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    New Chipotle CEO: We Have Been Invisible

  • Brian Niccol is ready to bring the iconic brand back to the forefront.

    Chipotle
    Drive thru? Late night? Big changes are coming to Chipotle.

    Mission No. 1 for Chipotle’s newly minted CEO: Make the brand visible. If there is an executive with a knack for this kind of task, it would be Brian Niccol, the former Taco Bell chief who repositioned it as a youth lifestyle leader.

    “I believe [Chipotle] has been invisible and I think as the brand becomes visible and we lead culture, that's going to be a huge opportunity going forward,” Niccol said Wednesday afternoon (April 25) in his first call since taking the reins March 5. “This brand needs to be leading culture, not reacting to it, and the people that are loyal to this brand—that's what they want to be a part of.”

    Niccol outlined his broad vision for the 2,441–unit Mexican chain, as well as reiterating several times that there’s vast opportunity in the company’s current standing. He also noted that Chipotle and its full executive team plan to host a “special call” late in the second quarter to really dive into what Niccol called the chain’s “path to performance.”

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    Chipotle’s Multimillion-Dollar Plan to Fix its Business

    Chipotle had a solid first quarter, although the call was more about what’s coming next than what was accomplished in a three-month period that ended March 31. The chain earned $2.13 per share on $1.15 billion in revenue, which crushed Thomson Reuters’ estimate of $1.57 per share on $1.147 billion in revenue. Comparable same-store sales climbed 2.2 percent, year-over-year, topping StreetAccount’s call of 1.3 percent.

    These figures, plus Niccol’s optimism, surged investor sentiment. Heading into the Wednesday, Chipotle’s stock had already climbed 36 percent since February’s announcement he was taking over for founder Steve Ells, who shifted into an executive chairman role. On Thursday, shares skyrocketed as high as $408.66 as of 10 a.m.—the biggest intraday gain since 2007. They were $251.33 on February 13. When asked if this was a recovery story or a global growth opportunity, Niccol didn’t hesitate.

    “I think the opportunity is clearly a recovery story in the U.S. and we'll be focused on taking what I believe is a powerful brand that has really strong economics, strong purpose, and that when we tie in the elements … I think the opportunity is really exciting for what this brand has in front of it. The innovation will be across the business.”

    Niccol said Chipotle’s overarching goals would be, first and foremost, to grow sales, transactions, margin, and restaurants. Second, as noted before, elevate Chipotle’s brand relevance and further its brand purpose. Next, to build the right structure and capabilities to sustain performance. Fourthly, create a people recognition and innovation culture. And, lastly, run “great restaurants that deliver best-in-class performance.”

    While the exact details of this plan are forthcoming, Chipotle did share some of its current strategy and potential changes ahead. Chief among them might be the digital picture unfurling across the system. Niccol also said drive thrus are “and interesting proposition for Chipotle as an element,” and that “they’ll be something that will definitely be a part of our access innovation program.” He added that drive thrus are a long-term target.

    Like Taco Bell and its “fourth meal,” Niccol said Chipotle could push into new dayparts as well. He said there’s opportunity to expand hours and leverage its existing food and platform in a seamless fashion.

    “Then when you look at the obvious day parts within those extended hours and you quickly see where there's opportunity where we have some down time where, frankly, I think with some marketing and some product innovation we could turn those down times into transaction-driving times,” he said.

    Digital sales grew 20 percent year-over-over and now represent 8.8 percent of sales at Chipotle. Since launching Smarter Pickup Times in February 2017—a system that improves on Chipotle’s digital ordering options by allowing users to schedule orders and reserve a future pickup time—average wait times for mobile orders are down by more than half. Mobile sales alone increased 41 percent, year-over-year.

    This past February, Chipotle also said it plans to spend $45 million to retrofit new make-lines at about 30 percent of its restaurants in an effort to increase the amount of digital orders that can be processed. These digitally enhanced second make-lines will be in about 1,000 restaurants by the end of the year.

    Niccol said digitally enhanced second make-lines are in 237 Chipotles currently. In those units, order accuracy has improved and driven a nearly 20 percent improvement in customer feedback.

    John Hartung, Chipotle’s chief financial officer, said the majority of second make-line orders are app and web orders, but also include third-party delivery orders and catering. “The surge in mobile sales since relaunching our app late last year gives us confidence that our customers appreciate the great experience,” he said.

    Catering is just about 1 percent of sales as well, leaving plenty of space for Chipotle to increase this platform. Catering delivery expanded to 1,500 restaurants from 940 and Chipotle, on average, is seeing a 15 percent lift in catering sales when it adds delivery. The chain is decreasing group-size minimums and testing lower per-person pricing options to grow this side of its business.

    When Chipotle offered delivery free of charge during Super Bowl weekend, volumes boosted nearly 250 percent. “We'll continue to expand the number of delivery partners we work with, and we'll look to partner with them to offer compelling options to our customers,” Hartung said.

    Niccol returned to the idea of brand visibility in regards to some of these digital changes. One of the biggest complaints, Niccol said, is that Chipotle is not convenient.

    “You've got people saying, ‘Hey, when can I do mobile ordering? When can I do delivery? When can I get Chipotle to me? And the good news is more than I think 50 percent of the people don't even realize that we started to do these things,” Niccol said. “So, there is tremendous opportunity of educating people on why they should feel good about the brand, why they will love the food, why it's craveable, because it gives them all of the customization, the abundance that they're looking for with the ingredients that they want.”

    Along with Chris Brandt, formerly the executive vice president and chief brand officer at Bloomin’ Brands’ Outback Steakhouse, Carrabba’s, Bonefish Grill, and Fleming’s, who Niccol brought in as chief marketing officer to replace Mark Crumpacker, Chipotle’s marketing is unquestionably going to shift. This is where Niccol has made a career. Niccol, who served as Taco Bell CEO from January 2015 until this Chipotle move, was the chain’s marketing and innovation chief when it climbed out of a 2011 PR disaster stemming from a customer lawsuit that alleged the chain’s taco mixture was more filler than beef. Niccol was also Taco Bell's president from 2013–2014. He was the driving force behind the brand’s decision to turn Taco Bell into a hip concept that connects with younger guests beyond its late-night menu. This included hiring interns to run its social media accounts, devising a taco lens on Snapchat, and pushing Taco Bell’s food through Instagram via user-generated content. Niccol is also credited with inspiring the crunchwrap sliders, an idea he garnered from watching employees use tortillas to make miniature wraps.

    At Chipotle, Niccol said: “I think the marketing spend is one of those areas that we believe there's a lot of opportunity to take those dollars that we're currently allocating and make the brand much more visible with what we have. And then we're going to put in place more of a test-and-learn approach on the initiatives that will roll out, so, we'll have clarity on what we believe the return is for the investment that we're making before we make those decisions to go beyond our current plans.”

    “I think the recovery plan that we'll be putting in place … our path to performance, will be based on leveraging the idea of testing, improving out propositions, while at the same token with our organization, we build capability and we restructure to support the strategy that I believe will set us up for growth in the near term and longer term.”