Chipotle Mexican Grill Inc.
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Chipotle Mexican Grill Inc.
October 26, 2012
EXECUTIVE SUMMARY
This report studies the issue of alleged probes made by Department of Homeland Security (DHS) and Securities & Exchange Commission (SEC) on Chipotle Mexican Grill. Chipotle have been accused of not complying with the highest recruitment standards and hiring of unauthorized workers. Chipotle faces potential crisis situation, which need immediate attention and proper planning to mitigate the concern of our key stakeholders. To tackle these challenges, we plan to clearly communicate our current recruitment policies, employ stringent practices of using E-Verify across the nation and provide support to employee in work authorization issues. This report encompasses all important events, happenings, facts and details pertinent to this case and recommended future course of actions
Timeline
In 2010, the federal agents from the Immigration and Customs Enforcement arm of the Department of Homeland Security, or ICE conducted silent raids in Chipotle restaurants in Minnesota and finding evidence that the company engaged in the employment of foreign workers who did not hold proper work authorization documents. Subsequently, the ICE conducted similar raids two other states; Washington D.C. and Virginia. During the initial rounds of ICE audits in 2010 and early 2011, Chipotle in Minneapolis was forced to lay off approximately 450 workers who were unable to provide valid work authorization documentation On May 18 2012, Chipotle Mexican Grill Inc. received a subpoena from the Securities and Exchange Commission as part of an expanding investigation into its alleged hiring of undocumented workers. The key chronological sequence of events which encompasses all important events, happenings, facts and details pertinent to this case has been described in Appendix.
Root Cause Analysis & Threats
Chipotle business model is unique in sense they owns and operates majority of its U.S. restaurants, rather than working with franchisees. As a result, the company sees a more direct impact from store and is ultimately responsible for its hiring. Due to the company model we are facing the brunt of investigation and financial cost. The probes and investigations along with the firing of employees have severely impacted our business. The company lost $1.3 million in legal costs related to the ICE investigation and subsequent firings. Furthermore, Chipotle would be forced to terminate many of its employees due to problem of unauthorized workers; they face potential disruption of operation across all the Chipotle location in US. There has been temporary increase in labour costs due to training of new employees In long run it could damage the reputation and brand of Chipotle .Additionally we are in danger of becoming subject to various litigations and lawsuits.
Message to Key Stakeholders
To resolve potential crisis situation, which need to address the concern of our key stakeholders on urgent basis. Following are the 3 major stakeholders (priority-wise) which need most attention: –
Federal agency: Chipotle needs to clearly communicate that it does not support the hiring of undocumented workers, in line with DHS and ICE guidelines. We also need to show our full support to DHS and ICE to gain back their trust. This is important for our long term and sustainable presence in U.S. market
Employee: Chipotle should continually cooperate with both our existing employee and employee terminated due to unauthorized work permit. Involve all divisional managers to work closely with Hispanic communities to resolve tension on the ground and engaging the existing employees to make sure their moral is not affected. Welcome back terminated employees if they acquire legal work permit.
Shareholder: There has been a huge impact on the share price. It has been showing a downward trend from May 17th 2011. Chipotle need to send out a newsletter addressing the stockholders that concrete steps are being taken to resolve the issue at hand. There should be clear message communicated to our shareholder that Chipotle is fully committed to growth and expansion of current business and maximizing the profits.
Recommendations
Based on above situation and priority of addressing key shareholder, following are the recommended actions in order to rectify the problems:
Implementation of E-Verify across the nation:
Chipotle needs to make strict implementation of E-Verify in all states in which it operates. Although it is only required in Arizona, North Carolina and South Caroline, but Chipotle must