Don Burrows, a feature writer for InvestorPlace.com, notes that social media has made it difficult for Chipotle Mexican Grill to recover after food poisoning incidents last year sickened some 500 customers of the fast-casual chain in 11 states.
“It increasingly looks like outbreaks of foodborne illness are much harder for a chain to overcome in the social media era,” writes Burrows. “Intuitively, at least, it makes sense. And every time CMG struggles with same-store sales, it adds more anecdotal evidence to the case.”
Earlier this week, Chipotle reported a plunge in third quarter earnings, with the company’s stock price immediately plummeting more than 9.2 percent to $368.02 per share, less than half of its pre-outbreak high. Burrows says “the critical retail metric” for Chipotle is “same store” sales, sometimes called “comparable restaurant” sales. For those stores, open at least a year, Chipotle said third quarter sales were down 21.9 percent.
Clearly, being proactive in protecting brand quality is paramount. Social media today takes news around the world in the blink of an eye, and trying to repair the damage after an incident that damages a brand’s prestige can be extremely difficult. Since the six outbreaks it experienced last year, Chipotle has been investing in both food safety and marketing programs. Analysts say it has won back most of its most loyal customers, but still has problems with customers on both coasts who have other fast casual options. READ MORE