Restaurant Chain’s Stock Reaches Historic High as Home Delivery, New Menu Items and Clean Hands Drive Performance and Recovery
7/25/19 – – On Tuesday, the fast-casual restaurant chain Chipotle Mexican Grill, Inc. reported same-store sales growth of 10 percent in the second quarter. That beat Wall Street expectations and sent the company’s stock price to a record high of $759 per share (it’s traded over $780 since the earnings announcement). The last time Chipotle’s shares traded above $750 was August 2015 – just weeks before customers began getting sick from outbreaks of norovirus, salmonella and E coli contamination in Chipotle restaurants from California to Massachusetts. Repeated incidents of food poisoning in multiple locations over the next six months threatened the chain’s survival.
Chipotle’s successful recovery from crisis holds many important lessons for crisis counselors and communicators. Above all, the company’s four-year reputational resurrection underscores the main message of Chapter 21 in The Crisis Preparedness Quotient – Measuring Your Readiness to Weather a Reputational Storm (“Performance is the Best Path to Recovery”): There’s no shortcut to recovering from crisis. Earning back lost trust is all about keeping your promises, staying in character and showing the world you can still perform.
There’s no question the leadership of Chief Executive Officer Brian Niccol, who joined Chipotle from Taco Bell in February 2018, has made a big difference. He’s moved the company’s headquarters to southern California from Denver, added popular quesadillas to the menu, dramatically increased advertising spending and focused on home delivery, partnering with DoorDash to make digital sales (which grew 99.1 percent in the second quarter) 18.2 percent of the company’s total sales.
All good stuff. But I saw promising signs of recovery way back in September 2016 when I read an article in The New York Times headlined, “Every Day’s a Safety Drill as Chipotle Woos Customers Back.” Here’s how retail reporter Stephanie Strom began her story:
A large digital kitchen timer perches near a sink at a Chipotle Mexican Grill in the Meatpacking District of Manhattan. It is reset every 30 minutes, and 12 minutes have passed.
“In about 18 minutes, everyone will stop what they’re doing and wash their hands,” said James Marsden, the company’s new executive director of food safety.
There isn’t much sexy about food safety, and that goes for regular reminders to scrub hands. But for the last year, Chipotle has been forced to focus on little else, after a string of illnesses among diners at the Mexican restaurant chain grew into nationwide alarm. The concern has battered the company’s sales, reputation and stock price.
Similar kitchen timers occupy a similar position in each of Chipotle’s more than 2,000 restaurants, a prosaic symbol of the company’s efforts to prevent similar problems in the future.
That’s the kind of unsexy but fundamental reform that puts an organization back in control of its future. Chipotle management, still committed to using locally sourced ingredients, had to know they were one contamination outbreak away from extinction. Customers loved Chipotle’s fresh food, but only clean performance over time would bring them back.
Around the first anniversary of the outbreaks, Chipotle ran full-page advertisements in publications like The New York Times and The Wall Street Journal reminding the public (and investors) of its robust reform initiatives. The ads, under the signature of founder and then-Chairman/Co-CEO Steve Ells, listed eight “advancements” made, as promised. The reforms included the formation of an independent advisory council made up of “industry experts,” additional farmer support and training, and enhanced restaurant procedures, along with more frequent, intense restaurant inspections.
Even after four years, any additional health scare would create serious headaches for the company. But by focusing on and carrying out real food-safety reforms in its kitchens, sticking with its differentiating local ingredient strategy and introducing valued customer conveniences, Chipotle has proven it can still perform. No shortcuts. Chipotle is winning back the trust of customers and investors, one delicious burrito – and home-delivered quesadilla – at a time.
You’ll have to excuse me now. It’s been 30 minutes. I’m going to wash my hands.