FDA, 2016b).

This was done to ensure safety standards. The restaurant chain was instructed to work in close collaboration with the local, state, and federal authorities to ensure the safety of the food. Further, the ingredients at the restaurants, which were the source of the outbreak, were replaced. Further cleaning was done for all the closed restaurants to ensure proper sanitization.

However, a few problems encountered while doing a trace-back of ingredients. First, Mexican food is prepared with multiple ingredients. Hence, a trace back did not provide any significant result for it was difficult to identify the ingredient that may have caused the poisoning outbreak. The FDA traced back to a few ingredients, which it believes to be the primary cause of the outbreak. However, the FDA’s investigations failed to identify any specific ingredient in the distribution path that could have caused the poisoning.

The FDA also conducted an investigation into the products sent by the suppliers. This was done to find if the supplies were the source of the outbreak. However, the research yielded no conclusive result. Further, no food item could be ruled out as a cause. The Centers for Disease Control and Prevention (CDC) declared on February 2016 that the E. coli outbreak at Chipotle was over (Whitten, 2016).

Research of Food Poisoning

A study conducted by Jones and Angula (2006) shows that there are health risks associated with eating at restaurants. In the case of E. coli infections, they suggest that it is mostly caused due to the consumption of half-cooked meat, or more specifically beef. Further, research suggests that outbreak-related cases only for less than 3 percent of the reported cases and hence studying outbreaks may not be the most suitable method of analyzing policies and regulations in place to offset a food poisoning epidemic (Jones & Angulo, 2006).

According to another research conducted on the outbreak of food poisoning from restaurant food, it was believed that Chinese, Indian, British and Italian cuisines were the most effective poisoning vehicle (Gormley, Rawal, & Little, 2011). The research shows that in Europe the restaurants have to have a written document with the detailed hazard analysis and the critical control point principles (Gormley et al., 2011). Norovirus outbreak in restaurants was found to occur mostly in seafood restaurants and such food poisoning occurred mostly in winter (Gormley et al., 2011).

Another study on the factors affecting compliance with food safety regulations show that operators in the food business usually lack the proper knowledge of laws and safety measures (Yapp & Fairman, 2006). This becomes one of the greatest barriers to implementation of food safety legislations. Further, lack of trust on food safety regulations, lack of motivation to deal with food safety, and lack of knowledge and understanding of such legislations becomes the greatest barrier to implementation of food safety legislations (Yapp & Fairman, 2006).

Another research on the issue of co-regulation of food safety in restaurants using private-public partnership states that though there is scope for co-regulation, there exists a wide net of obstacles to the implementation of such laws (Martinez, Fearne, Caswell, & Henson, 2007). However, the paper points that there are certain benefits of co-regulation of such laws as this would reduce non-compliance due to coercion. Further, access to reliable information regarding the regulations is essential. If the information source dries up, it will create errors in decision-making, which may affect food safety.

According to the research conducted by Grossman (2016), FDA guidelines on food safety covers around 80 percent of the US food supply. The recent outbreak of food-borne illness at Chipotle raises the concern of implementing a more comprehensive law that would cover the whole gamut of the produce producers and marketers. The regulation governs biological hazards that may be caused by agricultural and dairy products. Thus, FDA will work with the private owners to enhance hygiene practices for food preparation and serving area. The new law implemented by FDA would ensure the safety of both domestic and imported food. Further FDA is expected to work both with the domestic private operators and global organizations to enhance food safety in the US.

Private-Public Failure

The case of Chipotle food poisoning is a distinct case of failure of both the private and the governmental organization to prevent food fraud. Regardless of the cause of food risk, it is the responsibility of both the organization and the government to ensure food safety. Food safety, food fraud, and food defense issues raise the risk of food adulteration and cause health threats to the public. Food fraud is an intentional action to create health hazard while food safety is an unintentional means of causing heath risks. Research suggests that in case of Chipotle, the current safety measurement system failed miserably to understand the imminent food risks.

Previous studies into the compliance of regulation by the food industry suggests that small and medium scale organizations fail to comply with the regulations laid down by the government. The reasons are a lack of knowledge and understanding of the laws. Thus, the question that arises is if Chipotle failed to understand or follow the laws. Further, such companies have a reluctance to follow the rules. The reason for Chipotle’s apparent disregard for the regulations is unknown.

