The Chipotle Mexican Grill in Newport Beach, Calif., won’t open for another three hours, but the proving ground for the concept’s next iteration is already abuzz with the sounds of cooks chopping, utensils clanging and food sizzling. The unit incorporates many of the changes that were brainstormed to pull the brand forward, the next phase in the bounceback of a concept that once all but sneered at mainstream fast-food and quick-service conventions. Here and there are signs of a newfound openness to those once-disdained practices, even as the senses affirm Chipotle’s commitment to food sourced and prepared as if a chef ran the place. The scene captures the yin and yang of Chipotle’s refusal to compromise on its proudly nonconformist heritage while trying to accommodate the business realities of a 2,500-unit chain.
The person charged with finding that balance enters the store at opening minus 2.5 hours, aka 8 a.m. Tall, handsome (his wife agreed to a blind date because she was told he looked like Tom Cruise), wearing jeans and a sweater, Brian Niccol is visiting the store that morning for media interviews. But the unit’s GM says the Chipotle CEO or someone else from corporate is in the restaurant every day, checking out how one of the most disruptive restaurant brands of the past three decades is adjusting to more change in the past two years than it likely saw in the prior 20. Plenty of tweaks are on display, from digital menu boards to new drink arrays and slotted shelving where patrons can grab their digital orders and zip out.
If anyone knows the concessions some quick-service brands are willing to make for the sake of speed, price and menu originality, it’s arguably Niccol. Before succeeding Chipotle founder Steve Ells as CEO of the chain in March 2018, the veteran marketer spent seven years with Taco Bell, a chain that relies on bagged heat-and-serve ground beef and gimmicky products such as a Cap’n Crunch doughnut hole—the very antithesis of Chipotle.
His jump from the CEO job with Taco Bell to the same post with Chipotle would have been a stunner if Wall Street hadn’t been pushing Ells’ brainchild to drop its high-handed attitude toward conventional quick-service traffic drivers—things such as limited-time offers or even a broader menu.
Still, Chipotle’s die-hard fans and celebrity supporters were concerned the brand would be overly eager to copy and paste the quick-service restaurant (QSR) textbook.
“A lot of folks were fearful that Brian would come in and commercialize our product offerings or make us more QSR,” says Scott Boatwright, chief restaurant officer and one of only two members of the former senior leadership team who have been retained by Niccol. “Nothing could be further from the truth.”
From a restaurant-level perspective, back to basics seems like a more applicable term for Niccol’s strategy, albeit with an asterisk. “We’re on the same page with food with integrity,” he says. “Culinary will always lead.” But “there was a huge opportunity to get back our operations.”
The experience for customers, he explains during a sit-down in the Newport Beach store, had deteriorated, a downturn attributed by many to a misconceived incentive plan implemented by his successors for unit GMs. Managers were rewarded handsomely for developing future managers, not for pleasing customers.
Service slipped, slowing throughput and frustrating customers whose ardor for the brand bordered on the cultlike. At one point, unit sales averaged $2.5 million annually. The mean has since slipped to under $2 million.
“Brian has the innate ability to synthesize a lot of information, assess where an organization sits in its current moment in time and pull out the three to five most important things the organization can do in short order to really move forward.” —Scott Boatwright, chief restaurant officer
“I don’t know that our corporate organization at the time was oriented toward our restaurant teams,” says Boatwright. “The field teams felt disconnected from the support center.”
Critics said food quality also slid. They note abominations such as a queso that had to be reformulated within three months of its introduction.
Niccol doesn’t acknowledge the food criticism, but Chipotle is currently testing another iteration—version three—of its queso, or what Niccol’s predecessors identified as the menu addition most requested by the brand’s fans.
As significant as the differences in the initial and current versions of queso may be, the changes in the way they were developed are likely more profound. The original queso was shotgunned into the market in September 2017 after a quick test in California and Colorado, only to merit more R&D work almost immediately. A second version was rolled out that December, but it tended to congeal into lumps and was quickly judged another misfire.
Tests of the current Queso Blanco are approaching the six-month mark, and extend to 52 units in three geographically dispersed markets. It’s undergoing a newly adopted protocol the chain calls its “stage gate process,” in which the chain listens to customer feedback and adjusts a potential menu item accordingly.
The approach is right out of the quick-service manual, but Chipotle had nothing like it prior to Niccol’s arrival. As he told investors soon afterward, there was “no process for scaling and communicating innovation” and “no validated menu innovation pipeline.”
“We were trying to do too much, too fast,” Boatwright says of the months right before Niccol’s arrival. “We weren’t getting traction on a lot of fronts. Brian has the innate ability to synthesize a lot of information, assess where an organization sits in its current moment in time and pull out the three to five most important things the organization can do in short order to really move forward.”
