They promoted communication of their new programs through popular news networks, social media and press releases. Our managers and field leaders are zero tolerance on asking sick people to work, Mr. Niccol said. Making the world smarter, happier, and richer. the mobile phone industry was in mounting a defense against the It makes for a strong and easily recognizable differentiator in the industry. The CDC publicly reported six Chipotle-related outbreaks, all in the last half of 2015. Some PR professionals have some harsh words for Chipotle the chain is handling its food-borne illness crisis all wrong. Because that goodwill, even for a Chipotle-beloved business, isnt indefinite, according to Almonte, who says: Even the best brands have their threshold of controversy, when customers begin to hesitate in their support. (Photo by Steve Dykes/Getty Images). Sign up for free newsletters and get more CNBC delivered to your inbox. In fact, Ells said that Chipotle was embracing this as an opportunity, effectively trying to spin the crisis into a positive. The fallout has hammered Chipotle's comparable-restaurant sales and share price, which has dropped about 13 percent since the problems surfaced. He reported CDC's records show its investigators were working with Chipotle executives to address foodborne outbreak problems as long ago as Dec. 4, 2014. Although Im sure it was painful, Chipotle did exactly the right thing here. But perhaps more important, the chain has also found an efficient way to prepare food for customers who order online, installing separate assembly-line stations in nearly 2,000 of its kitchens. Now, he eats there as often as three times a week, without any concern that he might get sick. In July, only a quarter later, Chipotle announced a decrease in comparable restaurant sales by 23.6% . Starbucks (SBUX 1.50%), for example, had to recall sandwiches tainted with E. coli from its stores in December. For example, in April Chipotle announced a decrease in comparable restaurant sales by 29.7%. future. Paid sick leave designed to ensure that ill employees stay home when they are sick. As a subscriber, you have 10 gift articles to give each month. Did the company Repent or Defend? plaintiffs as selfish opportunists. Third, avoid cross contamination by properly sanitizing work surfaces, utensils and containers.. ANSWER: 1. What is the downside risk of mounting a rigorous defense? You have to give the CDC and state and local public health authorities the benefit of the doubt, though, Marler said. Is it best to apologize, repent and move on, or stand firm and aggressively defend? Additionally, when initially responding to the crisis, there was a little bit of miscommunication between Chipotle Spokespeople who placed blame on the CDC which rubbed consumers the wrong way. The company's labor costs are not segregated from operating and SGA expenditures, but Chipotle's cost of revenue is already at 62.3%. A good restaurant experience is dependent on a great staff that knows what theyre doing, said Marissa Andrada, Chipotles chief people officer. believed, is the best route to limiting damage and restoring the In the immediate aftermath of the crisis, it seemed that Chipotle used tactics from past PR crises to guide their response to the situation. The company has been aggressive in responding to the foodborne illness outbreaks, which sent sales -- and its stock price -- plunging. These additional production stations just provide a lot more speed and flexibility.. It also creates a set of challenges the kind of challenges that come when any company puts a stake in the ground and has to hold itself accountable to the stand it's taken. What are the relevant issues in this debate over the best Chipotle Mexican Grill (CMG-2.99%) has done well during the pandemic, as the company leaned heavily on its digital capabilities to continue serving customers even when indoor dining was . Chipotle responded to the criticism. labor shortages facing fast-food companies. In more recent years, Taco Bell wrestled with the E.coli problem in 2006 when 71 people were infected with the bacteria. Its all part of defending its brand value proposition as its understood in the eyes of the actual brand owners consumers. With fearful customers staying away, the company reported that comparable restaurant sales fell nearly 15% in the fourth quarter, which caused a revenue drop of 6.8% for the period. Stockholders contend the restaurant chains executives knew they had a problem long before the news broke in late 2015, but didnt properly inform investors. They implemented transparency with the press and responded to all press communications and inquiries. Anyone can read what you share. To weather the crisis, Chipotle needs to make it crystal clear how it is fixing the problems to ensure another incident does not crop up. Theyre 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. In CDC outbreak reports, companies are most often referred to as restaurant A or produce company B.. 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 dont affect its popularity.. But since then, the company has done everything right. The late 2014 E. Coli outbreak means that Chipotle experienced fourteen total outbreaks five Salmonella, six E. coli, and three norovirus from October 2014 to December 2015, a period spanning only fifteen months.. We want to hear from you. "I think it's very easy to armchair quarterback these things and say. to the authors, if you are facing a lawsuit, a sex scandal, a Wachtell and Chipotle did not return calls seeking comment, Morgan Stanley, Goldman Sachs and Joele Frank declined to comment on Thursday. Since then, Pershing Square and Chipotle have met at least once and have had telephone conversations, two people familiar with the matter said. future. People are happy to spend money on good food, but they do want to pay with money and not their lives. