Chipotle disclosed in January 2016 in an 8-K, an SEC filing that publicly traded companies must make when there are material business developments, that it had received a subpoena from the federal grand jury for the central California district. \({ }^{33}\) The investigation focuses on an outbreak of norovirus in late 2015 that occurred among 234 patrons of several of the Chipotle stores in California. The food inspectors for Ventura County found violations in their inspections of the Simi Valley restaurant where the customers purchased food, including storing food at temperatures below the 135-degree requirement, dirty and/or broken utensils, lack of necessary hand washing by employees, and 17 employees who had become sick from eating food at the restaurant. The inspection reports show failures to address previous violations.

This disclosure of a criminal investigation followed on the heels of an outbreak of norovirus in the Boston area among 136 people who had eaten at Chipotle. In addition, the company found that \(\mathrm{E}\). coli was the cause of illness for 20 people who were hospitalized after eating at Chipotle restaurants in the Pacific Northwest. Reports of a salmonella outbreak came from Minnesota and were connected to tomatoes served to customers. The company experienced six outbreaks in six months. A lawyer who represents plaintiffs in actions against companies for food poisoning said that the rate of outbreaks was unprecedented in his career, which began in \(1993 .{ }^{34}\)

The drop-off in customers was almost as great as the drop-off Jack-in-the-Box experienced following an E. coli breakout at that chain in 1993. After the outbreak in the Boston area restaurants, sales declined 34\%. On December 21, 2015, the Centers for Disease Control and Prevention (CDC) announced that new illnesses related to E. coli in October and November 2015 had slowed substantially and also announced five new investigations in November 2015 of the same strain of E. coli. Following the CDC announcement and national media attention, sales declined \(37 \%,{ }^{35}\) Chipotle's stock price was at an all-time high in August 2015 of \(\$ 757.77\) per share. By January 2016, the share price was \(\$ 404.26\).

Chipotle had gained credibility and some of its customer base from its commitment to using local farmers and suppliers. Support for local, small farmers has been touted as a step toward local sustainability. However, the small farmers and their marketplaces have escaped regulation and inspection. "Farmers' markets are great.... One day they're going to kill some people, though." \({ }^{36}\) Galen Weston, the Chairman of Loblaw, the Canadian grocer, offered this assessment in his speech at the 2012 Canadian Food Summit. The local produce market has been growing because of the ease of entry and lower costs of regulatory compliance. The Centers for Disease Control and Prevention concluded in 2013 that produce such as fruits and vegetables accounted for \(46 \%\) of the 4,589 food-borne illness outbreaks linked to a specific commodity between 1998 and \(2008,{ }^{37}\) At the top of the list were leafy greens. A 2013 similar FDA analysis found that leafy produce resulted in 131 outbreaks (including salmonella, E. coli, hepatitis A, and cyclospora) between 1996 and 2010 that resulted in 14,000 illnesses and 34 deaths. In the summer of 2012, the salmonella-infected cantaloupes from a farm in Indiana affected all growers and caused all melon growers to experience significant losses because of one farm's shoddy operations.
As a result, Congress passed the Food Safety Modernization Act (FSMA), called the most sweeping safety reforms in 70 years. \({ }^{38}\) The FSMA imposes growing standards, packing requirements, inspection procedures, and record-keeping requirements through administrative rules designed to track food from farm to table so that the outbreaks can be reduced, tracked, and, hopefully, prevented. However, the law exempts from federal standards and regulations any farms with less than \(\$ 500,000\) in food sales for the past year, a threshold that results in an exemption for \(80 \%\) of the farms, including many of Chipotle's vendors...........................................

Discussion Questions Explain the food safety incidents at Chipotle.
2. Make of list of who was affected by the food safety problems and describe the impact.
3. Describe the purpose and components of the "Food with integrity" program at Chipotle.
4. What lessons should companies take away from the Chipotle experience?