A new Chipotle Mexican Grill (NYSE:CMG) opened in my seasonal hometown of Celebration, Florida, on Monday. It's an event that was building up in social media anticipation since the development was announced several months ago, but the buzz didn't last. Many of my neighbors posted on an online forum that they plan to stay away, concerned about the E. coli outbreak in the northwest and the more recent norovirus spike at a Boston Chipotle.
The place was still packed for dinner the first night that it was opened, according to folks who decided to roll the dice. However, it is kind of unsettling to see people starting to see the market darling in fast casual as a scary place to eat.
This will pass. The incidents will cease, and then Chipotle will be tasked with convincing burrito seekers that it's still a cool place to eat. C'mon, now. How much longer can you resist the cilantro rice or deny your barbacoa or carnitas fix?
We know that this won't be fixed overnight. Chipotle already warned that comps will be negative for the current quarter, something that we haven't seen in the chain's tenure as a public company. Chipotle will bounce back, but it has to make sure that it doesn't repeat SeaWorld Entertainment's (NYSE:SEAS) mistake.
SeaWorld took too long to fight back after its reputation came under attack following 2013's Blackfish. The marine life theme-park operator wasn't quick or vocal enough to refute the claims raised in the scathing documentary. Some people think that SeaWorld is still capturing killer whales in the wild, or take Blackfish claims for gospel like the suggestion that orcas in captivity have shorter average lives than those in the wild.
SeaWorld suffered back-to-back years of 4% declines after its reputation got smacked, bucking the the trend from the leading theme-park operators that grew their turnstile clicks during that time. Attendance at SeaWorld has stabilized this year, but margins are still getting crunched.
Chipotle can't take that long to turn around. Its valuation is too rich for a market laggard, even after its recent sell-off.
Chipotle is already trying to turn things around. Founder and co-CEO Steve Ells was on Today last week, apologizing for the health scares. Ells said that his company went through all 64 ingredients it uses and they all tested clean. This may seem like a bad thing since it still doesn't know the culprit, but it also suggests that the bad times have passed.
Customers still aren't convinced. I've been to a couple of Chipotle restaurant over the past month and the lines have been short if not nonexistent. However, as long as Chipotle gets out there -- controlling the narrative -- it has a better chance of bouncing back sooner rather than later. Let's just hope the creators of Blackfish don't put out Blackcoffee.
Rick Munarriz 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.
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