The Fall of Chipotle
A year after Chipotle’s E. coli crisis the food chain has yet to bounce back. Their revenue has significantly decreased, which has resulted in reportedly some investors calling for the co-founder, Steve Ells, to step down from his position as co-CEO.
Chipotle has been unable to turn things around since more than 100 customers became ill after eating at Chipotle restaurants last year. There were numerous E. coli outbreaks that sickened customers in 11 different states. Chipotle eventually reached a financial settlement with the customers who’d become ill and the company’s image has not recovered since.
Despite Chipotle’s best efforts to do damage control since the health scandal customers are turning down Chipotle’s promotions and taking their business elsewhere.
The food-chain’s reassurance about their new food safety practices has failed to save the company revenue and their average unit volumes have shrunk from roughly $2.5 million pre-E. coli scare to about $1.8 million.
The news breaking of Chipotle’s health issues dominated social media and have clearly affected their customer’s perception of the food-chain’s brand. In addition to social media constantly reminding customers of Chipotle’s health concerns lawsuits that were filed against the company helped keep Chipotle’s bad press in the public’s eye.
The fast food chain was sued for allegedly failing to disclose flawed quality controls to investors, after the E. coli outbreak. With investors believing they were duped into giving money to a company that was bound to tank the public was given even more reasons to doubt Chipotle’s ability to turn things around.
In 2015 before the E. coli crisis, their third quarter earnings were $144.9 million, however they were $7.8 million during that same time span in 2016. This is a continuation of the trend that Chipotle revenue continues to drastically decrease, which has resulted in the company’s stock prices to fall as well.
Not only are Chipotle restaurants losing revenue but they are having an even more difficult time opening up new locations. The new restaurants are running at 73% of the comparable restaurant volumes, which is a lower level than before the health crisis.
Although the data clearly shows more people are not willing to take the risk of eating at Chipotle some customers are not deterred.
Ultimately, Chipotle’s shareholders are hoping that a new change in management can help get the company back on track. What they will have to do to win their customers back is unclear but they will have a lot of ground to make up in order to get back to where they once were in the fast food chain business.
