Chipotle Has Not Gone Out of Business, But There Were Headwinds in 2015
No one would have thought and to that matter not even Steven Ells that a small taqueira in Denver, Colorado will one day become a fastest growing restaurant chain within few years. Yes we are talking about Chipotle Mexican Grill founded in 1993 by Steven Ells. Chipotle is a Mexican Spanish name given to smoked and dried Jalapeno chilli pepper. Equipped with a culinary degree, Steven with monetary help from his father started first Chipotle in Denver. Their initial target to meet the breakeven point was to sell 107 Burritos in a day. However, within one month the restaurant started selling more than 1000 burritos in a day.
With enormous success, Ells thought to open a fine dining restaurant, but relinquished his idea and focused on opening Chipotle Mexican grill restaurants. The restaurant chain grew fast and by 2016 there were more than 2000 restaurant outlets all over USA and few more in other countries. It also had 11 ShopHouse south East Asian kitchen restaurants. The company even operates Pizzeria Locale and Tasty Made restaurants. Chipotle does not give any franchise of its business, but owns all its restaurants. MacDonald’s made its initial investment in Chipotle in 1998. MacDonald further increased its investment and at one time it was Chipotle’s largest investor. But in 2006, MacDonald completely divested from Chipotle. In 2007, Ells made its first public offering.
In later months of 2015 there were series of E-coli and norovirus outbreaks in several Chipotle Maxican Grill restaurants. Due to this the company had to face negative press and criticism. Due to this the company had drop in its sale and even the stock of Chipotle had to bear the brunt. However, the company took this eventuality seriously and rendered massive damage control. In this perspective the company took steps to close all its 2000 locations temporarily. The company wanted to make sure that its restaurants were safe to eat. Chipotle educated and informed its employees about the new food safety measures to prevent future outbreaks. This hefty risk of temporarily shutting down its outlet taken by management paid off well. It took this step in the name of food safety. The company wanted to prove the public and its patrons how serious it took of the recent outbreak. The company smartly made its come back by combination of damage control tactics, positive press and reviving loyalty of customer that was lost after the E-coli outbreak.
- Results of latest quarter ended September 2017:
- The revenue of the company increased by 8.8% to 1.13 billion.
- Comparable restaurant sales increased by 1%.
- Net income is 19.6 million.
- The sales of restaurants increased by 6.5%.
- Outlook by the management:
- For the year 2018, management is aiming to open 130 to 150 new restaurants.
- How Chipotle made its comeback in 2017 after the E-coli crisis in late 2015:
- It took food safety measures in all its 2000 and more locations with breakthrough food technology. This technology helps to prevent spread of E-coli and other microorganisms.
- Increased its advertizing expenditure. The advertize focuses on quality of ingredients used in preparation of various menus such as burritos, tacos, burrito bowl, and fresh salad. Chipotle prepares its food using real and whole ingredients. It does not add color, flavor and other synthetic additives that are usually found in fast foods.
- Digital online ordering facility.
- Addition of a sweet in the menu.
- Improvement in hiring process of employees.