The wrap on Chipo­tle is di≠er­ent from a year ago

Peo­ple are turned o≠ by lines and miss­ing items, not food con­tam­i­na­tion.

The Denver Post - - BUSINESS - By Sarah Halzack

It was a lit­tle more than a year ago that Chipo­tle was rocked by the first in a brief flurry of food-con­tam­i­na­tion in­ci­dents that sent many cus­tomers flee­ing from the bur­rito chain. Since then, the com­pany has been try­ing to win back din­ers in a va­ri­ety of ways, rang­ing from a sweep­ing over­haul of its food-safety mea­sures to adding chorizo to its menu. It even em­ployed gim­micks such as a sum­mer­long re­wards pro­gram and of­fer­ing free meals for kids.

And yet, things are still look­ing sour at Chipo­tle: In the most re­cent quar­ter, sales were down a stag­ger­ing 22 per­cent at restau­rants open more than a year. In­vestors have sent the stock down 22 per­cent so far in 2016. These trou­bling fig­ures help ex­plain why the com­pany an­nounced this week that co-CEO Monty Mo­ran was de­part­ing the com­pany, clear­ing the way for its other co-CEO, Steve Ells, to ex­e­cute a sin­gu­lar vi­sion to re­vive the busi­ness.

Against that back­drop, it’d be easy to as­sume that Chipo­tle’s trou­bles sim­ply re­flect a need to put the food-safety scare be­hind it. But ac­tu­ally, on

a Mon­day con­fer­ence call with in­vestors, ex­ec­u­tives ac­knowl­edged that some­thing more con­cern­ing may be turn­ing din­ers off.

“The data, ev­ery­thing that we have, sug­gest that there are not large num­bers of cus­tomers stay­ing away from Chipo­tle be­cause they feel like ei­ther we didn’t ad­dress the prob­lem prop­erly or that they are afraid of Chipo­tle,” said Mark Crumpacker, the restau­rant’s chief mar­ket­ing and de­vel­op­ment of­fi­cer.

In­stead, the com­pany is having trou­ble get­ting the ba­sics right: Through­put is down, mean­ing cus­tomers are fac­ing frus­trat­ingly long lines. The din­ing room ta­bles and drink sta­tions are of­ten a mess. And pa­trons are con­stantly find­ing that the bur­rito as­sem­bly line is out of an in­gre­di­ent or two.

In other words, it seems the core source of Chipo­tle’s dif­fi­culty right now is con­vinc­ing peo­ple it is en­joy­able to eat at Chipo­tle — a re­mark­able turn of events for a com­pany that was not long ago the dar­ling of the in­dus­try for its seem­ingly un­stop­pable sales growth.

Ells of­fered in­vestors a frank di­ag­no­sis last week of the com­pany’s prob­lems: Restau­rant em­ploy­ees’ time had be­come too con­sumed by overly elab­o­rate job in­ter­view pro­cesses. And their train­ing fo­cused too much on soft skills and not enough on the nuts and bolts of mak­ing the restau­rant run smoothly.

“Over time, we started to make run­ning our restau­rants more and more com­pli­cated. And on oc­ca­sion, we lost sight of what re­ally mat­tered: our cus­tomers,” Ells said.

Ex­ec­u­tives es­ti­mate that about half of Chipo­tle’s 2,100 lo­ca­tions are com­ing up short on cus­tomer ser­vice. That can take shape in a va­ri­ety of ways. For ex­am­ple, long lines have al­ways been the top pain point on Chipo­tle’s diner sur­veys. But lately, some of that wait­ing around has been at­trib­ut­able to slower through­put. The com­pany reg­u­larly mea­sures how many cus­tomers can make it through the line in a 15-minute time win­dow, and chief fi­nan­cial of­fi­cer John Har­tung said that it is cur­rently “well off that mark” of what it was hit­ting one or two years ago.

The com­pany is tak­ing steps to try to speed things along, in­clud­ing cre­at­ing a sec­ond bur­rito “make line” in the back for fill­ing dig­i­tal food or­ders. This should ease some of the bur­den in the main line, es­pe­cially if Chipo­tle suc­ceeds in get­ting more peo­ple to place on­line or­ders.

And then there’s the mat­ter of get­ting your cus­tom bur­ri­tos or tacos made to your lik­ing: Crumpacker said it is an “in­creas­ingly fre­quent prob­lem” that din­ers make it up to the counter, only to find that the as­sem­bly line is out of, say, brown rice or one type of salsa. Ex­ec­u­tives be­lieve that solv­ing this doesn’t nec­es­sar­ily call for more work­ers per restau­rant, but just bet­ter train­ing: Em­ploy­ees, they the­o­rize, can do bet­ter at keep­ing up with de­mand if they’re given bet­ter in­struc­tion on how to do so. Same goes for those messy ta­bles: They are hope­ful that will get bet­ter as they en­cour­age work­ers to turn more at­ten­tion to the din­ing room in­stead of just the kitchen.

Chipo­tle’s lead­ers sus­pect these ser­vice hitches are not com­pletely turn­ing off their most loyal bur­rito fans, but they are con­tribut­ing to those din­ers com­ing less fre­quently.

Chipo­tle ex­ec­u­tives are still bar­rel­ing ahead with ex­pan­sion plans, say­ing they will open at least 195 new restau­rants in 2017, sug­gest­ing the com­pany re­mains con­fi­dent about its abil­ity to turn things around in rel­a­tively short or­der.

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