The Newport Beach unit and other test stores sport features that might frighten fans who worried a mascot and Chipotle Happy Meal would be in the works by day two of Niccol’s tenure. Most noticeable is the brand’s embrace of a drive-thru, albeit a version unlike the pull-up lanes found at a typical McDonald’s or Wendy’s. These “Chipotlanes” are pickup stations for orders placed via app or internet, not an option for placing an order without getting out of the car.
Innovations take off
The Chipotlanes were actually developed before Niccol arrived, a result of Chipotle’s experimentation with a conventional drive-thru at its short-lived Tasty Made burger venture. It was, however, the new CEO who gave the go-ahead to shoot for 60 locations in 2019 and at least another 150 this year. Niccol explained to investors that pickup times for car-bound customers drops to as low as 12 seconds, a big step toward his goal of raising throughput and bringing average unit sales back to $2.5 million.
Similarly, Niccol has amplified the efforts that began before his arrival to boost Chipotle’s off-premise and digital business. Ells and the prior team dusted off a second production line that existed in most stores and decided it would be devoted to to-go orders. They also tried at least two versions of a smartphone app and a website that automatically adjusts to fit a phone screen.
Niccol and his team pushed the process. They took advantage of the unique fact that Chipotle runs all 2,500 of its restaurants,
retrofitting each one with cubby-like pickup slots for to-go orders. “Less than a year later, we had them in all 2,500 restaurants,” says Niccol.
“In a franchise system, we’d still be talking about who’d be paying for it,” says Chris Brandt, who followed Niccol from Taco Bell to become Chipotle’s CMO.
The various efforts boosted Chipotle’s 2019 digital sales to $1 billion, an 87.9% leap.
“We’re much better than we were six months ago, a year ago, but we can still improve from where we are today with great food, great speed and a great hospitality.” —Brian Niccol
Marketing is another area in which Niccol has added mainstream industry methods to Chipotle’s idiosyncratic, often snarky approach. The old Chipotle strived to bolster awareness of the brand through unprecedented means such as renting movie theaters for free airings of a movie on farming, or posting animated internet videos that depicted quick-service competitors as factories cranking out “Frankenfoods.”
Instead of LTOs and other conventions, it relied on a video game in which champions of “real food” fought the evil forces peddling processed junk. Most of the unconventional efforts bashed the competition as much as it underscored the positives of Chipotle.
“In the few years preceding our arrival, they hadn’t done as much,” says Brandt. What little they did was more promotional, with programs pushing product giveaways or bargains. “We pulled back on a lot of the promo spending because we don’t have to discount this food. We used a lot more traditional and digital media to tell the Chipotle stories that were already out there.”
He stresses that the brand isn’t forsaking its legacy as a maverick marketer. Under Niccol, who rose to the top job at Taco Bell through marketing, the chain has sponsored a spelling bee where children were challenged to spell the chemical-sounding additives found in competitors’ food. Chipotle sponsored a float in this year’s Rose Bowl Parade to raise money for young farmers. It has also backed competitors in interactive, multiplayer online game Fortnite.
But “we took an approach where we wanted to change the philosophy and the tone of the marketing,” Brandt continues. “In particular, we wanted to creatively celebrate Chipotle and not worry about what everyone else was doing. Our tone now is much more fun, much more engaging and much more focused on what makes us special, and celebrates the food.”
The new effort sports an obvious dab of conventional marketing here and there. Currently on the menu, for instance, is an LTO, something the prior regime seemed to regard as an abomination better suited to the likes of Taco Bell. The chain hints that the current short-term option, carne asada, might be added to the menu permanently, an outcome familiar to anyone in the quick-service business. Meanwhile, a test of quesadillas is underway.
“We’ll never be in a place where we have a new product every six weeks,” says Brandt. “But we can have a cadence where two or three items [are added] every year or 18 months to keep the menu fresh and interesting.”
At the start of 2019, Chipotle introduced a line of Lifestyle Bowls—rice or lettuce-based meals that comply with the popular keto and Whole30 specialty diets. The selections can be ordered only digitally through the chain’s channels for takeout and delivery.
A close look at the bowls’ ingredients suggests that most were already among the 51 items that Chipotle stocks in its pantries, a bragging point since the concept rolled its first burrito 26 years ago.
“Chipotle had not done a lot of menu innovation in the past, and there’s a lot of good parts to that,” says Brandt, who oversees menu development. “We don’t want ever to do innovation that slows throughput or impacts us negatively from an operational standpoint. But we did feel that there were some opportunities to freshen the menu.”
