Chipotle Research Project

Prepared forChipotle

Prepared bySean McCoy, Arielle Tsoran, Hannah

Langford, Mike Scheiner, and Henry Fiedler

Table of ContentsExecutive Summary ………………………...………………2

a. Backgroundb. Issuec. Reactions and Aftermathd. Management Decision Problem

Methodology …………………………………...….…….......6

a. Primary Researchb. Secondary Research

Findings……………………………………………................8Conclusion and Recommendations………………………….13Appendices…………………………………………………..16

Executive SummaryBackground

Chipotle Mexican Grill Inc. is a chain of fast food restaurants based out of the United

States with other chains in the United Kingdom, Canada, France, and Germany. Chipotle serves

Mexican inspired cuisine such as burritos, bowls, and tacos and more. Chipotle’s arrival marked

a transition in the industry towards healthier options while still retaining quick service. The

company gets most of their ingredients from local farms which adds to their image and helps to

differentiate the company from other fast food competitors. Even their mission statement called

Food with Integrity aims to deliver the message to stakeholders that Chipotle’s ingredients come

from only the best and most sustainable sources. The foundation of Chipotle’s image rests on

differentiating itself from competitors by allowing for individual customization on orders, the

assembly line system of workers preparing the food, the contemporary ambiance and atmosphere

of the facilities and the use of all natural ingredients. The company markets itself as a high end

fast food chain with its greatest focus on the supply chain of its products. Chipotle was founded

by Steve Ells in July 1993 who started off with only 16 restaurants, all of which were located in

Colorado. The growth exploded in 1998 when the McDonald's Corporation became a major

investor helping to create hundreds of new restaurants and more awareness on the chain. By

2015, the company expanded to 2,000 locations, employed a staff of over 45,000 people, and

generated billions of dollars in revenue.

IssueThe fast growth and development of the company took a great halt in December of 2015

after it experienced a firestorm of allegations regarding the safety of their food due to cases of

e.coli, salmonella, and norovirus being reported in several different states such as Illinois, New

York, Maryland and Pennsylvania. In the initial, larger outbreak, 55 people infected with the

outbreak strain of STEC O26 were reported from 11 states. Twenty-one ill people were

hospitalized. In the second, smaller outbreak, 5 people infected with a different strain of STEC

O26 were reported from 3 states. One ill person was hospitalized. There were no reports of

hemolytic uremic syndrome and no deaths in either outbreak. Over 40 facilities nationwide

temporarily closed down while the restaurant chain worked with federal, state, and local health

officials to investigate the outbreak. The corporation acted quickly to ensure that the epidemic

was under control and released several public announcements regarding the incidents, taking full

responsibility for its unfortunate impact.

Reactions and AftermathThe negative publicity and nationwide fear of the foodborne illness outbreak brought led

to great distrust among consumers in the fast food industry, specifically Chipotle. According to

the Food and Drug Administration report on the outbreak, the company took several actions to

ensure that the incidents were being managed and attended to right away.

Confirming that all microbial testing performed by the company did not reveal any trace of e.coli (more than 2,500 tests of Chipotle's food, restaurant surfaces, and equipment all showed no signs of e.coli)

Making sure that employees in the chains were unaffected by the incident (sickness, symptoms of illness)

Prior to restocking restaurants, thorough testing was done on all incoming inventory such as raw meat, dairy items and fresh produce

Implementing additional safety procedures, and audits, in all of its 2,000 restaurants to ensure that robust food safety standards are in place

Working closely with federal, state, and local government agencies to ensure that robust food safety standards are in place

Replacing all ingredients in the closed restaurantsConducted additional deep cleaning and sanitization in all of its closed restaurants (will

conduct deep cleaning and sanitization additionally in all restaurants nationwide)

The company’s stock dropped from an all time high of US $757 in October 2015 to US $413 by

the end of December 2015, after the outbreak. Even after The Center for Disease Control

announced on February 1, 2015 that the E-coli outbreak was officially over, people were still

skeptical and Chipotle was very much aware that there was still much work to be done in

reviving its image. Efforts to improve the company's image were broken down into 5 main

components:

1. New food safety protocol2. Increased store audits by in-house management and third party inspectors3. A $50 million marketing and promotion campaign4. Continued expansion5. Aggressive investments in staff and management

Among these, its $50 million marketing and promotion campaign seemed to have the greatest

effect on consumers. A big part of the promotion campaign included giving away thousands of

promos and coupons to consumers for free food and drinks. The promotions were used as an

incentive to attract customers back to Chipotle and divert attention away from the incident which

had great coverage in the media (Facebook, Twitter, Fox News, NBC News, CNN, etc.) The

campaign was used as a way to show the public that Chipotle was taking immediate action by

reconstructing their management and supply chain to ensure the safety and high quality of their

food. Free products were used as a way to bring customers back into the chains and increase the

traffic once again.

