SUZANNE ALDAHAN—Chipotle Mexican Grill has been in the news a lot lately, and not because the restaurant chain finally decided to stop charging extra for the guacamole (although someone may want to tell their public relations staff that doing so might not be a bad idea). Rather, Chipotle began serving something a little extra with every bite.
Beginning in July 2015, five people in Seattle, Washington, were exposed to E. coli bacteria after dining at Chipotle. One month later, at least 234 people were inflicted with Norovirus in Simi Valley, California. By that point, my Mom—like most moms would—called and warned me to stay away from their scrumptious cilantro lime rice. In August and September it was discovered that 64 people in Minnesota got sick from Salmonella Newport. By the end of 2015, exposure to E. coli spread to 52 more people in Ohio, New York, Pennsylvania, Maryland, Illinois, California, Washington, and Minnesota and another 136 people contracted Norovirus in Massachusetts.
Customers don’t usually expect to get sick after eating at dining establishments like Chipotle, but it is more common than one might think. The Centers for Disease Control and Prevention reports that Norovirus is the “leading cause of illness and outbreaks from contaminated food in the United States,” causing about half of all food-related illness outbreaks—an average of 19–21 million cases per year. But what does all of this mean for Chipotle, even if Norovirus is fairly common? Well, Chipotle’s stock plummeted, the Company forecasted sales to drop at least 15 percent by the end of the fourth quarter, and its consumer perception reached all time lows.
Steve Ells, Chipotle’s Co-Chief Executive Officer, apologized on national television and ensured the public that Chipotle will become the “safest place to eat.” Going into 2016 with the “new year, new me” mentality, Chipotle announced that it would hold a Company-wide food safety meeting on February 8 where it will close more than 1,900 restaurants.
Sadly, 2016 is not starting off strong. At least nine lawsuits have been filed against Chipotle because of the food-borne illness outbreaks and a few are really putting the Company under fire. A class-action lawsuit was filed on behalf of those in Simi Valley, California, which alleged that the restaurant chain tried to cover up the Norovirus outbreak. Allegedly, one of the kitchen managers in Simi Valley continued to handle and prepare food at work while suffering from gastrointestinal symptoms. Two days later he was diagnosed with Norovirus, and Chipotle did not contact health officials. The lawsuit claims that “Chipotle chose instead to try and conceal all evidence of the outbreak by disposing of all food items, bleaching all cooking and food handling surfaces and replacing its sick employees with replacement employees from other restaurants before notifying county health officials of the outbreak.” Petitioners allege that Chipotle was already experiencing issues with food in Minnesota at the time and was trying to prevent more bad publicity by covering up the Simi Valley incident. Additionally, a Chipotle shareholder, seeking class action status, recently sued the Company for “misleading investors about its food-safety and quality control measures.” Susie Ong claimed that the restaurant made “materially false and misleading statements” and “did not disclose that its quality controls were not in compliance with applicable consumer and workplace safety regulations.”
Other restaurant chains have experienced similar situations in the past. In late 2006, Taco Bell had an E. coli outbreak that affected about 71 people across five states. Taco Bell was, like Chipotle now, hit with various lawsuits and many estimated that Taco Bell would spend between $25,000 and $500,000—perhaps millions—on each settlement, depending on the severity of the case. Here, Chipotle should follow in Taco Bell’s footsteps. With the advent of social media and Chipotle’s “Food with Integrity” image, the Company may have to spend more time and money recovering from this outbreak; and Chipotle has already lost almost $10 billion in market value since the first outbreak in August 2015.
Normally, the quintessential question people have to answer after walking into Chipotle is “burrito or bowl?” This time, the question is “lawsuit or settlement?” With what could end up being countless lawsuits, Chipotle should strike while the tortillas are hot and settle.
