Restaurant chain Chipotle Mexican Grill Inc. is finally rallying from a contamination crisis that started at one of its restaurants in Simi Valley.
An outbreak of the norovirus there in August sickened 234 customers and was followed over the next few months by cases of E. coli, salmonella and norovirus at other Chipotles around the country.
The crisis sent shares plunging by 40 percent and saw sales down 30 percent by the end of last year.
But now the outbreaks appear to be over, according to the Centers for Disease Control and Prevention, and shares have recovered upon the news.
Health officials have failed to identify the source of outbreaks at Chipotle but point to fresh produce as a probable cause.
Meanwhile, one local analyst believes that chain suppliers, not the brand, are to blame.
“My guess is that Chipotle is not doing anything wrong, it’s suppliers who made some errors,” said Kevin Burke, a managing partner at Brentwood investment banking firm Trinity Capital. “When you have rapidly-growing chains, they’re either adding suppliers or adding production and that can lead to break downs.”
The brand tells its suppliers how to handle food, Burke said, including how to wash and store vegetables as recommended by food safety experts. But suppliers must decide to follow that protocol.
Despite his view, other chains that pride themselves on fresh produce are taking their own increased steps to ensure food safety and customer loyalty – just as Chipotle has pledged to do.
“We’re very concerned the same thing can happen at our restaurants,” said Bruce Schroder, president of Atlanta-based Moe’s Southwest Grill, a Chipotle competitor. “And because of that, we’re doing everything we can to ensure the safety of our guests.”
He added, “Our business model is a little different than Chipotle. We have a franchise system and because of that we have an extra line of defense.”
Moe’s has owners who operate independently whereas Chipotle’s restaurants are all company-owned. “At the corporate level, we have strict standards for safety for franchises to execute,” Schroder said. “And then our franchises tend to be connected with a local community, which is working on serving safe food.”
Chipotle is currently trying to win back its customers. The company said it would close its 1,895 U.S. stores on Feb. 8 for a half day, while a national team meets to discuss food safety measures and a marketing campaign to make its customers return.
The food empire, headquartered in Denver and founded in 1993, built a reputation based on fresh ingredients and naturally raised meat. Its menu consists of burritos, bowls, tacos and salads.
But when almost 500 people across the country headed to the emergency room after eating at Chipotle in the last few months of 2015, that healthy reputation took a huge hit along with the stock price.
At two inspections following the Simi Valley outbreak, Ventura County health inspectors found various health violations. But officials allowed the restaurant to continue to operate.
Share prices and consumer confidence dropped as further outbreaks occurred at other Chipotle restaurants across the nation.
Business is slowly recovering now but many people in the food industry avoid talking about the Chipotle outbreaks, according to Burke, the Trinity Capital analyst. He explained, “There is a little bit of superstition in the industry that it can happen to you too.”
When the Business Journal called a string of Los Angeles restaurant chains about this story, including Blaze Pizza, 800 Degrees and Tender Greens, not one of them responded to requests to comment.
According to Centers for Disease Control and Prevention estimates, 48 million Americans get sick from contaminated food each year.
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