What: Shares of Chipotle (NYSE:CMG) slumped on Friday afternoon after the CDC reported that additional E. coli cases have been linked to the chain. Chipotle closed on Friday down 12.55%.
So what: Chipotle was forced to close 43 restaurants earlier this month after an outbreak of E. coli was discovered at restaurants in Oregon and Washington state, with 37 people infected as of Nov. 4. Chipotle announced on Nov. 10 that it would reopen the affected restaurants.
The story, however, didn't end there. On Friday, the CDC announced that a total of 45 people have now been infected across six states, including Oregon, Washington, Ohio, New York, Minnesota, and California. The CDC has not yet discovered the root cause of the outbreak, and so far, 16 people have been hospitalized.
Now what: An E. coli scare has the potential to keep customers away from Chipotle's restaurants, and depending on how severe the outbreak ends up being, it could have long-lasting negative effects on the company's brand. An E. coli outbreak at Jack in the Box restaurants in 1993 killed four people and, not surprisingly, caused a dramatic drop in sales.
So far, the Chipotle E. coli outbreak is far less severe, but Chipotle's sales will likely suffer in the short-term as customers think twice about visiting its restaurants.
Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.