Management Decision ProblemA year later, we wanted to examine the progress Chipotle has made in reviving its image,

specifically in State College. Chipotle in State College has a market of over 40,000 individuals

with new potential customers coming in every single year. Although Pennsylvania did not get hit

with the outbreak as severely as other states, students are coming to Penn State from across the

nation, representing every state. We were interested in seeing if customer perception has changed

in State College after the outbreak. Analyzing the frequency of purchasing Chipotle before and

after the outbreak, looking at individual opinions on the chain, and seeing whether or not people

have received coupons recently would help us answer the decision problem and look for trends

among responses.

MethodologyPrimary Research

We created a survey as our main methodology for finding more about our management

decision problem of whether the food borne illness outbreak affected customer perception of

Chipotle in State College. Our main target market of the survey was Penn State students ages 18-

24 who had preexisting feelings towards Chipotle before the outbreak. We distributed our survey

through multiple social mediums including Facebook groups for Penn State classes of 2017,

2018, 2019, and 2020, our friends’ Groupme messages, sorority and fraternity Groupme

messages, and by directly sending it to people through text messages and email. We distributed it

through theses means in order to fully encompass a good sample of the Penn State population

including Freshmen, Sophomores, Juniors, Seniors, and 5th year Seniors or older; along with

trying to receive responses from the main races of the Penn State population counting white,

black, asian, hispanic and others. We started our survey by simply asking the respondents if they

were generally aware of the events. Our survey itself consisted of multiple questions to help

students recall their spending habits at Chipotle and their perceived perception of the company

before the outbreak and then the same parameters after the incident. We went into ask the

respondents on how much the outbreak affected the consumers and the image of Chipotle and if

they still had the same feelings today. The survey also solicited on how much they went to

Chipotle in a month before the incident compared to after. We then went into inquire if the

change in perception motivated the students to try competing fast mexican restaurants such as

Qdoba or Moes. We also asked questions regarding Chipotle’s promotional campaigns with their

coupons such as free burritos and buy-one-get-one free and whether the respondents utilized

them and whether it would incline them to go more. Next we wanted to find out how far the

students lived from the downtown State College location and their average discretionary income

per month. We finished the survey by asking all the demographic questions and whether the

respondents answered all the questions honestly and to the best of their ability.

Secondary ResearchAlong with doing our own primary research, we sought some secondary research to see if

there were any national findings that we could incorporate into our investigation to help us

answer our management decision problem of whether the consumer perception of Chipotle

changed after the food borne illness outbreak. We found a study done by Foursquare, which is a

technology company that uses location intelligence to monitor consumer activity through a

mobile application on the user's smartphone. The Foursquare community has an active

community of 50 million users all across the country steadily accessing the service through

desktops, mobile web, and the mobile application. Foursquare averages about 9 million check-

ins a day. So clearly Foursquare has the capability to conduct a thorough survey on the turnout at

Chipotle locations nationwide both before and after the outbreak. Foursquare conducted a survey

to monitor the foot traffic and sales at 1,900 Chipotle locations nationwide from the fourth

quarter of 2015 to Spring of 2016, around when the outbreak was happening.  Some major

findings Foursquare discovered from the data points are Chipotle same-store foot traffic was

down 23 percent, estimations that same-store sales will decline 30 percent for Q1 compared to

the same period in 2015, loyal customers were 50 percent more likely to stop going to Chipotle

after the E.coli scare, and formerly loyal patrons were slightly more likely than the average diner

to instead go to Whole Foods to eat along with frequenting typically popular chains like

McDonald's and Starbucks. So clearly from the Foursquare findings, the food borne illness

outbreak did have a profound effect on the national perception of Chipotle and their sales as a

result.

Findings After our surveys had been sent out and completed, we were able to dissect the data. We

found that 210 respondents had recorded. We next went on to clean our data. Overall we had to

eliminate 17 surveys because of too many skipped questions or other possible problems.

Question 12 on our survey was a qualifying question and read, “If you are still following along

with this survey please select the response “No”.” We had six people answer something other

than “No” so we discarded their surveys because we didn’t want their randomly selected answers

skewing our data in any way. Later in the survey we also asked a screening question to make

sure our respondent was between the ages of 18-24, since that is primarily who were are

targeting. Seven people said they were not between the ages of 18-24 so we also discarded those

surveys.

