Chipotle in Crisis after Virus Outbreaks

Convershaken Staff
January 6, 2016

Chipotle has grown quickly in part because of its high-quality, responsibly sourced offerings. But the Mexican fast-food chain's reputation has been tainted by a widespread E. coli outbreak and several customers falling victim to norovirus.

A recent stock market filing reveals that 'same-store' sales - those at locations open for at least a year – slumped 30% in December. Chipotle's management now predict a fourth-quarter sales decline of 14.6% - the previous estimate was 8% to 11%. The company also expects to stomach between $14m and $16m in costs related to the E. coli outbreak as it replaces unsafe food and conducts lab tests on produce. And the flurry of bad news has driven Chipotle's share price down a third in the past year.

Worse still, the US Food and Drug Administration (FDA) and a California district attorney have launched an investigation after 230 patrons of a Chipotle restaurant in Simi Valley, California, came down with norovirus in August 2015. Health inspectors cited the restaurant for violations in pest control, sanitation and maintenance, and discovered that food was being kept at unsafe temperatures. A federal grand jury will now decide whether to indict the company. Chipotle's bosses have been unable to identify the source of the outbreak or estimate the magnitude of potential fines or penalties.

Similarly, in December 2015, more than 140 students at Boston College in Massachusetts caught norovirus from eating at Chipotle. City inspectors closed the restaurant and reported three major health violations: a sick employee working, multiple counts of foodborne illness, and chicken and steak being kept at least 12°F below the minimum required temperature of 140°F.

Victims of norovirus can suffer inflammation in their stomachs or intestines, leading to pain, nausea, vomiting and diarrhoea.

Chipotle has also suffered supply issues that weren't its fault. It fired one of its major food suppliers in January 2015 for failing to meet its standards for responsibly sourced animals: the company requires that pigs be raised with outdoor access or in deeply bedded pens and without the use of antibiotics. As a result, Chipotle was forced to remove carnitas – shredded pork – from the menus of more than 600 restaurants.