In September of this year, it was revealed in SEC filings that Bill Ackman's Pershing Square Capital Management had acquired nearly 10% of Chipotle (CMG Quick QuoteCMG - Free Report) shares, making his funds the second-largest shareholder behind the behemoth Fidelity.

Three months later on December 16 his Ivy-league brand of insider activism resulted in four new directors being named to the company's board.

But I find what happened in between there more interesting as Chipotle still reels from the lingering effects of their E.coli food poisoning scare last year.

In late October, the burrito king delivered Q3 results that made many investors lose their lunch. CMG reported that revenue decreased 14.8% to $1.0 billion and comparable restaurant transactions decreased 15.2% while comparable restaurant sales dropped 21.9%.

Shares of CMG plunged 9% the next day from $405 to $368 on over 6 million shares, the single biggest one-day drop and volume display in over four years. By November 1, new 3.5 year lows were hit at $352.

The Guac Thickens

Then, at a December 6 investor conference hosted by Barclays, Chipotle management admitted that it is now "nervous about the guidance" the company gave during its most recent earnings call, attributing part of the headwinds to customer service and high labor turnover. More on this in a moment.

The fast-casual Mexican restaurant chain forecast Q4 same-store sales declines in the low single digits. And for 2017, the company projected a same-store sales increase in the high single digits and earnings per share of $10.

Analysts at J.P. Morgan and Instinet cut Chipotle's price target in the days following the conference. Describing the news as "disappointing" the analyst from JPM cut his price target from $425 to $375 while Instinet analysts also lowered their price target to $333 from $372.

After recovering from the October slide back up to $400, the stock took another $30 tumble, or 7.5%, on over 4.9 million shares.

Activists, Rich and Poor

Ackman had to exert some degree of legal pressure to change faces on the board. On October 28, CNBC reported from unnamed sources that Chipotle was beefing up its defense against Ackman's intentions.

Reportedly, the company turned to investment banks Goldman Sachs and Morgan Stanley, as well as law firm Wachtell, Lipton, Rosen & Katz, to hold off the activist's advances.

In the end, CMG gave in. I think their bargaining power may been weakened by the admissions and subsequent fall-out from the Barclays conference.

Because the more troubling problem for the restaurant was a new conundrum they faced: keeping reliable staff and maintaining quality customer service in the face of new work demands on employees. During the food safety crisis of the past year, management found itself having to pour new procedures on staff to keep stores clean and protect customers.

According to a MarketWatch article by Tonya Garcia on December 8, CEO Steve Ells talked about the company's “laser-like focus” on improving customer service. Ells attributed a high number of changes to various operational problems that were “thrown at crew members.”

Garcia reported "Usually, there are about eight changes in a year, Ells said. After the illness outbreaks that began in late 2015, there were 80."

The result was a higher turn-over in staff which has negatively impacted customer service overall. And that high turnover is also impacting costs at a time of declining revenues, creating a double-edged sword of their own design.

Ten times more operational changes may not be ten times more work, but I bet the load probably doubled in some cases. One could say that unskilled restaurant laborers have their own brand of activism when the job just isn't worth it.

And this is a new black eye for Chipotle that most investors didn't see coming.

As the Burrito Turns

While Chipotle has survived the food-borne health scare as a company, they have lost their growth momentum as potential new customers choose other dining options. You can imagine the quick and easy decision that many people might make to go elsewhere when the stigma of food poisoning lingers, consciously or otherwise.

But now they have new issues with customer service as they over-burden their low-wage staff with excessive cleaning procedures. This is one problem many analysts, myself included, did not expect.

Here's how I viewed Chipotle's stellar position in fast-casual with stand-out customer service in July of 2015, ironically right before the beans hit the fan...

Chipotle's Secret Sauce of Success

The business certainly still has a fighting chance, and clearly Bill Ackman is joining other large shareholders who still believe and haven't sold their shares yet. Fidelity did sell about 500,000 shares in Q3 to knock their haul down to 2.57 million shares, or 8.8% of the company but UBS was found adding with a buy of over 1.6 million shares.

The real challenge for Chipotle management, besides attracting customers and solving the labor vs. service conundrum, might simply be time.

After a crisis, it takes a while to re-work, or just heal, one's image in the minds of the public. Five to ten years from now, this will all be forgotten.

But in the meanwhile, you may get a chance to buy Chipotle shares near $300 as sales continue to fall.

Kevin Cook is a Senior Stock Strategist for Zacks Investment Research