Though the company used to spend a lot of money on the advertisement of their product as a safe and healthy option to the other industrialized food chains, yet their product caused the outbreak, which could have become a severe risk to public health. The inability of the state or federal regulators to identify the reason for the outbreak of the illness shows the inability of the present system to categorically understand what may have caused the poisoning. This shows that the present regulations in place and the investigation methods are not adept to handle the more mature strains of pathogens.

The measures undertaken by the Chipotle seemed more like a desperate attempt to damage control rather than a complete commitment to public health and food safety. Chipotle immediately closed all their restaurants and openly acknowledged the issue and collaborated with the local and federal authorities to control the situation. They even implemented changes in their food safety and employee leave policy. Apparently, such measures seem a complete commitment to the safety concerns however a closer look would reveal that the company was merely trying to save the brand name. Had the compliance policies been in place from the very beginning, the outbreak could have been deterred.

The Chipotle food crisis is one of the many food poisoning incidents that have affected the health of the American public. Why does such an outbreak occur in a country where detailed measures are taken by the local and federal authorities to avoid such situations? The reason lies in the implementation process, which is faulty. Further, Chipotle suddenly became more aware of the food safety issue and started implementing written policies and regulations to ensure clean and safe food. However, before the outbreak, these measures seem to have lacked importance. The inconspicuous absence before the poisoning outbreak makes the situation even more suspicious.

Were they not following the FDA guidelines for food safety? Was the FDA aware of Chipotle’s disregard of their safety regulations? In either case, both Chipotle and/or the government regulators were not doing their job rightly. After the outbreak, the state and the federal regulators tried to pinpoint the cause of the outbreak but failed to find a singular reason. Is it because the tests followed by the federal bodies are inept to track genetically advanced pathogens? Do these pathogens go undetected by the tests currently used by the FDA? These are the questions that need to be answered. This research conclusively states that the government response to the outbreak was quick which helped to handle the situation. However, the whole food safety machinery was not in place as there was no intent to implement the rules. Adoption of the regulations must be made mandatory and these should be monitored ensure these rules are properly followed.

Recommendations

From the following research, it is evident that the state and federal government take a keen interest in updating and revamping the food safety laws, as this is one of the most talked about issues today. However, the regulators fail to establish a thorough implementation process. This enhances the risk of food poisoning caused due to ill-managed food processing to unhygienic restaurants. Therefore, the first recommendation of this research is to improve the implementation process.

A law in itself is just a few words with no real meaning. It can stipulate what should be done and what not. However, it, in itself, will not be able to enforce the actions. The government and the targeted organizations must do it. Implementation is an essential part. If not implemented, the law remains hidden in the annals of hundreds of legislations. Thus, implementation of the regulation should be the first priority of the regulators. Second, the regulators should try to educate the small and medium scale food operators. This will enhance knowledge and awareness. Research has shown a lack of awareness among these operators to be one of the main causes for food poisoning outbreaks. Thus, this step will help in advancing their knowledge and encourage them to implement safety measures.

Further, the companies need to write down the regulations and policies related to the safety issues related to food preparation and disinfecting the raw ingredients. Third, there should be scope for public-private co-regulation for the food industry. In other words, the private parties must take more active role in the formulation of the regulations, especially of the food industry. A co-ordination between the two parties will ensure safer food, delivered at a lower cost. Such coordination at different stages of the regulatory process will improve food safety and lower the cost of production and help in more effective distribution of the limited monitoring resources.

Fourth, compliance can be adopted based on the relation between industrial and administrative performance. The food safety controls must evolve towards more performance and process based security norms. This will automatically place greater importance to the implementation of the safety regulations. Thus, companies can adopt the food safety regulations as a competitive advantage for improving performance.

Chipotle. (2017). Our food safety advancements . Web.

FDA. (2016a). FDA investigates multistate outbreak of E. coli 026 infections linked to Chipotle Mexican Grill Restaurants . Web.

FDA. (2016b). FSMA final rule on sanitary transportation of human and animal food . Web.

Fortin, N. D. (2016). Food regulation: Law, science, policy, and practice. New York, NY: John Wiley & Sons.