Breaking down the data further, 52.85% of our respondents identified as female, 45.60%

identified as male, and 1.55% of the respondents said they prefered not to answer. This means

that out of 193 respondents, 102 were female, 88 were male, and 3 people chose not to identify.

We then wanted to get a breakdown of the class standings of our respondents. 29.17% of those

who responded were freshman, 9.90% were sophomores, 35.94% were juniors, 17.19% were

seniors, and 7.81% were fifth year seniors or older. Breaking that down means that out of the

total 193 people being surveyed, 56 were freshman, 19 were sophomores, 69 were juniors, 33

were seniors, and 15 were fifth year seniors or older. We asked a question wanting to know if our

respondent was between the ages of 18-24 because we felt that target segment was most

representative of college aged students. We had 7 people answer “No”, that they were not

between the ages of 18-24. Those surveys were discarded since we specifically want to target the

18-24 year old population.

Since our main goal was to answer our management decision problem, we decided to ask

a few questions pertaining to change in customer perception. Question 1 started off with the

basics. We asked, “Are you aware of the foodborne illness incident that affected Chipotle last

year?”. 84.46% of our respondents responded “Yes” that they were in fact familiar with

outbreak. 9.33% said that they were “Somewhat” aware of the foodborne illness incident, most

likely meaning they had heard of it but didn’t know too many details. 6.22% responded “No”

that they were not at all aware of Chipotle’s incident. This question was put at the beginning to

gauge how aware our respondent was initially before reading any further.

Another important question was question 4 reading, “Chipotle’s incident last year

affected the image of Chipotle today in your opinion”. 7.77% of those being surveyed said they

“Strongly Agree” that the incident last year affected Chipotle’s image today in their opinion,

while 33.68% simply “Agree”. 36.79% of the people said they “Disagree” as well as 16.58%

who “Strongly Disagree”. We included an option that read, “Unsure” and had 5.18% choose this

response. Looking back on the survey, we should have included a “Neutral” response for those

who place themselves strictly between agree and disagree. This question was enlightening

because it showed us that most of our respondents in State College didn’t have very strong

opinions either way.

This pattern seemed to continue as our questions went on. Question 6 was, “How often

did you eat at Chipotle before the foodborne illness incident?” Followed by question 7 which

asked, “How often do you eat at Chipotle now?” To both questions, the respondents were given

the choices once a week, twice a week or more, once a month, once every few months, hardly

ever, and never. Before the incident, 31.61% of respondents said they ate at Chipotle once a

month, with this being the most common response. After the incident, “once a month” remained

the top choice with 29.02% of respondents. The next most common response was “once every

few months” with responses of 22.28% and 21.76%, respectively. These two questions help to

show us that there wasn’t really a significant change in customer demand in terms of how often

the respondent ate at Chipotle before and after the foodborne illness outbreak. However, there

were changes in the “Never” category. When asked how often the respondent ate at Chipotle

before the incident, 16 people, which is 8.29% of the total, answered that they never ate at the

restaurant. In the next question, “How often do you eat at Chipotle now?”, 26 people answered

that they never eat at Chipotle, increasing from 8.29% to 13.47%. Even though this is very low

significance in terms of the question as a whole, there were some notable changes in terms of ten

people who went from eating at Chipotle at some point to never eating there at all.

We wanted to know if the bonuses given out by Chipotle, whether it be free burritos,

coupons, or other discounts, affected an individual’s  likelihood to visit Chipotle. Question 13 on

our questionnaire read, “Would you feel more inclined to eat at Chipotle if they offered you a

coupon or discount?”. A majority, 57.51% of our respondents chose the answer “Yes, I would

eat there anyway”, followed by 33.68% who said “Yes, but only because of the discount”, and

lastly 8.81% who claimed, “No, I will not eat at Chipotle”. This finding supports our other data

pretty well in terms of Penn State students will likely eat at Chipotle regardless of discounts just

like they would regardless of the foodborne illness incident.

The results of our Cross Tabulation analysis is generally consistent with that of our

frequency analysis.  For our Crosstabs analysis, we ran the question of, “On a scale of 1-5, how

strongly would you say the foodborne illnesses affected you at the time (1 being not at all to 5

being strongly)?” against gender, race, and class standing of the respondents.

Our analysis on how people were affected based on Gender resulted in the conclusion

that gender doesn’t make a difference in response selections.  Males and females both evenly, in

terms of proportion, answered almost the exact same.  Their answers were heavily correlated

toward 1, with 1 being the most popular answer, 2 being the second most popular answer and so

on.  In total only 11 of the 193 respondents answered higher than 3 for this question.

