Coverage: Chipotle CEO steps down as turnaround flames out

Chipotle Mexican Grill said on Wednesday that it was looking for a new leader “with demonstrated turnaround expertise” to replace Steve Ells, the current chief executive and founder of the fast casual chain.

Tiffany Hsu of the New York Times had the news:

Mr. Ells, who started the company in Denver in 1993 and now oversees more than 2,350 restaurants, will become executive chairman once his successor is found. Montgomery F. Moran stepped down as co-chief executive of Chipotle late last year after several food safety failures at the chain, which caused an exodus of customers and a pummeling on Wall Street.

“While we are continuing to make progress, it is clear that we need to move faster to make improvements,” Mr. Ells said in a statement. “Simply put, we need to execute better to ensure our future success.”

Chipotle’s stock closed up 5.7 percent, at $301.99, on Wednesday after tumbling 20 percent this year. In the summer of 2015, shares were priced above $700 each.

Sarah Whitten of CNBC.com reported that Ellis never meant to build a burrito empire:

The CEO of Chipotle Mexican Grill was working as a chef in San Francisco and trying to find a way to fund his own fine-dining restaurant. So, he decided to open up a small burrito shop in Colorado, a low-risk investment, that could provide the capital for the restaurant he really wanted to run.

“This was going to be one restaurant,” Ells said on NPR’s “How I Built This” podcast in October. “And this was going to be a cash cow that could fund and help support a full-scale restaurant. You know, I knew that full-scale restaurants were a dicey proposition. I mean, they go out of business often. It’s hard to make margins, very difficult to operate. And so I wanted Chipotle to be a backup.”

Ells admits that he had never taken a business course before seeking to finance his new venture. At 28, he asked his father for a loan of more than $80,000.

“There was no business plan,” he said on the podcast. “I was just making this up as I went along.”

Chipotle’s original concept was modeled on burrito shops and taquerias that Ells ate at while working at Stars restaurant in San Francisco.

Nick Turner and Craig Giammona of Bloomberg News noted that Chipotle lacked an operations expert:

The Denver-based company also lacked an operations expert during a time when its food-safety protocols were under fire. Ells’s previously had a co-CEO, Monty Moran, who was more focused on day-to-day operations. But Moran left that role in December 2016, leaving Ells in sole control.

“It’s been mismanaged for two years,” said Michael Halen, an analyst at Bloomberg Intelligence. “They need someone who can turn around horrible sales and operations.”

Chipotle’s board has formed a search committee that includes Robin Hickenlooper and Ali Namvar — two directors who were added in an overhaul last year backed by investor Bill Ackman. Ells, 52, also will serve on the committee, which he said would seek an experienced leader who can improve “customer experience, operations, marketing, technology, food safety and training.”