What you need to learn from Chipotle’s troubles

Burrito maker Chipotle is the current poster child for Murphy’s Law: Anything that can go wrong, will go wrong.

And smart small business, medium-sized business, and large business leaders will take note of what has happened to Chipotle over the last couple of years to carefully examine their own management structure and talent.

The food chain made the news recently when it sorely missed earnings expectations and made millions of dollars for investors who held short positions. The poor results caused Chipotle stock to plummet some 15 percent.

The lesson to be learned from Chipotle’s misfortune is that every segment of your business must be under excellent management. This can be difficult for smaller businesses, especially when founders are reluctant to delegate. Chipotle experienced problems through:

  • Operations: An e-coli outbreak in 2015 set the company back and since then there have been other food-safety incidents.
  • Technology: A malware-powered data breach put customer data into the hands of hackers.
  • Natural disasters: Chipotle said that the hurricanes also blew away some of its revenue, contributing to the poor Q3 results.

Chipotle couldn’t stop the hurricanes, but the fact that it lays some blame on those storms emphasizes the impact natural events can have on your business. Chipotle has restaurants across the fruited plain and frankly, the hurricanes – as severe as they were – impacted only a small part of the nation in terms of area.

How would your results look if you suffered a shutdown caused by a severe natural or man-made disaster? Do you have logistical plans and preparation in place to get back on your feet quickly? Do you have the funds required to bridge your downtime? Statistics show that many small businesses are unprepared.

The operational and technological problems Chipotle suffered highlight one of the basic problems faced by small business owners. Typically, the tech guru isn’t the same person who can create and manage the nitty-gritty systems that must be in place to exert proper control in an organization – nor is he or she the marketing magician.

If you look at the different leadership expertise required as we’ve outlined the problems Chipotle has faced, they cover these areas:

  • How will you weather a disaster?
  • Technical: Is your data secure?
  • Operations: Does your company run safely and efficiently?
  • Marketing: When you experience a problem, how will it be managed in the public?

Let me say one more thing about that final point. Chipotle is suffering because of repeated food safety problems or scares. I don’t want to criticize any actions it has taken to fix those problems, but I do want to point to the fact that they have left a lingering skepticism on the part of many consumers.

Compare this to the Tylenol 1982 tampering crisis. If you weren’t around for that terrible scare, seven people in the Chicago area died after someone laced extra-strength Tylenol on store shelves with cyanide. Johnson & Johnson recalled 31 million bottles of Tylenol and developed excellent tamper-proof packaging. It was essentially the first real product recall. Customer confidence was restored.

Had there been another incident of tampering, I think Tylenol may have never recovered. Strong, immediate action, and good follow on marketing, restored its critical position in the market. Today, it’s perhaps the premiere case study in handling a product crisis.

Will Chipotle again become a favorite child in the fast-casual restaurant space? Maybe, but it will take a lot of excellent leadership.