Note: This article was initially published on the fast casual restaurant trade site The Chipotle Effect on 6/15/16.
Chipotle was plagued with a foodborne illness outbreak in the latter half of 2015. Word of mouth and social media caused negativity toward the fast casual chain to spread like a wildfire. However, Nation’s Restaurant News reported Chipotle is on a path towards success.
In January, Chipotle had a same-store sales decline of 36.4 percent, but their most recent April report showcased a 22 percent decline — a 14.4 percent improvement. While Chipotle is still in decline, the company’s road to recovery is evident.
According to NRN, Wall Street analyst Andrew Charles cited increased coupon releases and the passage of time as two causes of Chipotle’s improvement.
Although Charles said he found a correlation between positive brand perception and coupon use, he said he noticed a flaw in his analysis. He said coupons were mainly provided to loyal customers, who, regardless of controversy, would regularly eat at Chipotle.
A series of interviews conducted by Foodable in November 2015 showed some customers weren’t deterred by the outbreak. They said they believed the restaurant had taken immediate measures to solve the problem.
Although the company is experiencing evident economic recovery, Charles said he believes Chipotle isn’t doing everything in its power to improve.
“Chipotle remains in a ‘show me’ state, given the slower-than-expected pace of recovery since issues surfaced,” he said.
NRN wrote Chipotle will be tapping into methods that provided them much success in the past, such as short filmmaking and game creation. “The Scarecrow” and “Back to the Start” are examples of this success.
Chipotle has experience with recovering from controversy. This outbreak was not the first time Chipotle had to work hard to regain positive brand perception. In an episode of “On Foodable Weekly,” Foodable CEO Paul Barron said the chain was sued for lying about serving non-GMO ingredients.
However, Charles believes Chipotle’s efforts to improve after this mistake are misdirected.
He said Chipotle isn’t fully communicating the safety of its food to customers. He specifically cited the lack of a sign placed in each restaurant explaining the food safety standards of the chain.
“We understand management’s desire to not want to harp on the issues,” he wrote, “but we believe a reflection and wider communication of the improved safety measures still represents an opportunity to drive traffic.”
Chipotle Chief Financial Officer Jack Hartung said he does not expect to report any loss in the current quarter, contrasting the 29.7 percent decline of the first. Read More