Chipotle CEO hopes to 'drive profits' by closing underperforming units, implementing 5-point strategy

Chipotle Mexican Grill CEO Brian Niccol told investors Wednesday that his growth-driven turnaround strategy includes closing up to 65 underperforming restaurants and upgrading the customer experience. Specifically, the plan calls for the following:

  1. Becoming a more culturally relevant and engaging brand in order to grow love and loyalty.
  2. Digitizing and modernizing the restaurant experience to be more convenient and enjoyable for customers.
  3. Running great restaurants with great hospitality and throughput.
  4. Being disciplined and focused to enhance the company's powerful economic model.
  5. Building a great supporting culture as Chipotle innovates and executes across digital, access, menu and the restaurant experience.

"All our efforts will focus on making the brand more engaging, visible and culturally relevant while our restaurant teams are dedicated to providing an excellent guest experience with great hospitality and real food cooked to perfection," Niccol said. "Specifically, this will include three big initiatives: revamping our marketing communications and plans; leveraging our second make-line to grow digital sales and expand access; and engaging with our customers by launching a new loyalty program in 2019."

Specifically, Niccol said that Chipotle will implement in-app delivery at approximately 2,000 restaurants by the end of 2018.

"We believe our digital business has a long runway for growth and ultimately can be a multibillion-dollar business," he said.

Niccol's plans also call for consolidating the corporate workforce in two office locations and adding talent in key areas such as marketing, CRM, menu innovation, digital initiatives, data analytics and human resources.

The leadership team believes these changes, along with possible menu updates announced last week, will "sustainably drive transactions, improve unit economics, accelerate earnings growth and create significant shareholder value," Niccol said.

Wednesday's investor call comes just a month after Niccol, who took over theCEO role in February, announced that he was moving the chain's headquartersto California.

"I can easily see a future where Chipotle more than doubles the business to $10 billion in revenue," Niccol said Wednesday. "We will execute flawlessly in our existing restaurants, add more high-performing restaurants, build brand relevance and engagement, expand digital capabilities for team members and customers, and build an organization with top-tier talent that can win today and cultivate a better future."

Chipotle Cief Financial Officer Jack Hartung said during the call that although it was too early to predict the timing and precise impact of the strategies, he was confident that they will lead to higher average unit volumes and margins in the future.

"We know that the combination of great operations, clever marketing, and pushing further into our digital initiatives can drive near-term sales growth," he said.

Hartung also said that the corporate restructuring will cost between $115 million and $135 million, including about $50 million—$60 million in the second quarter.

The brand will share Q2 results July 26.

Topics: Loyalty Programs, Marketing, Marketing / Branding / Promotion

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