Case Detail

Case Summary

Chipotle Mexican Grill: Food with Integrity?

Case Number: 5-316-501, Year Published: 2017

HBS Number: KEL979

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Key Concepts

Branding, Business Marketing, Business Process Improvement, Change Management, Competitive Strategy, Consumer Marketing, Corporate Strategy, Crisis Management, Distribution Channels, Ethics, General Management, Growth Strategy, Labor Relations, Marketing, Marketing Planning, Marketing Strategy, Operations Management, Organizational Culture, Regulation, Reputations, Risk Management, Service Strategy, Social Responsibility, Society and Business Relations

Abstract

By any measure, Chipotle Mexican Grill was a success story in the restaurant business. It grew from one location in 1993 to over 2,000 locations by 2016 and essentially created the fast casual dining category. Its stock appreciated more than 1,000% in the ten years following its 2006 IPO.

However, after more than 20 years without a major reported food safety incident, Chipotle was revealed as the source of multiple outbreaks of illness from norovirus, salmonella, and E. coli that sickened nearly 600 people in 13 states in 2015. The company closed stores, spent several months under investigation by the U.S. Centers for Disease Control and Prevention (CDC) and other health organizations, and faced a criminal investigation in connection with the incidents.

After a much-publicized closing of all of its stores on February 8, 2016, and numerous changes to its food sourcing and preparation practices, Chipotle tried to win back customers with dramatically increased advertising and free food promotions.

However, on April 26, the chain announced its first-ever quarterly loss as a public company. Same-store sales for the first quarter were 29.7% lower than in the previous year. Operating margins fell from 27.5% to 6.8% over the same period, and the company’s share price was down 41% from its summer 2015 high.

Learning Objectives

After reading and analyzing the case, students will be able to identify ways in which Chipotle could have minimized operational risk through governance and measurement; assess Chipotle’s actions to rebuild consumer trust; and suggest approaches to demonstrating recovery and safety when the new product looks no different than the old product.

Number of Pages: 8

Extended Case Information

Teaching Areas: Marketing

Teaching Note Available: Yes

Geographic: United States

Industry: Restaurant

Organization Name: Chipotle Mexican Grill

Organization Size: Large

Year of Case: 2015