Stories of sickness, rodent infestation and class action suits that pulverized the Chipotle brand last week not only sent the company's stock into freefall, but also swept through the global news media like a tsunami. Ultimately the chain gave back 5.5 percent of its year-over-year gains in share value, according to Chipotle CFO Jack Hartung, who reported second-quarter results during an earnings call Tuesday.
In other words, the restaurant industry and those supporting it got an all-too-real-life example of one of the nightmare scenarios that keep restaurant brands' leadership up at night.
"There but for the grace of God go I," said Ellen Hartman, whose company handles public relations related issues for numerous restaurant brands. "Most of these issues can happen to any restaurant, especially [with] norovirus, which is so contagious."
You could almost hear the industry's collective sigh of relief as Chipotle's C-team finally spoke during the earnings call, relating that for the quarter ended June 30 (and before last week's negative news coverage) the brand had shown significant progress. In the first half of this year alone, earnings per share skyrocketed from a loss of 3 cents to a gain of nearly $4.
"Of our last 24 years, there's no doubt the last two have been extremely challenging," Chipotle founder and CEO Steve Ells told analysts and investors during the Tuesday webcast. "But we are emerging as a stronger company ... ultimately creating greater shareholder value."
The confidence and optimism generated by Q2 results was almost palpable as Chipotle leadership spoke Tuesday. Clearly, Ells and other company executives believe that the brand can rise from the ashes of its food safety debacles of the past two years — and the past two weeks. The restaurant industry as a whole seemed to have new hope Wednesday morning.
The 'elephant in the dining room'
But amid the rush of relief, are restaurant leaders missing a larger point?
Hartman's remarks last week offer an initial suggestion of a much bigger story to be told in the aftermath of Chipotle's July crisis. That story could aptly be titled, "Exhale and Repeat."
Those three words seem to sum up the food service industry's response to this latest restaurant-related illness episode — one that Chipotle management says their investigation traced to an employee who reported to work while infected with the highly contagious norovirus. This despite protocols the company had put in place to prevent just such an incident, leadership said on Tuesday.
"We conducted a thorough investigation and it revealed that our leadership there didn't strictly adhere to our company protocols," Ells said. "We believe someone was working while sick, and we took swift action and made it clear to the entire company that we have a … zero-tolerance policy for not following these protocols. These protocols were designed by leading experts on our food safety council and in-house by our food safety expert, Jim Marsden. … When followed, they work perfectly."
Still, after hearing the harrowing tales about other brands Hartman has worked with that have experienced situations all too similar to the one at the Sterling, Virginia, Chipotle, it is clear that there's a very sick, but virtually ignored "elephant in the (dining) room" of the restaurant industry.
The problem in 4 points
The food service industry's standard operating model — in the U.S. and other nations, as well — is practically structured to make illness outbreaks a fact of life for four reasons:
- there are no real industry-wide standards relating to restaurant industry employee illness and presence at work;
- brands with standards in place fail to account for the fact thatinfected workers can be contagious both before and after they exhibit symptoms of an illness;
- in most cases, no one is tasked with enforcing standards that have been put in place. And finally ...
- even assuming that the above issues were addressed, many restaurant employees would still show up to work while contagious because they don't get paid if they don't work, and they don't have employer-supported medical insurance to cover physician visits confirming an illness and then clearing them to return to work.
As one restaurant chain CEO who wished not to be identified said, the reality is that "People infected with a norovirus are contagious from the moment they begin feeling ill to at least three days after recovery. Some people may be contagious for as long as two weeks after recovery."
Restaurant leaders surely know this. Certainly, health officials and physicians in any community with a restaurant know this. But the situation remains as it's been since the dawn of dining out: unregulated and primed for the next disaster.
Whether the industry will do anything about this remains to be seen; regulations of any kind have always been anathema to business. In the meantime, Hartman underscored that wise brand leaders will take matters into their own hands and address the situation in-house with comprehensive training at all levels and all stages of employment.
It's certainly sounding as if this is going to be Chipotle's next big push. When asked by an analyst on the call about the way forward after last week's blows to the brand, Chipotle's new chief restaurant officer Scott Boatwright replied:
I assure you that we've taken swift action on what's transpired there, and [are] making it clear to the entire organization that not following our procedures will have severe consequences. What I plan to bring to the organization here at Chipotle is a maniacal focus on the fundamentals of our business. More specifically, ensuring the integrity of our training programs to lay a strong foundation for the organization's success. This type of rigor and discipline has been absent from the brand for some time and we will re-instill it again.
S.A. Whitehead Award-winning veteran print and broadcast journalist, Shelly Whitehead, has spent most of the last 30 years reporting for TV and newspapers, including the former Kentucky and Cincinnati Post and a number of network news affiliates nationally. She brings her cumulative experience as a multimedia storyteller and video producer to the web-based pages of Pizzamarketplace.com and QSRweb.com after a lifelong “love affair” with reporting the stories behind the businesses that make our world go ‘round. Ms. Whitehead is driven to find and share news of the many professional passions people take to work with them every day in the pizza and quick-service restaurant industry. She is particularly interested in the growing role of sustainable agriculture and nutrition in food service worldwide and is always ready to move on great story ideas and news tips.