It's been almost one year since Chipotle Mexican Grill's multistate E. coli outbreak first rocked the popular fast-casual food chain. And while all signs point to an improving prognosis, the company's wayward path back to health has been somewhat head scratching.
Since last March, the burrito maker has rolled out a seemingly endless parade of campaigns aimed at getting customers to give it another chance. Last month, the company said it was giving away free drinks to all students--even those who are home schooled (with a valid ID). The day after that announcement, it said it would give a free meal for kids with the purchase of an entree every Sunday in September. Then of course there's Chiptopia, the chain's summer-long loyalty program.
An analysis of the company's press releases for the past five years reveals its abundant marketing efforts aimed at regaining the public's trust. Before the food safety scandal, Chipotle usually publicized about eight marketing campaigns a year (and hardly any in 2012). In the past six months, it has announced 10.
The blitz makes sense. After all, food safety issues are serious and prompt action is vital. However, the Denver-based company's flood-the-zone approach for regaining the public's trust has been perplexing--and some suggest it might even backfire, as it might condition customers to buy only when there's a freebie involved.
For entrepreneurs studying the Chipotle food scare, its response should be instructive. After all, should you go through something similar one day, you'll want to have a plan in place. The question is, do you follow Chipotle's lead?

On the mend.

If you ask the company, the answer is resounding yes. "All of these programs have been in support of two overarching goals: Winning customers back after last year's food safety issues and increasing frequency," says Chris Arnold, a Chipotle spokesman.
After last November, when the U.S. Centers for Disease Control and Prevention officially opened its investigation into the E. coli outbreak that led to 60 cases of food-borne illnesses at the Chipotle eateries in as many as 14 states, the company's sales torpedoed. And in February 2016, for the first time since the company's IPO in 2006, its quarterly sales declined. Chipotle said its fourth-quarter revenue fell 6.8 percent to $997.5 million. Further, its net income over the period clocked in at just $67.9 million, a 44 percent loss from $121.2 million the same time a year earlier.
The bloodletting hasn't let up. In July, Chipotle reported that for the period ending in June, profits plunged 81 percent, to just over $25.6 million from $140.2 million a year ago. Sales for the quarter also missed analysts' expectations, but just barely. The company reported $998.4 million in revenue, whereas analysts had expected about $1.05 billion.
To Arnold, it's only a matter of time before Chipotle is back on top. It has already recovered nearly 40 percent of its lost sales, he says, adding: "Things have been moving in the right direction."
CLSA equities analyst Jeremy Scott tells Inc. that he believes Chiptopia has been the key to Chipotle's recovery. "They've been able to accumulate 3.6 million members in a span of weeks. It took Starbucks and Dunkin' two years to achieve those numbers," explains Scott. He adds that over the next 12 months, traffic is the only thing that will matter to the valuation of the stock.

The road to redemption.

Still, serving up free Sunday meals and drinks is pricey. That's not exactly a strategy that every company in Chipotle's shoes can consider--especially if you don't have Chipotle's bankroll. If there isn't enough volume, Chipotle--or any other company for that matter--may end up losing much more than what it stands to gain.
Some have argued that the easiest way for Chipotle to redeem itself would be to bite the bullet and be more vocal about its efforts to prevent similar food-safety issues in the future. Among those who support this approach is Jeff Carr, a clinical professor of marketing and entrepreneurship at New York University.
"If people are concerned about the safety of the food or the health of the food, offering them discounts is not addressing the problem," says Carr. He adds that the people taking advantage of the promotions are probably those who were not worried and were likely to continue purchasing at Chipotle. So, he concludes, "you're giving away money that you would have gotten."
What's more, he argues, frequently engaging in promotions like these typically conditions people to count on them. In effect, he says, "you train your customers to expect them, [and] then people tend to not buy on a regular basis or they only buy when there is a promotion."
To be sure, Chipotle is actively working on securing its ingredients. It has pledged $10 million to support local farmers and help suppliers meet the company's "heightened food safety standards." It also brought in Jim Marsdens, a former meat science professor at Kansas State University, as its new executive director of food safety. That's on top of a nationwide voluntary closing of its stores on February 8, when it announced new regulations for handling ingredients and other food safety practices.
Naturally, the closings made headlines around that time. However, at present, the public can view these rules in a dedicated section in the company's website. That's not public enough, suggests Carr. "That demands that someone goes to the website to read it. Who would take the time and effort to do that?"
It's easier for people to simply choose a different restaurant, adds Carr. His advice? A more proactive effort to get Chipotle's food-safety message across to people concerned about last year's incidents.
Arnold, on the other hand, is convinced the company's strategy is on point. "Our focus now continues to be on three things: marketing programs to continue to bring customers back to our restaurants, providing the very best customer experience we can, and rebuilding the strength of our economic model."
Whether Chipotle's freebie-focused strategy will improve its bottom line faster remains an open question. What else is unclear? Bill Ackman's role going forward. Theactivist hedge fund investor behind Pershing Square Capital Management snapped up almost 10 percent of the company for a whopping $1.2 billion, according to a recent Securities and Exchange Commission filing. Even if he pushes for a franchising model, as some suggest, or refocuses Chipotle's marketing efforts, as others advise, the only certainty is that he has his work cut out for him.