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• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2023, August 17). Chipotle Company's Food Crisis. https://ivypanda.com/essays/chipotle-companys-food-crisis/

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• Chipotle Mexican Grill Company's Management Strategies
• Chipotle Mexican Grill: Business Strategy
• Chipotle Restaurant: Company Analysis
• Chipotle: The Strategic Analysis
• Chipotle Company's Development & Motivation Initiatives
• Chipotle vs. Illegal Pete's Restaurants
• Career Development and Employee Motivation Initiatives at Chipotle
• Review of Chipotle Mexican Grill Restaurant
• Chipotle Mexican Grill, Inc.: Financial Recommendations
• Chipotle Restaurant as a Socially Responsive Business
• Sous Vide Food Production System
• Glass vs. Paper/Cardboard in Food Packaging
• Food Security and Growing Population
• Food Nexus Tools and Results
• Supply and Demand Influences on Food in the Recent Years

The New Equation

Executive leadership hub - What’s important to the C-suite?

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Redefining fast-casual loyalty at Chipotle, one burrito at a time

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Hospitality and leisure

We redefined fast-casual loyalty

Our BXT way of working

How do we get  6M loyal  burrito-loving customers?

For years, Chipotle had been known to deliver real food, real simple, real fast. But in order to maintain growth and shape the demand curve, they realized they needed to better understand their customers. That meant being able to identify and communicate with them individually, rewarding the most loyal customers and bringing them back into their stores.

With a new loyalty program, Chipotle saw an opportunity to learn from customers and drive remarkable relationships, target loyal visitors, and help grow the business. By strengthening the employee culture for front-line workforce, staff could serve as the ambassadors for every customer interaction.

Build an unbreakable bond

Chipotle needed a way to create special relationships with customers, transcending any typical fast-casual program. We helped Chipotle get started by putting a new approach in the middle of the taco universe, using our  BXT way of working to instill a new type of DNA across all parties involved. That meant titles down, creative minds in, and all ideas on the table.

We reframed the problem and put Chipotle’s people and customers at the heart of its decision-making. Bringing together business expertise (B), human-centered experience design (X) and technology (T), we reimagined loyalty from strategy and experience design to market testing and nationwide roll-out, down to the store level.

Generating demand wasn’t a problem — until it was

A slowdown in demand served as a wake-up call for Chipotle when the company realized it didn't have a 1:1 relationship with customers or a way to reach them meaningfully.

Bringing people back in the doors — and keeping them — was crucial to success. Traditional marketing programs weren’t going to cut it, so we worked with Chipotle to create a new kind of loyalty backed by a financial model showing just how the program would impact the bottom line.

Uncovering the secret  ingredient for loyalty

Loyalty and customer relationships are built around everything that customers see and everything they don’t. A cross-functional design session brought everyone to the table to imagine a new experience, and what it would mean for everyone who interacted with it.

We considered everything from the server making a burrito, to the cashier, to marketing, quality and beyond. A customized change management playbook and training execution program made every employee a change agent. Usability testing and a foundational set of 50+ promotions were created to engage customers, not just satisfying expectations, but exceeding them.

Introducing a recipe for success

To successfully launch Chipotle’s largest initiative and top strategic priority, it took more than just a good idea — it included a solid technology roadmap. PwC technologists were there to define and influence the design and tech requirements, integrating the needs of multiple teams around the world, with customers’ data and privacy top of mind.

Working with our competitors [yes, true story], we served as one team for Chipotle, working side-by-side at a command center that included 75 people, fielding questions and concerns from 2,500 restaurants.

Six million enrollments and counting

We transcended traditional loyalty programming, focusing on what the results would mean to Chipotle, its customers and employees, and its brand. Our BXT way of working helped Chipotle strategize, design, test and launch a new loyalty platform within 18 months, across 2,500 stores.

increase in digital sales Q2 2019 YOY

enrollments in Chipotle Rewards within the first week

in revenue, an increase of 13.2% Q2 2019 YOY

One of the smoothest launches in company history.

Chief Restaurant Officer Chipotle

Behind the scenes

Back of the house,  front of the line

PwC quarterbacked, managed, and held everyone accountable — from our team, to vendors to competitors. By breaking down silos and bringing disparate parts of the business and disparate partners together, we were able to focus on the experience and the solution to help Chipotle solve its loyalty conundrum. More importantly, we leveraged Chipotle’s culture and 80,000 employees to act as change agents.

Reimagine how you work, think and engage

Combine business expertise, experience design, and technology to achieve the extraordinary. Bring your best ideas to life faster with BXT Works.

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#Chipotle. When you hear the name, you salivate. 6M burrito-loving #customers agree with you. The story behind their game-changing loyalty program:

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Principal, Customer Transformation and Loyalty, PwC US

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