Chipotle Mexican Grill (CMG) is trading sharply higher today (+13%) after hiring a new CEO. The struggling burrito chain announced in late November that it was looking for a new CEO. Its current CEO and Founder Steve Ells agreed to step down when a new CEO is named although he will stay on as Executive Chairman. The company has been searching for a CEO replacement since then and last night they named Brian Niccol as their new CEO, effective March 5.
Niccol most recently served as CEO of Yum! Brands' (YUM) Taco Bell Division, where he was responsible for the highly successful turnaround of the business. CMG says his expertise in digital technologies, restaurant operations and branding make him a perfect fit for Chipotle which is seeking to enhance its customer experience, drive sales growth and make its brand more relevant. CMG is confident that Niccol's skillset ideally positions him to make the bold moves needed to improve operations and take the company to the next level.
Niccol did not provide much in the way of specific changes he will be proposing, but that will probably happen soon after he takes over and once he gets a better sense of where the company needs help. However, he does say that Chipotle's core is delicious food, which he will look to pair up with consistently great customer experiences. He will also focus on dialing up Chipotle's cultural relevance through innovation in menu and digital communications.
Prior to joining Chipotle, Brian Niccol was at Taco Bell from 2011 and has served as CEO since January 2015 and president from 2013 to 2014. Under his leadership, he successfully repositioned Taco Bell as a lifestyle brand and successfully launched numerous product initiatives, including the new breakfast daypart, the fastest growing daypart in the industry. He transformed Taco Bell into a social media leader and revolutionized its digital approach through mobile ordering and payment across their 7,000 restaurants. Prior to Taco Bell, Niccol held leadership roles at Pizza Hut (another YUM segment), including vice president of strategy, chief marketing officer, and general manager. He led the brand strategy and positioning that achieved record transactions and market share. Additionally, his innovation in digital with on-line and mobile app ordering was industry leading during his time in the business.
Based on the reaction in the stock price, investors are happy with this choice as Chipotle's new CEO. This is a pattern that is not that unusual: A founder of the company has a great idea, builds the company up from scratch but once it gets so large, sometimes it's better to have industry veterans come in and take over as they have the specialized skill sets and experience to manage a large enterprise and Chipotle surely qualifies as such.
Another point on this is that it's probably good that Chipotle brings in an outsider, someone who can give a fresh and objective look at the company. And it's somebody who does not have past relationships with other members of management, so past loyalties are not as prevalent. This allows the new leader to come in fresh and make changes that are best for the company.
We will learn over the coming months what changes will be made, but it seems pretty certain, based on his track record, that improving CMG's digital capabilities (mobile ordering etc.) will top the list. There will also likely be some menu updating as well. Hopefully, he adds new items that will do better than the Queso misstep in 2017. Maybe nachos or breakfast items? Or possibly more value-priced options like at Taco Bell's $1 menu? Overall, he did a good job turning around Taco Bell, the hope is that he can do the same for Chipotle. It should be interesting to see how this develops.