Chipotle is planning to close at least 55 locations in the coming quarters, including five Pizzeria Locale units in Kansas City and Cincinnati, as part of a major restructuring of the company that could cost up to $135 million, executives said on Wednesday.
Speaking on a special conference call, CEO Brian Niccol said that the company will have a flatter organization that will speed decision-making in the coming years as it moves its headquarters from Denver to Southern California.
The company said it expects to close 55 to 65 locations, half of which would be shut down in the next several days, while the others would be closed in the following quarters, pending lease negotiations. The total restructuring cost is expected to range from $115 million to $135 million.
This announcement came as the company announced a series of growth strategies in marketing, operations and digital in a bid to improve its sales and traffic in the coming years. “I could easily see a future where Chipotle more than doubles the business to $10 billion in revenue,” Niccol said in a statement.
Chipotle is also testing efforts to improve the use of its digital ordering platforms, including shelves inside locations that give preorder customers a place to pick up their food while also serving as a big in-store advertisement. At the moment, Chipotle is generating nearly $500 million in digital orders. “We think it can be a multibillion-dollar opportunity,” Niccol said.
The company said it would begin testing a loyalty program in the second half of the year, for instance, with plans to expand it nationwide at all 2,400 locations in 2019.
In addition, it's considering a “happy hour,” with $2 tacos between 2 p.m. and 5 p.m., and is also looking at strategies to increase late-night sales. Those efforts echo similar efforts that Taco Bell has made over the years.
This news follows the chain’s announcement last week of several new product tests in New York, including a new quesadilla, nachos and avocado tostadas.
Niccol was named CEO in February. Since then, the company’s stock has risen 83% as investors have bought into the former Taco Bell CEO’s strategies. The company has also in that time named a new chief marketing officer, Chris Brandt, and named Marissa Andrada chief human resources officer, quickly adding two new top executives to a chain that has long been run by the same group of people.
The closure of five Pizzeria Locale locations comes as Chipotle has mostly ended its experiments with ancillary concepts. At one point, the company was trying three different fast-casual brands; an Asian concept, ShopHouse Southeast Asian Kitchen, was closed in 2017, the same year that Chipotle's ill-fated burger restaurant, Tasty Made, was also closed.
A company spokeswoman said via email that Chipotle would concentrate its efforts on Pizzeria Locale in Denver, where the chain has two locations.
On the call, Niccol said that he has learned “a number of positives” about the company since he was named CEO, including customers’ love of the brand. “We want to build on that to put more distance between us and others,” he said. “We’re going to remind customers why they fell in love with Chipotle in the first place.”
He said that unit economics are strong and the company’s second make line, devised for catering and digital orders, represents “a significant competitive advantage” for the company.
But Niccol did not hold back his criticisms of the chain, either. He said throughput remains “below potential,” and said the company lacks “discipline” on its priorities, struggles with a “skills gap in many areas,” has insufficient data and has “no validated menu innovation pipeline.”
The goal, Niccol said, is to get “singles and doubles in the form of short-term transactions” while the company builds its capabilities for the long term.
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