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Chipotle Restaurant Case Study Paper
Chipotle, Restaurant, Case Study, Paper
Chipotle Mexican Grill’s Strategy in 2018: Will the New CEO Be Able to Rebuild Customer Trust and Revive Sales Growth? Headed into August 2015, Chipotle (pronounced chi-POAT-lay) Mexican Grill’s future looked rosy. Sales and profits in the first six months of 2015 were at
But a series of events occurred over the next five months that alarmed customers, drove down sales at Chipotle restaurants, and proved frustrating for Chipotle top executives to fix.
In August, a salmonella outbreak in Minnesota sickened 64 people who had eaten at a Chipotle Mexican Grill. The state’s Department of Health later linked the illness to contaminated tomatoes served at the restaurant.
In August, 80 customers and 18 employees at a Chipotle Mexican Grill in Southern California reported gastrointestinal symptoms of nausea, vomiting, and diarrhea that medical authorities and county health officials attributed to “norovirus.”
Norovirus is a highly contagious bug spread by contaminated food, improper hygiene, and contact with contaminated surfaces; the virus causes inflammation of the stomach or intestines, leading to stomach pain, nausea, diarrhea, and vomiting. After the reported food poisoning, the restaurant voluntarily closed, threw out all remaining food products, and sent home the affected employees.
Employees who tested positive for norovirus remained off duty until they were cleared to return to work. County health officials also inspected the facility on two occasions and rendered passing grades, despite finding several minor violations. The restaurant reopened the following day, and no further food poisoning incidents occurred.
In October, 55 people became ill from food poisoning after eating at 11 Chipotle locations in the Portland, Oregon, and Seattle, Washington areas. Medical authorities attributed the illnesses to a strain of E. coli bacteria typically associated with contaminated food.
Most ill people had eaten many of the same food items, but subsequent testing of the ingredients at the 11 Chipotle restaurants did not reveal any E. coli contamination. (When a restaurant serves foods with several ingredients that are mixed or cooked together and then used in multiple menu items, it is difficult for medical studies to pinpoint the specific ingredient or ingredients that might be contaminated.)
State and federal regulatory officials reviewed Chipotle’s distribution records but were unable to identify a single food item or ingredient that could explain the outbreak. Nonetheless, out of an abundance of caution, Chipotle management voluntarily closed all 43 Chipotle locations in the Portland and Seattle markets, pending a comprehensive review of Page C-121the causes underlying the food contamination and a check of whether any of Chipotle’s food suppliers were at fault.
Chipotle management worked in close consultation and collaboration with state and federal health and food safety officials (including personnel from the Centers for Disease Control and Prevention, the U.S. Department of Agriculture’s Food Safety and Inspection Service, and the U.S. Food and Drug Administration) throughout their investigation of the incident and also launched a massive internal effort review of the company’s food preparation and food safety procedures. These internal actions included:
Meanwhile, the Federal Drug Administration sought to identify a cause for the outbreak. The FDA’s investigation revealed no ingredient-related cause and no evidence that particular suppliers were the source of the outbreak. Ultimately, no food item was identified as causing the outbreak and no food item was ruled out as a cause, although fresh produce was suspected as the likely cause.
After health officials concluded it was safe to do so, all 43 restaurants in the Portland and Seattle markets reopened in late November 2015, roughly 6 weeks after the incident occurred.
Extensive reports of the last three incidents in the national media took a toll on customer traffic at most all Chipotle locations. The average decline in sales at Chipotle locations open at least 12 months was a stunning 14.6 percent in the fourth quarter of 2015, causing Chipotle’s revenues in Q4 2015 to be 6.8 percent lower than in the fourth quarter of 2014. The company’s stock price crashed from an all-time high of $758 in early August 2015 to $400 heading into 2016.