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. But it can and should go further by offering smaller portion options or predetermined/prepackaged lower calorie options and then it should boldly feature these options in its ad campaign in the same way it talks about sustainable farming and the lack of antibiotics and hormones. The campaign continues to lob new challenges at Chipotle. When to Defend? Chipotle used their founder and spokespeople to publically apologize and take ownership of the crisis on mainstream news outlets. It seemed that those tactics have been the most effective and Chipotle waited months before rolling them out. Chipotle Mexican Grill was founded by Steve Ells in 1993 and is based in Denver, Colorado. trial, for example, you might want the public to think youre a When he arrived, Mr. Niccol faced some skepticism from critics who argued that the tactics he used to succeed as chief executive of Taco Bell introducing new menu items and selling off stores to franchisees might not apply at Chipotle. Chipotle was founded by Steve Ells in Denver in 1994 and became a public company in 2006. However, it raises an interesting issue that Chipotle will need to deal with: Although Chipotle is making ethical sourcing claims, not better health claims, Americans generally assume they mean the same thing that no GMOs, antibiotics or hormones means the food is healthier and they can eat it guilt-free without worrying about pesky things such as calories. I missed it.. DEVELOP to activate our talent. Other companies infected with E.coli have also lived to tell the tale. The name Chipotle derives from the Nahuatl/Mexican name for a smoked, dried jalapeo chili pepper. Editors note: Bill Marler is publisher of Food Safety News. As chief executive, Mr. Niccol said he has tried to keep the chains management focused on a few key projects, including the chains digital presence. When facing a crisis, especially one in which the organiza defend yourself. The What can a business do? Do research on the Chipotle crisis. Over the years, weve seen E. coli-related recalls from products like California-based National Selection Foods companys prepackaged spinach (in 2006, 205 people sickened) and Nestle Toll House Cookie dough (in 2009, at least 66 people sickened). cheery talk does not help much during a real crisis, and its easy Last month, Chipotle announced a new bonus program created to keep hourly employees at the chain longer. It was hard for the target audience to believe that Chipotle has the highest safety standards in the industry when such a massive outbreak just occurred. Chipotles campaign was successful since they were able to contain the situation and not make it worse than it already was. At some point, nearly every restaurant chain suffers some sort of food-poisoning incident, but most do not suffer as much as Chipotle. First, officials linked it to an E. coli outbreak that has sickened 52 people in multiple states. defend aggressively. Marler is a founding partner of the Marler Clark LLP law firm, which is representing more than 100 food poisoning victims in civil lawsuits against Chipotle. Chipotle perhaps should have segmented their audience more based on demographic trends and focus on the publics that were most affected. And the controversy doesnt have to be a major one or even justified. recommend not admitting guilt and meeting each accusation with a Then, 65 people, including Boston College students and basketball players, fell ill after eating at one of its locations and tests indicated the presence of norovirus, according to the Boston Public Health Commission. Chipotles strategy was to initially take ownership of the incident and express their extreme apologies and concern over the situation . After her first three months, only a quarter of the original staff still worked there. What's a materiality assessment and should you be doing one? While those issues were met with some skepticism, Chipotles message of rewarding loyal customers resonated with the target audience well, giving the target audience confidence that Chipotle really does care about their customers. And other than the initial response we mentioned above, Chipotle has been silent. Later down the road Chipotle developed the strategy of rewarding loyal customers. Chipotles stock price reached a high last week: $759. If you havent, take a tour of itswebsiteand youll learn about how vegetables are grown in healthy soil, how it's removed GMOs from its menu, how it's taken a stand against growth hormones and antibiotics in milking cows and how it's allowing pigs to "root and roam" instead of being caged up. 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. Nevertheless, any food business owner can probably take some measure of relief in noting that this isnt exactly the first company to experience an E.coli crisis. Its efforts reinforced to the public that its brand is pure that its commitment to the humane treatment of animals and sustainable farming practices isnt just some nice-sounding ad copy.