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Chipotle isn't experiencing a bounce-back just yet.
Reuters/Charles Platiau
Still hasn’t turned the corner.
BURRITO BLUES

Chipotle’s food safety scare late last year still has the burrito chain looking a little sickly

By Chase Purdy

Mark Crumpacker has a 60-page deck of research delivered to his office everyday. This is the burrito bible.

Among other things, it tells the Chipotle executive how consumers feel about the burrito chain and how frequently they visit it. But there’s one thing Crumpacker’s burrito bible can’t answer: What customers need to see from Chipotle, specifically, to get them walking in through the doors like they used to.

“I wish I had compelling data on that, because we certainly asked the question,” Crumpacker, Chipotle’s chief creative and development officer, said in March at an investor conference hosted by Bank of America Merrill Lynch. “It’s just not something people can really answer. You basically get a hundred different answers. The most compelling thing is time. They just want—I just want to give it a little bit of time.”

It may take longer than anticipated. First-quarter sales at Chipotle locations open at least a year shrank 30% from the same quarter last year, the company said—a sign that the once-irreproachable brand has a long road to recovery in the aftermath of a 2015 food safety crisis that sickened 60 people with E. coli across 14 states, hospitalizing 22.

Total first-quarter revenue of $834.5 million was down more than 23% year over year. And the company, which has more than 2,000 US locations, reported a net loss of more than $26 million for the period.

The results, while disappointing for Chipotle executives, should not have come as a big surprise.

“It was kind of eerie,” chief financial officer Jack Hartung said at the March conference. “We’d hear this from customers. They would walk by our restaurant and say, ‘God, that was always busy and now there is no line whatsoever.’ ”

To change the perception, the chain offered free burritos to lure people into the restaurants and to show them the food can be trusted. And the company plans to send out 21 million coupons by direct mail offering buy-one-get-one free burritos through the summer.

The company says it’s already seen a good response to the promotions—customers redeemed coupons for more than 6 million free burritos in February and March (that’s roughly $39 million in free food based on the price of a chicken burrito)—although sales are still lagging in places near to where the illness outbreaks took place. If those don’t improve, the company said it will consider offering mobile deals to potential customers.

To address systemic food safety issues in-house, CEO Steve Ells said Tuesday (April 26) that Chipotle has hired James Marsden, a meat-science professor at Kansas State University, to be its executive director of food safety. The company also has reviewed how it prepares each ingredient. It’s now blanching all produce and pre-cooking its steak, among other things.

Management says it is also considering adding new items to its menu, though it did not elaborate beyond chorizo, which it had already introduced in one market in late 2015.