Article

Chipotle 'Not dialing back food-safety efforts'

Chipotle's Chris Arnold said the chain is not dialing back food-safety efforts.

March 16, 2016 by Cherryh Cansler — Editor, FastCasual.com

Although several headlines this week have reported Chipotle may be considering "stepping back from some of its food-safety changes" announced last month, Chris Arnold, communications director, said any changes will only strengthen Chipotle's commitment to food safety.

"We are not dialing back our food safety efforts, our commitment to establishing Chipotle as a leader in food safety remains fully intact," he said in an email to FastCasual.com. "Over the last few months, we have implemented a number of programs and procedures to enhance food safety — including prep of some ingredients in central kitchens, high resolution testing of ingredients, and procedural changes in our restaurants. Any changes we may make to our initial plans will be to strengthen what we are doing."

Despite these efforts, the chain reported in a March 15 filing with the United States SEC, that it expected a loss of $1 per share or more for the first quarter. It had announced several weeks ago, however, that it expected break-even earnings for the period. This was before the chain's same store-sales dropped 27.3 percent in the second week of March, after a Boston restaurant closed due to employees reporting illnesses, just weeks after the Centers for Disease Control and Prevention closed an investigation that linked strains of E. coli back to the burrito chain. 

According to the SEC report, the chain's losses are due in part by incurring higher expenses driven by increased marketing and promotions spend in other operating costs, which are anticipated to be higher in the first half of 2016 compared to historic reporting periods. The chain, during the week of Feb. 8,  launched an aggressive marketing campaign to invite customers to dine at Chipotle via a free burrito offer. 

In the filing, the chain also said it anticipated higher food costs "due to additional food safety protocols put into place, as well as higher food costs related to food waste, rejection rates related to high resolution DNA testing, and lower volumes."

"We have also incurred higher labor costs to ensure we were fully staffed as customers redeemed their free burrito offer. The first quarter results will include an estimate of the liability for expected, but unredeemed free burrito offers."

Legal expenses associated with the investigation by the Department of Justice have also led to the higher costs.  

"We continue to expect that our margins and earnings potential will fully recover as our sales improve over time, except that we expect our food costs to be higher on an ongoing basis by about 200bps due to the food safety related actions we have taken," stated the filing.

Lastly, the chain said in the SEC filing that it hired Kansas State University’s meat science professor, James Marsden, to oversee food safety across the 2,000-unit chain.

About Cherryh Cansler

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Cherryh Cansler is VP of Events for Networld Media Group and publisher of FastCasual.com. She has been covering the restaurant industry since 2012. Her byline has appeared in Forbes, The Kansas City Star and American Fitness magazine, among many others.

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