In terms of race, the breakdown of respondents were as follows: 160 white respondents,

10 black, 3 hispanic, 15 asian and the rest responded either “other” or “prefer not to answer.”  Of

these groups, they again all proportionately answered 1 most often.  Of the 160 white

respondents, 92 answered 1 which translates to 57% of the white respondents.  Of the black

respondents, 3 answered 1 while 5 (the most popular answer) answered 2.  The most popular

answer of two for black respondents accounted for 50% of the total black respondents.

Interestingly in terms of the hispanic respondents, 1 answered 1, 1 answered 2 and 1 answered 5.

As interesting as this seems when looking at the total percentage of where the answers fell, the

fact that there were only 3 hispanic respondents points to the fact that the sample size of

hispanics in this case is too small to conclude that they were affected more than any other racial

group.  In terms of Asians, the most popular answer was 1 with 8 of the 15 respondents, or

53.33%, choosing that answer.   Despite the slightly differing percentages of popular answers,

we can’t really conclude that one race was affected more than the other due to vastly differing

numbers of respondents.  Due to the fact that the response rates of different races were so

different but the percentages were still in the same ball park, that is leaning towards 1, we can

conclude that there isn’t really a difference in opinion among racial classifications.

Next we crossed class standing with how much people were affected by the outbreak.

The response rates were as follows: 56 freshmen, 18 sophomores, 64 juniors, 34 seniors, and 15

fifth year seniors or older.  Of the freshmen, 50% answered 1.  Of the sophomores, roughly 56%

answered 1.  Of the Juniors, 53% answered 1.  Of the seniors, 70.5% answered 1.  Lastly, of the

5th year seniors or older, 73% answered 1.  From these numbers it is obvious to see that the

majority of students in each class agree that they were not affected at all by the outbreak, but

there were some interesting trends that over 70% of both seniors and 5th year seniors or older

answered 1.  This trend could possibly be attributed to the fact that they have been going to the

State College Chipotle for longer than the other students and thus have a greater trust for the

quality of food it offers.  In order to further look into this trend, I grouped the seniors and fifth

year or older group together to make it more similar in size to the other, younger student sample

sizes.  When looking at those two as a group, we see that approximately 71% of those students

answered 1, whereas in the rest of the classes only about 50% answered 1.  Interestingly, based

on these results, we were able to conclude that seniors or older were affected slightly less than

students of lower class standings.

One last cross tabulations we ran was between how strongly the individual was affected

on a scale of 1 to 5 (Q5) and how likely they were to go to a competing chain such as Moes or

Qdoba (Q8). Our results showed that 18 people who chose 1 in Q5, meaning they were not

affected at all by the outbreak, also chose 1, or “Yes”, that they would be likely to go to a

competing fast food Mexican chain like Moes or Qdoba, which we found to be interesting.

However, 49 respondents, which was the highest correlation, was between those who said they

were not at all affected by the outbreak and no, they would not be likely to go to a competing fast

food Mexican chain. Another 40 people who said they were not at all affected by the outbreak

chose option 3, which was “Does not matter”.

Lastly, we ran a discriminant analysis to check significance of gender, race, and class

standing in terms of determining how affected respondents were.  In analyzing the means of each

of the variables given their response, we see that there is almost no change across the differing

variables.  We can thus conclude that based on the means, there is no reason to say that gender,

race, or class standing had any effect on how respondents answered how they were affected by

the foodborne illness outbreak on a scale of 1 to 5.  Next, we analyzed the Wilks’ Lambda to see

the significance values for each variable.  Each variable had a significance value of over 0.5,

meaning that none of the variables were significant in determining how respondents were

affected.  Based on these two factors in the discriminant analysis pointing towards no

significance in the variables, we can conclude that, overall, none of the variables were significant

in determining how affected the respondents were by Chipotle’s foodborne illness outbreak.

Conclusion and RecommendationsOnce we had collected all of our primary and secondary research, the last step in order to

have a successful marketing research campaign was to give Chipotle the proper recommendation

based on our results.  As our group was analyzing our results, we realized that our data and

Foursquare’s data did not correlate with each other at all.  We did not find significant results in

which the customer perception of Chipotle in State College was changed after their foodborne

illness outbreak. As we stated earlier, Foursquare’s data set made it clear that there was a

significant negative change in how customers perceived Chipotle since the outbreak occurred. In

order to make sense of both results to be so contradictory, we have concluded that the outbreak

of foodborne illness mainly occurred across the west coast of the country, specifically

Washington, Oregon, and California. We believe that if the foodborne illness outbreak reached

across the east coast more abundantly, specifically Pennsylvania, more consumers in State

College would be cautious about going to a Chipotle, thus adjusting our results to become closer

to Foursquare’s results.

