CHIPOTLE PLANS TO ROLL OUT QUESO IN DENVER AND L.A.
Chain to test queso it wants to help company overcome another food-borne illness crisis
Chipotle Mexican Grill announces a big test of Genuine Queso in 350 stores in Denver and Los Angeles markets — but is the buzzy new menu item enough to overcome yet another food-borne illness crisis?
Chipotle Mexican Grill on Tuesday announced a big test of Genuine Queso in 350 stores in Denver and Los Angeles markets — but is the buzzy new menu item enough to overcome yet another foodborne illness crisis?
Chipotle’s earnings, revenue and restaurant margins all were up in the second quarter of 2017 compared with last year, but the effect of norovirus cases linked to a store in Sterling, Va., won’t be known until the Denver-based company’s thirdquarter results are released Oct. 24.
Diluted earnings per share was $2.32 for the three months ended June 30, up 87 cents from second quarter of 2016, the company reported Tuesday.
Restaurant sales increased 8.1 percent and revenue was up 17.1 percent to $1.17 billion, according to Chipotle’s report. Top executives attributed the increase to an aggressive expansion. Their goal is to open 195 to 210 new stores this year.
The fast-casual chain opened 50 new stores in the second quarter and closed two, bringing their national total to 2,339.
But food-safety controls (including paid sick leave for workers), implemented when the company was blamed for infectious disease outbreaks in 2015, now face criticism from patrons and from the stock market. Immediately after news of the Virginia outbreak, shares lost as much as 7.6 percent of their value.
Chipotle founder and CEO Steve Ells blamed the Virginia crisis on a few workers in a single location not following the new protocols. As many as 135 people reported becoming ill after eating at the restaurant but only two norovirus cases have been confirmed.
“We believe someone was working while sick,” Ells said during a conference call with analysts Tuesday. “We made it clear to the entire company that we have a zero tolerance policy for not following these protocols. When followed, they work perfectly.”
Executives hope queso will hope the chain bounce back. Chipotle’s chief marketing officer Mark Crumpacker said that the queso-effect should not be underestimated. Others said they hope it changes the conversation.
“Our hope is that the impact will fade, and the marketing and buzz (around queso) will change the narrative,” chief financial officer Jack Hartung said Tuesday.
Queso will hit menus in Colorado and Los Angeles on Aug. 1, and if the test goes well, will be rolled out nationwide by midSeptember.
The company has faced a difficult road from the 2015 foodborne illness crisis that sickened more than 50 customers in multiple states with E.coli. Its share price has
stayed around $400 per share in 2017, compared with $749 per share in 2015.
And, the July 17 norovirus outbreak isn’t the first to be linked to the brand. In 2015, more than 120 Boston College students were sickened by the virus, the most common cause of foodborne illness in the U.S., according to the Centers for Disease Control and Prevention.
“It was very clear that procedures were not being followed,” said Scott Boatwright, Chipotle’s newly appointed chief restaurant officer on the call Tuesday. “Not following our procedures will have severe consequences, and I’m bringing a maniacal focus on the fundamentals of our business. This type of rigor and discipline has been absent from the brand for some time.”
In addition to Boatwright’s crusade for adherence to rigorous food safety procedures, Chipotle management hopes to make a rebound with the roll-out and marketing of queso — expect to see the liquid cheese frequently in television commercials — and a digital platform for ordering.
The company plans to improve and expand digital and mobile ordering, and will release a mobile app later this year.
Executives said they want to position Chipotle as a digital leader.
“The last two (incidents of foodborne illness) have been extremely challenging,” Ells said, “but we are emerging as a stronger company.”
Chipotle Mexican Grill’s Genuine Queso will hit menus in Colorado and Los Angeles on Aug. 1, and if the test goes well, the queso will be rolled out nationwide by mid-September.