Chipotle CEO: No price increase to cover food safety costs
Chipotle will not raise prices to cover the cost of new food safety procedures put in place after an E. coli outbreak sickened more than 50 people, the company's founder and CEO said Tuesday during a visit to Seattle.
CEO Steve Ells would not say how much the new testing along its supply chain and safety protocols inside its restaurants are costing the chain of more than 1,900 casual Mexican restaurants. Suppliers also would not be paying for all the new testing requirements started, he said.
"This is a cost that we will bear," Ells told The Associated Press at the beginning of a day stopping by Seattle restaurants to talk to employees about new food safety rules.
At a meeting with business analysts last week, company executives said they would consider raising prices to invest in food safety, but they did not expect to do so before 2017.
Suppliers who are unwilling to meet the new "high resolution testing" requirements, which Ells said are years ahead of testing procedures at other restaurant chains, will no longer do business with Chipotle. Small farms won't be asked to cover the whole cost of this new approach to food safety.
Ells said the company's approach to food safety is similar to its focus on food quality and none of the new procedures are impossible or very difficult to follow. It's easier at some other chains to meet the highest food safety standards because everything is cooked, processed or frozen, which Ells said is not the Chipotle way.
Chipotle has lost money and customers this fall after an E. coli outbreak led the company to close more than 40 stores in the Pacific Northwest, followed by a massive norovirus outbreak at one restaurant in Boston.
Chipotle said in a regulatory filing on Dec. 4 that sales have been "extremely volatile" as a result of the E. coli cases. November sales fell 16 percent from a year ago. For the full fourth quarter, the company said it expects sales to fall between 8 and 11 percent at established locations. That would mark the first time quarterly sales declined since the company went public in 2006.
Although the Denver-based chain is sure the October and November E. coli outbreak was caused by bacteria in fresh food like tomatoes or cilantro, Ells said they will never know for sure which item actually sickened people who ate at their restaurants.
Chipotle is now focused on getting the chance of foodborne illness as close to zero percent as possible, Ells said. But, he added, "it is impossible to insure that there is a zero percent chance of any kind of foodborne illness anytime anyone eats anywhere."
In addition to more testing along the supply chain, Chipotle is instituting more high-tech food tracking inside its restaurants and some new procedures, including cutting, washing and testing tomatoes at central commissaries to insure they are as clean as possible.
Tomatoes, lettuce, cilantro, celery and onions have all been implicated in recent outbreaks of food borne illness.
The Centers for Disease Control and Prevention has said the E. coli outbreak associated with Chipotle sickened 52 people in nine states. It has not yet identified the ingredient that made people sick. The most recent of the illness reported by the CDC started Nov. 13.
About 48 million people get sick from a foodborne illness each year, according to the CDC.
"I am deeply sorry that people got sick from eating at our restaurants. It's the worst thing that can happen," Ells said, adding that his No. 1 goal is to do whatever he can to prevent that from happening again.
(Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)