Chipotle
Introduction
Chipotle opened in 1993 as a fast food experience. With the additional of vegetables and a healthier fare, classic cooking methods and a new style interior Chipotle grew very quickly. Part of their experience is to offer fast food experience with a fine dining atmosphere. There are now about 1,500 restaurants and the category of dining is called fast casual. In other words, people can get fast foods in a fine dining experiences.
Currently Chipotle is coming out of some very bad times as an outbreak of illness by a reported 350 from eating at Chipotle. No deaths have been reported but many, many lawsuits are being filed. The investors are even suing as they claimed they were lied to. This calamity came at a time when the Chipotle chain was looking for a banner year. Now they can only hope that things get better,
2016 is being called an investment year as the problems with the lawsuit are still a grave issue to the CEO, Steve Ells. His comeback strategy was expressed in an ICR conference in Orlando and was even broadcast over the radio so that no secrecy could be charged. Fourth quarter earning s in 2015 were down 14.6% . Steve Ells plans to show the changes in the press to keep everyone apprised of the focus on food safety counting on the increased communication adding some much needed credibility for the company.
Chipotle has some aggressive strategic alignments ready to put into place in the coming months . A new campaign called the food with integrity is a new slogan and a new mission for the company. The company is pursuing an ethical promotion of their brand by establishing franchises in new markets. They’re continued efforts to prove that their foods are organically grown are helpful in new geographic markets. In addition, in the United States market they are looking to introduce breakfast menu, sit down dining areas, and possible delivery service.
Customer value and retention is critical to Chipotle during this rebuilding phase. Morgan Stanly did a survey this past month in which 15%of the people said that they would never return. More than 70% surveyed were aware of the health issues surrounding Chipotle. Key brand metrics such as taste and value remained the same or higher than they were in 2015 which is a very good sign..
Chipotle stock took a hit in2015 undenaibly. According to the company’s fourth quarter fianancial statement as compared to 2014 the revenue decreased 6.8% to $997.5 million. In the area of comparable restaurants the sales decreased 14.6%. Net income always an indicator of the strength of the organization fell to $67.9 million a decrease of 44%. This is a huge factor to overcome as this net income figure fuels the rest of the earnings potential of both the investors and shareholders. On the bright side though, they opened 79 new restaurants.
The corporate management and investors of Chipotle admit that 2015 fourth quarter was the worst in their history. However they are encouraged as the Centers for Disease Control and Prevention has completed their investigation in the E.coli incidents and has cleared Chipotle of any incidents currently associated with the restaurants. They helped Chipotle establish a governance plan that established Chipotle as a leader in the food safety area. The additions of the necessary programs by the CDC helped Chipotle to come out of the incident as a leader of the food safety movement. As Steve Ells, founder, chairman and co-CE) believes. Chipotle has taken a very negative situation and has tried to turn it around to make them a leader in the industry.
The problems though are not over for Chipotle as on January 28, 2016 they were served with a subpoena on a criminal investigation from the U.S. Attorney’s office for the Central District t of California. The subpoena requires the documentation back to 2013. The is a problem in that Chipotle can be criminally charged for incidents that happened long before 2015 and the Board charged with intent ot harm if ther is proof that they knew of the problem and id nothing about it. You cannot look await from conditions that cause people to become ill and almost die.
Conclusion
Going forward, Chipotle is doing the necessary and strategic steps to insure the stigma of 2015 is behind them. The CDC offering to certify the restaurants as operating within the guidelines makes it a more secure and comfortable environment for consumers. As the Morgan Stanley survey shows not everyone will be going back to the restaurant but only 15% is not too bad and they should be able to make up that amount of loss of customers.
Chipotle has opened new outlets and these would not have been a part of the old regime so the procedures are in place to make the customers feel secure in the health and safety of the food that they are eating. Chipotle did something unique in turning around the bad press by initiating a program called food with integrity and marketing that program as their new motto. This is also in an effort to make consumers confortable.
Chipotle is not out of the woods as yet though, as legal matter continue to come up. The U.S. Attorney’s charges alone are terrifying but the investors are also suing the management team as they knew of the food safety problems and did not tell the investors about this or any actions concerning it.
References
Bibliography
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http://ir.chipotle.com/phoenix.zhtml?c=194775&p=irol-newsArticle&ID=2134993. Accessed March 2016
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Accessed March 2016.
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