The Newport Beach unit sports a few items not found elsewhere in the system, in addition to the new Queso Blanco. Included are an array of noncarbonated drinks with natural fruit flavorings, similar to the ones that Sweetgreen offers. The restaurant also features a reach-in well on the serving line where patrons can grab packaged soft drinks.
Driving diners—and dollars—back
Tweaking Chipotle’s sacred traditions while buffing its image as a different sort of quick-service experience is winning back the die-hard fans who abandoned the brand after a series of highly publicized food safety lapses in 2015 and 2016. Executives acknowledged at the time that the outbreaks of E. coli O157:H7 and norovirus were symptomatic of fundamental problems with operations and culture. Remedies eluded them. Same-store sales for 2016 fell 20.4%, and net income dropped 95%, to $22.9 million, on a revenue decline of 13.3%, to $3.9 billion.
Chipotle’s comp gains for the fourth quarter of 2019 were among the industry’s highest, at 13.4%—driven by an 8% jump in transactions. Sales from digital orders grew 78.3%, to 18% of total intake, most of it presumably incremental.
The chain’s stock price skyrocketed more than 90% in 2019, to $837 per share, for the highest growth of any restaurant stock. Clearly, Wall Street likes what it sees in the new CEO.
“They love him,” says CFO Jack Hartung, a 17-year veteran of Chipotle. “The stock was up 93% last year. Enough said.”
And the brand doesn’t expect the improvements to stop. “We’re still just getting started,” says Niccol. “With our operations, we’re much better than we were six months ago, a year ago, but we can still improve from where we are today with great food, great speed and a great hospitality.”
“I love to lead with some intuition, and I love to lead with using analytics to inform that intuition.” —Brian Niccol
A new feel takes hold
Members of his team note that the chain’s new headquarters hasn’t even been completely renovated yet. Niccol says he moved Chipotle’s HQ from Denver to Newport Beach in large part to sweep out the company’s old culture, bashed widely by outsiders as arrogant and change-averse, and start fresh.
“It was one of the scariest things I’ve ever been involved in,” says Hartung. “It was absolutely the right thing to do.”
The relocation also enabled Niccol to tap Southern California’s pool of experienced restaurant talent. The area abounds in chain and franchisee headquarters, including the home office of Taco Bell, a mere chalupa toss away from Chipotle’s new digs. Along with CMO Brandt, Chief Corporate Reputation Officer Laurie Schalow followed Niccol over from the Yum Brands holding.
Hartung and Boatwright are the only members of the C-suite-level leadership team who were retained from the previous regime. In addition to Brandt and Schalow, the new hires include Chief Technology Officer Curt Garner, a 17-year veteran of Starbucks, and Chief People Officer Marissa Andrada, another alumnus of the coffee chain.
Most were recruited personally by Niccol.
“One of the things I’m really proud of is the team we’ve put together,” he says. “These are all really talented leaders who are creating a world-class culture that resonates all the way down to the restaurant.”
Old and new execs say there’s a definite feel taking hold in the Newport Beach offices. They describe the new corporate mindset as neither Taco Bell-ian nor a straight-line outgrowth of Chipotle’s long-standing contrarian mindset. Rather, there’s an openness to new ideas set against a reverence for the heritage of a chef-founded concept. (Ells’ idea for the brand came from observing the food carts that sold burritos in San Francisco, where he was working in the kitchen of the famed Stars restaurant.)
And that’s exactly what Niccol says he’s striving to do: “I want to have a culture where people are curious, they want to learn and they feel confident to bring forward ideas.
“That feeds itself,” he continues. “Young people want to be part of a company that’s driven by ideas and purpose.”
The team attests that Niccol has a knack for keeping the organization focused and instilling discipline into the decision-making process, even as he encourages anyone in the organization to float a notion.
“This place has a feel more like a startup than a big corporate organization,” says Brandt. Yet “there is a unification of purpose unlike any other place I’ve ever been.”
“One of the mistakes a fast-growing company can make is trying to do too many things,” says Hartung. Niccol “is very logical. We will decide what we’ll do, and what we won’t do. Once we decide on something, we go after it. “
“I love the debate, and I love the learning,” Niccol says of his style. “I’m always pushing for, ‘What’s the idea?’ I don’t want the discussion to be driven by PowerPoint, someone speaking to a slide. I want to hear what their intuition is as well as the data behind it.”
Intuition should not be underappreciated, he says: “I love to lead with some intuition, and I love to lead with using analytics to inform that intuition. You have to have a nice balance of science and art and intuition.”
As for how that approach will serve Chipotle’s future, he continues, “I would say the headline is growth. A lot of growth is in front of us, whether it’s adding new restaurants, whether it’s getting more sales within our current restaurants, and then how we take this beyond the United States down the road.
“There’s so much we can do underneath that to grow this business to levels we have never achieved before.”