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Steve Ells says Chipotle's new CEO should be in charge

The company didn't put a timeline on when its new executive would be in place, says RB's The Bottom Line.

The Bottom Line

Steve Ells will let Chipotle’s new CEO be the company’s CEO.

That’s what he said on Tuesday, during the company’s fourth quarter earnings call, when asked about whether his replacement would have “free rein” over the company Ells founded 25 years ago.

“It’s a delicate balance bringing in a new CEO,” Ells said on the call. “You’ve heard examples of new CEOs coming in and not being allowed to act as CEO.

“I fully intend to have the new CEO be in charge.”

Ells announced his upcoming departure in November, after the chain struggled to recover from a 2016 in which the chain’s unit volumes declined by 23%—declines brought on by a series of food safety incidents in 2015 that knocked Chipotle off of its perch as the restaurant industry’s most admired company.

The topic of who Chipotle would tap to be its next chief executive has generated a lot of buzz in the industry, and even prompted the CEO of a certain pizza chain to make a point that he had no intention of running another company in the near term.

One of the concerns about the process is Ells, who will become Chipotle’s executive chairman once a new CEO is in place. Theoretically, the presence of Ells could discourage certain candidates from going for the job, fearing the company founder and former CEO would be too controlling, thus limiting what they could do in the top job.

To be sure, Bill Ackman’s presence as a major investor is probably a bigger drawback, and Chipotle’s historic pay practices and the chain’s high profile and its history of success could probably be enough to attract plenty of highly qualified executives.

The company did not provide a timeline on the CEO search, but Ells did say that he has spent time with “a number of candidates.”

He also suggested that some of those candidates have led restaurant companies or were close to the top of restaurant companies and view Chipotle as the next step.

Ells said that the candidates all admire Chipotle’s “purpose” around food with integrity, and would likely continue operating the company under that same strategy.

“One thing that was consistent was how strongly Chipotle has impressed, based on the purpose,” Ells said. “So many of the candidates come from the restaurant industry. They either led them or have been a key player in these brands. While they enjoyed a lot of success in their companies, they never had the kind of purpose we have at Chipotle.

“It’s not lost on them that you could have both. You can have a purpose and you can have a very popular product with consumers.”

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