Chipotle Has Improved Food Safety, Customer Service Not So Much (NYSE: CMG)

nyse-cmgChipotle Mexican Grill Inc (NYSE: CMG) may be well on its way to restoring customer confidence in the cleanliness of their food but it looks like they may have a new problem as a result. Both figuratively and literally plagued by disease outbreaks last year, the burrito chain has focused mostly on delivering safe products . Obviously this is admirable but as a result, the focus on food safety and constantly changing menu items the chain’s cleanliness has suffered.

Indeed, Chipotle Co-Chief Executive Steve Ells say that employees have been so focused on food-safety changes that they have not been able to keep up with cleaning table. As such, Ells notes that the company will now put “laserlike” attention on these problems in order to attract previous customers they may have lost.

At a Barclays investor conference, on Tuesday, Ells comments, “When we invite lapsed customers into restaurants that are less than perfect, they will not return as frequently.”

And the number reflect this: in October, the company reported same-store sales (in the third quarter) had fallen even more than they had expected: by nearly 22 percent. More importantly, though, profits fell 95 percent.

Looking at the number it is pretty clear to see what happened. The company typically only implements about 8 operational changes at their stores every year. However, after last year’s food safety crises, the chain made 80 of these operational changes. With that, employee turnover, unsurprisingly, increased and, as mentioned, workers had a very hard time keeping up with standard maintenance like cleaning window glass or even busing tables.

But now, Ells notes, the food safety systems are in place and they can finally begin to focus on new training for employees in order to provide better customer service. This is increasingly important because of the continued pressure from fast-casual restaurant competition like Panera and [Tex-Mex rival] Qdoba (owned by Jack in the Box). Obviously, Chipotle (NYSE: CMG) also bears competition from former owners McDonald’s, and even from formidable pizza chain dominators Papa John’s and Domino’s.

Apparently, Chipotle (NYSE: CMG) is also facing lawsuits from 10,000 former workers suing over allegations of unpaid wages; so they have quite the journey ahead of them.

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