Chipotle hires Taco Bell CEO to help firm regain past success

Chipotle Mexican Grill recently announced it was hiring former Taco Bell Chief Executive Brian Niccol to act as the company’s new CEO on March 5.

Current CEO and founder Steve Ells will remain with Chipotle as its executive chairman, according to CNBC.

Chipotle, a fast food chain company, was once popular among consumers and investors alike. Upon building the company, Ells touted it as the healthy alternative to fast food. Chipotle is a chain that serves nutritious food quickly. It promoted organic produce and antibiotic-free meat in order to distance itself from its competitors. However, the restaurant has spent the past few years struggling to recover from various food safety crises, where E. coli, salmonella and norovirus outbreaks sickened numerous U.S. customers. This has led to customer abandonment of the chain and a decreased stock price.

Niccol, who was successful in his stint as CEO of Taco Bell, was hired by Chipotle to turn its image around. “He joined Taco Bell in 2011, serving as president of the brand from 2013 to 2014 before taking the helm as CEO in Jan. 2015,” according to CNBC.

Niccol is a good fit for the struggling Chipotle, since he has experience in turning around companies with a negative public reputation. In 2011, a customer filed a lawsuit alleging that the company’s taco mixture was more filler than beef. The suit was eventually withdrawn, but Taco Bell’s reputation and sales were hurt as a result. Upon joining, Niccol helped to revive the chain’s image.

As marketing and innovation chief of Taco Bell at the time, Niccol repositioned the chain as a youthful lifestyle brand. The company hired interns to handle the brand’s Twitter and Pinterest accounts, circulated a petition in favor of a taco emoji, created a taco lens on Snapchat and developed an ad that showcased photos of people posting Taco Bell food on Instagram, according to The Wall Street Journal.

According to Reuters, in 18 of the past 20 financial quarters, Taco Bell has reported growing sales at established U.S. restaurants. This is a metric better than many of its rivals, including McDonald’s Corp. and Chipotle, said Maxim Group analyst Stephen Anderson. Under Niccol’s leadership, Taco Bell was also the best performing subsidiary of Yum! Brands, outpacing Yum! chains Pizza Hut and KFC in same-store sales for 2016 and 2017.

Taco Bell owes its success to its experimentation with new technologies, products and services. One year ago, the company teamed up with ride-sharing startup Lyft to allow passengers to request rides that incorporated a stop at a Taco Bell location, a feature dubbed as “Taco Mode” in the Lyft smartphone application.

Taco Bell also partnered with Grubhub to expand delivery nationwide, competing with rivals like McDonald’s to tap into the expanding market for delivered fast food. The chain had also pledged to remove artificial coloring and flavors from its items, experimented with serving alcohol in select locations and added more breakfast items to its menu, all in an attempt to appeal to millennials, who commonly frequent fast food chains.

Niccol also introduced mobile ordering and payment across Taco Bell’s locations in the United States, and the highly successful Doritos Locos Tacos and A.M. Crunchwrap items.

The overall opinion regarding this CEO change among investors seems to be positive. Chipotle’s shares rose nearly 12 percent following the announcement.

Ells, the current CEO and founder, said in a statement “Brian is a proven world-class executive, who will bring fresh energy and leadership to drive excellence across every aspect of our business,” according to CNBC. “His expertise in digital technologies, restaurant operations and branding make him a perfect fit for Chipotle as we seek to enhance our customer experience, drive sales growth and make our brand more relevant.”

For his part, Niccol said he has “tremendous respect for the Chipotle brand and its powerful purpose.” A spokesman for Pershing Square, Chipotle’s biggest shareholder, called Niccol “the right leader to reinvigorate the company and help it achieve its enormous potential.”

“The firm held more than 10 percent of shares as of September,” according to Bloomberg.

There are still numerous obstacles in the firm’s path. Chipotle has not yet recovered from its recent health scares, and it will have to develop confidence among consumers regarding its health and safety practices.

Consumers are overall less enthusiastic about Chipotle’s brand than they once were, and the menu may need to introduce more items soon. Price points are another glaring issue. The competition among fast food chains has become more value-focused in recent years, with companies offering consumers deals and items for cheaper prices. Chipotle may have to reduce its prices to entice consumers to purchase its goods.

February 19, 2018

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