The overall recommendation from our group would be to test different student markets

across the states, specifically located on the west coast because that is where most of the

outbreak occurred. The purpose of running another student market research campaign along the

west coast would be to see if there would be different or more significant results for Chipotle to

use. The best objective for Chipotle to do right now is to continue with current promotions and

discounts as an incentive for consumers to return to Chipotle and work on maintaining a positive

image.

Another possible recommendation for Chipotle would be to look at a different age group.

Our study was specifically done on college aged students ages 18-24. Although other age groups

were not part of our study, we feel as though it may be beneficial for Chipotle to further their

studies to test customer perception in consumers older than 24, specifically middle aged to

seniors. This could help them better target those who were in fact negatively affected by the

foodborne illness outbreak, and see if incentives targeted at their age group would persuade

customers to return.  

Appendices

Appendix 1: Copy of the Questionnaire with coding for SPSS

Management Decision Question: Did customer perception of the Chipotle in State College change after the outbreak of foodborne illnesses?

Research Questions:1. How often did Penn State students eat at Chipotle before the outbreak?2. How often do Penn State students eat at Chipotle after the outbreak?3. How much money do Penn State students have to spend on eating out?4. To what degree was the student’s opinion of Chipotle affected?5. Is the student likely to choose to eat at a competing mexican fast food restaurant now

rather than eat at Chipotle?6. How far away from the State College Chipotle does the person live?7. Does the person’s gender, race, or age have anything to do with perception of Chipotle?8. Would a coupon or other incentive make the person more inclined to eat at Chipotle?

1. Are you aware of the foodborne illness incident that affected Chipotle last year?a. Yes 1)b. No (2)c. Somewhat (3)

2. Chipotles incident last year affected you directly at the time.a. Strongly Agree (1)b. Agree (2)c. Disagree (3)d. Strongly Disagree (4)e. Unsure (5)

3. Chipotles incident last year affected your opinion of the chain.a. Strongly Agree (1)b. Agree (2)c. Disagree (3)d. Strongly Disagree (4)e. Unsure (5)

4. Chipotle’s incident last year affected the image of Chipotle today in your opinion.a. Strongly Agree (1)b. Agree (2)c. Disagree (3)d. Strongly Disagree (4)e. Unsure (5)

5. On a scale of 1-5, how strongly would you say the foodborne illness affected you at the timeNot affected at all 1 2 3 4 5 Strongly affected

6.  How often did you eat at Chipotle BEFORE the foodborne illness outbreak?a. Once a week (1)b. Twice a week (2)c. Once a month (3)d. Once every few months (4)e. Never (5)

7. How often do you eat at Chipotle now?a. Once a week (1)b. Twice a week (2)c. Once a month (3)d. Once every few months (4)e. Never (5)

8. Do you feel more likely to go to competing Mexican chain restaurants such as Qdoba or Moes since the outbreak?

a. Yes (1)b. No (2)c. Does not matter (3)

9. Are you aware that Chipotle has been giving away coupons and has given a portion of their profits to THON?

a. Yes (1)b. No (2)c. I did not know that until this question (3)

10. Have you ever received a coupon from Chipotle?a. Yes (1)b. No (2)

11. Have you recently used a Chipotle coupon or discount?a. No (1)b. Yes, once (2)c. Yes, twice (3)d. Yes, three times (4)e. Yes, more than three (5)

12. If you are still following along with this questionnaire, please select no.a. Yes (1)b. No (2)c. Sometimes (3)d. Depends (4)

13. Would you feel more inclined to eat at Chipotle if they offered you a coupon or discount?a. Yes, I would eat there anyway. (1)b. Yes, but only because of the discount. (2)c. No, I will not eat at Chipotle. (3)

14. How much discretionary income (money leftover after bills, rent, etc.) do you have per month?

a. $0-$75b. $75-$150c. $150-$225d. $225+

15. Gender:a. Male (1)b. Female (2)c. Prefer not to answer (3)

16. Are you between the ages of 18-24?a. Yes (1)b. No (2)

17. What is your class standing?a. Freshman (1)b. Sophomore (2)c. Junior (3)d. Senior (4)e. 5th year Senior or older (5)

18. What is your race?a. White (1)b. Black (2)c. Hispanic (3)d. Asian (4)e. Other (5)f. Prefer not to answer (6)

19. Do you feel that you have honestly answered all of the questions to the best of your knowledge and that your answers will be beneficial to our research?

a. Yes (1)b. No (2)

20. Do you feel that as you were taking this questionnaire, your opinions has changed about Chipotle?

a. Yes (1)b. No (2)c. Slightly (3)