Chipotle Restaurants - Paper Example

4 pages
899 words
University of California, Santa Barbara
Type of paper: 
Case study
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Chipotle has indeed paid the ultimate price for its food safety lapses. The management has made necessary steps to ensure they address identified health lapses. The costs that are expected to be associated with this effort will without any doubt pressure the earnings for the next few quarters CITATION Chi15 \l 2057 (Chipotle Mexican Grill, Inc.:, 2015). Moreover, the company needs to plan a significant advertising and promotional campaign so that it can regain the customers visitation and trust. In the long run, the company will have the capability to bounce back. Moreover, other companies including McDonalds and Jack in the Box have had to deal with more serious food-related incidents and they have successfully bounced back. Therefore, Chipotle also has an opportunity to also amend its systems so that it can return its former glory CITATION Chi15 \l 2057 (Chipotle Mexican Grill, Inc.:, 2015). Thus, it is up to the management to ensure they deploy different necessary measures that ensure the company is able to return its former glory.

Chipotle has enjoyed a rapid growth in the recent years since it went public. In 2006 reports indicate the company had approximately 510 restaurants, but this time has quadrupled now. As a result, the company has enjoyed great annual revenue and growth CITATION Chi15 \l 2057 (Chipotle Mexican Grill, Inc.:, 2015). In 2015 the company suffered food safety issues which affected the company revenues but was still able to post 10% revenue and 7% in growth CITATION Chi15 \l 2057 (Chipotle Mexican Grill, Inc.:, 2015). Therefore, despite the food issues setback, the company has immense potential to continue expanding into other states. As earlier noted, the company needs to concentrate on developing advertising and promotion campaigns for its proposed new restaurants CITATION Chi15 \l 2057 (Chipotle Mexican Grill, Inc.:, 2015). Moreover, the company enjoys a good financial strength, thus the company has the capability to continue doing business under the less-than-favorable conditions without having to pay hefty interests to the creditors. To further ensure the company financial stability, it is critical for the management to buy back the re-advertised stocks in the market to take advantage of the low price and also give a lit to the current earnings per unit share.

Chipotle was once known for its quality ingredients but as a result of the recent E-coli outbreak, the company has had difficulties proving itself in its quality food serving and high-quality food CITATION Chi15 \l 2057 (Chipotle Mexican Grill, Inc.:, 2015). Once the quality of standards was questioned, many customers began to flee. To have a strong comeback, there is the need for all the employees to be retrained and ensure they have the right skills to ensure food is handled in the right manner. Moreover, Chipotle depends on a very complex supply chain where it gets many of its produce from small-scale farmers CITATION Chi15 \l 2057 (Chipotle Mexican Grill, Inc.:, 2015). Therefore, this potentially becomes very difficult to monitor the quality standards and also the safety of the produce. Moreover, many local suppliers do not have enough resources to effectively track the latest food safety concerns. Therefore, the Chipotle management needs to devise ways that it can exploit to ensure the company former glory of its high quality and excellent produce returns. First, the company can decide to sort one supplier of its produce. By identifying one or few suppliers, it will be easier for the company to keep track of the quality levels. Moreover, many large-scale suppliers have the capability to maintain the higher quality standard and deploy measures to guarantee safety. Second, if the management sorts to continue getting its products from the small-scale farmers, then the company needs to organize a DNA testing where it can effectively identify any harmful bacteria before they enter the supply chain. Third, to avoid cross-contamination in the kitchen, it is proposed for all the foods to be prepared in different workstations. Forth, to ensure it empowers its small-scale suppliers, the company can ensure it offers classes to all the farmers so that they can deliver the right quality products needed.

Chipotle restaurants depend on the U.S market by approximately 99% CITATION Chi15 \l 2057 (Chipotle Mexican Grill, Inc.:, 2015). Despite the growth that is realized in the US market, research has proved that the company is so much dependant on the consumer preference. Therefore, the company is affected by the dependency on consumer discretionary spending. In the event the consumers change their feeding patterns then the company is affected badly CITATION Chi15 \l 2057 (Chipotle Mexican Grill, Inc.:, 2015). Therefore, recommendations can be made or the company to explore other markets other than the US market. Moreover, given the food poisoning happened in the US, the company was hit hard. However, in the event the company could have exploited other markets, then it would not have suffered such significant financial setbacks at it experienced.

In conclusion, it will take some time for the Chipotle customers to regain their trust of the brand. Therefore, it is essential that the company avoids any additional instances of food-borne poisoning as is could permanently decimate the customers perception of the quality of Chipotle food items. As noted in the memo, the management needs to take initiatives to improve food safety even beyond the industry standards. When the management has the ability to take care of the current problems then it will be possible to prevent in the future.



BIBLIOGRAPHY Chipotle Mexican Grill, Inc.:. (2015). Fanning centre for Business Communication, 1- 15.



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