Chipotle has a plan to regain customers it keeps losing to food safety issues

Key Points
  • Chipotle knows that it has lost the trust of consumers and it's got a plan to revitalize its reputation.
  • The company will be focusing on operational changes, digital innovation and restaurant renovations to enhance guest experience.
  • Chipotle plans to launch a loyalty program in the second half of 2018.
Chipotle restaurant workers in Miami
Getty Images

Chipotle Mexican Grill has a trust problem and its finally addressing it.

The burrito chain has struggled to regain customer confidence since a series of food-borne illness outbreaks caused diners to flee the restaurant chain two years ago. On Tuesday, the company said it was aware of these issues and was making strides to revitalize its reputation.

"Our results for the quarter clearly show that there's still work to be done to restore strong growth and customer trust," CEO Steve Ells said during an earnings conference call Tuesday.

Ells said that the company would be focusing on operational changes, digital innovation and restaurant renovations to enhance guest experience.

Training and staff oversight

To start, Ells said that the company is launching a "dedicated centralized training program" in Denver that will combine classroom and in-store training to improve consistency and speed of service as well as hospitality.

"We also completed the restructuring of our field leadership, reducing the number of regions and eliminating unnecessary layers above the restaurant," he said. "Our field leader ratios have been reduced, enabling our strong field leaders to spend more time in each restaurant. This has had a direct and lasting impact on the restaurant teams."

In the past, Chipotle has had a hard time enforcing corporate policies in-store. Last year, a Chipotle employee told CNBC that sick employees would often not call out sick or be forced to work while sick. Another employee said that staff members were not always properly blanching vegetables and were asked to falsify food safety sheets.

Since then, Chipotle has strengthened its paid-sick leave and held mandatory training sessions about proper food safety protocols.

Digital innovation

As digital ordering becomes a bigger piece of restaurant sales, Chipotle is looking to improve the speed at which it can push orders through.

Digital sales are about 8.6 percent of Chipotle's overall sales, led by mobile ordering, which has increased 50 percent year over year.

By the end of 2018, the company hopes to add a second make-line at about 1,000 locations, or 30 percent of its stores, to boost the number of orders it can handle and how fast it can handle them. Chipotle estimates that it will spend $45 million to retrofit second make-lines into existing and new restaurants.

"We're also seeing higher guest satisfaction in the restaurants that have the new, second make-line, and we've seen further reduction in guest wait times to under 15 minutes as we continue to optimize our smarter pick up times," Ells said.

Chipotle also plans to launch a loyalty program in the second half of 2018. The burrito chain's previous loyalty program, Chiptopia, which ran for about three month in 2016, was a major driver of sales for the brand.

The company will spend an additional $15 million to improve IT infrastructure to help support its digital programs.

Refreshing old locations

The back of house isn't the only part of Chipotle that's getting a face lift.

The company plans to spend $50 million, or $20,000 per restaurant, to upgrade the interiors to have more comfortable dining areas and allow for more ordering options, better presentation of its beverage selection and improve the mobile ordering experience.

"You know, it's real low-hanging fruit to change light bulbs and to freshen with new deep thirds on the service line, the new stainless steel pans that aren't bent, things like this that really cause customers to notice that there's something different," CFO Jack Hartung said on the call. "It's shinier, it's brighter, it's cleaner. And we're going to continue to find those kinds of opportunities."