Steve Ells may be stepping down from his role as CEO of the fast-casual pioneer he nurtured, Chipotle, to turn more toward “bringing innovation to the way we source and prepare our food,” as he puts it.
But a successor who’s got the “turnaround expertise” the company is seeking will find a stiff challenge in executing an about-face for a brand that has experienced a spectacular fall over the last few years.
After two years of battling a spate of food-poisoning incidents and a subsequent sales swoon, and after struggling to improve Chipotle’s old, antibiotic-free menu, the CEO, chairman and founder gave in to his evident inability to put the company back on a fast track.
“Chipotle has vast unrealized potential,” said Ells, who will become executive chairman. So in his place, he said, “The board and I are committed to bringing in an experienced leader with a passion for driving excellence across every aspect of our business.” While Chipotle is “continuing to make improvements,” Ells said, “it is clear that we need to move faster.”
“While Chipotle is continuing to make improvements, it is clear that we need to move faster.”
That is for sure. He founded the Denver-based chain in 1993 and got a major investment from McDonald’s in 1998 that helped propel growth. After leading a public spinoff of Chipotle from McDonald’s in 2006, Ells fashioned a boom for the newly independent entity by positioning Chipotle, its antibiotic-free meats and simple ingredients, as a sort of anti-McDonald’s.
Chipotle even attacked regular fast-food fare as “industrial food,” with videos that caricatured the industry’s traditional supply chains while extolling its own pristine food stocks.
The problem was that Ells neglected his own company’s risk, and sure enough, as we all know, the house came crumbling down in 2015 when the 2,350-store chain ended up poisoning dozens of customers at a handful of locations. This resulted in a dive in same-store sales that reached nearly 30 percent in early 2016.
Nothing Ells has done since then – ranging from a massive overhaul of Chipotle’s safety practices to promotional giveaways for teachers to introducing queso – has returned Chipotle to anything like its former momentum. And a fresh food-poisoning scare in July undermined much of the progress Chipotle was starting to make earlier this year, including an 18-percent jump in same-store sales for the first quarter.
Similarly, Chipotle has struggled with its menu. Once lauded for its simplicity – basically, customers pick from among a couple dozen freshly prepared ingredients for burritos or tacos assembly-line style – lately the chain has been criticized for lack of product innovation.
For example, earlier this year, Chipotle pulled a new chorizo-flavored, pork-and-chicken sausage option that it had announced with great fanfare only a year before. The chain said that the move was to make way for its next major innovation, queso, and to keep kitchen operations simpler – but chorizo accounted for only about 3 percent of entrée sales, a mere sliver of the total.
Interestingly, in the press release, Ells said he wants to focus on his “strengths” in “the way we source and prepare our food.” But it was vulnerabilities in food preparation that led to Chipotle’s recent debacle. It’ll be interesting for the new CEO to see what else Ells might be able to bring to the table to fix the problems he hasn’t already.