It’s been seven months since Chipotle Mexican Grill made the bold move of leaving Denver for Newport Beach, Calif.
New CEO Brian Niccol, left, whose total compensation in 2018 was $33.5 million, said the move would be instrumental to transforming Chipotle’s culture and building a world-class team to revitalize the brand. That was evident during a recent visit to Chipotle’s headquarters, which occupies three floors in an 18-story tower overlooking the Pacific Ocean and the glamorous homes in the wealthy community.
During the visit, NRN interviewed chief marketing officer Chris Brandt and chief technology officer Curt Garner.
Here’s are few takeaways from those interviews, as well as a look at how Chipotle restaurants are doing financially.
A new start with ex-Taco Bell employees
When Chipotle snagged Niccol from Taco Bell last year, many industry watchers speculated that he would bring along top talent from the Mexican-inspired fast-food chain where he served as CEO.
Those suspicions escalated when Niccol hired Brandt, left, who served as Niccol’s chief marketing officer at Taco Bell before Brandt left for Bloomin’ Brands in 2016. More eyebrows raised when Niccol announced plans to move Chipotle to Newport Beach, which is located in the same county as Taco Bell’s Irvine, Calif., headquarters.
During NRN’s visit, two new hires with ties to Taco Bell were spotted. But Brandt noted that, like himself, they had already left Taco Bell before coming to Chipotle. (One had worked for a firm that contracted with Taco Bell.)
“We haven't hired anybody directly from Taco Bell,” Brandt said. “But we hired people who were there that we knew who had left.”
Last year, for example, Brandt, hired Tressie Lieberman and Stephanie Perdue. The former Taco Bell marketing executives were instrumental in creating the culture-driving ethos at Taco Bell, the darling division of Yum! Brands Inc.
At Chipotle, Lieberman is vice president of digital marketing and off-premise. Perdue is vice president of marketing.
The real reason behind the Denver exit
Chipotle is not revealing how many employees left the company since the move to Colorado.
Brandt, however, provided a big picture reason for the relocation strategy.
He said it gave Chipotle a chance to “reset” with people who truly wanted to bring change to the company.
“I will say there were plenty of good people in Denver. And some of them we brought [to California]. But the mindset over time, there were a lot more people that were just happy to live in Denver than were happy to be at Chipotle.”
“We want people who are comfortable with change,” he added, “and see that change as an opportunity, not a problem.”
Wall Street has taken notice and likes what it sees.
“The new team at a new HQ has resulted in a culture change with a fully formed executive team that is highly collaborative and aligned,” senior analyst Nicole Miller Regan of Piper Jaffray wrote in a March 28 research note. “At current prices CMG shares are back to where we started pre-crisis.”
Last week, the company’s stock eclipsed the $700 mark for the first time since mid-October 2015. In early trading Tuesday, the stock price hovered around $703 a share.
Does this mean the company is fully recovered? According to NRN data, not quite yet.
Chipotle’s ESPU — NRN’s proprietary estimated sales per unit metric — is rebounding but has not reached peak levels. It reached $1.99 million in 2018, up from 2016’s $1.84 million mark.
However, that’s well below the company’s ESPU of $2.44-million in 2014, according to NRN’s Top 200 research.
Same-store sales trends at Chipotle for the past four years were: up 4% in 2018; up 6.4% in 2017; down 20.4% in 2016 and up 0.2% in 2015.
Loyalty program: Keep it simple
Garner, left, who came to Chipotle in late 2015 from Starbucks, tested Chipotle’s loyalty program for six months before launching nationwide in March.
Fans told Garner, who led the team that developed Starbucks’ mobile-order-and pay app, to keep it simple and engaging.
He said rewards members don’t have to pull out a plastic card or enter a phone number to log points. On the Chipotle app, members touch the “scan” button, which generates a QR code tied your account. Points are logged when the cashier scans the code.
And, if you forget to pull out your app when making a purchase at a restaurant, Garner said don’t fret. Chipotle’s program features retroactive credit.
“If you forget, you can take your receipt and plug in [information on the app or online] to get credit for the transaction.”
The company reached 1 million registered users in the first week after unveiling Chipotle Rewards.
“We’re really happy with the response,” Garner said.
Building a brand R&D center
Chipotle Cultivate Center is under construction a few miles from the company’s new offices in Newport Beach.
The Irvine, Calif.-based facility, which won’t be open to the public, will be outfitted with a test kitchen and rooms for hosting focus groups. It will also contain Cultivate University, a training center for employees that first launched in Denver in early 2018.
“It’s going to be amazing,” Brandt said of the facility. “We’ll have a full mock restaurant. We’ll have a lot of R&D there. We’ll have Cultivate University, which is training for all employees. We will have a studio there to shoot food and all kinds of video — external and internal.”
When it’s done next year, Brandt said the chain would likely invite “influencers” to the center.
“We hope to have a bit of a Chipotle experience there, so when you walk in there’s some signature element — some Instagrammable piece that reflects Chipotle culture.”
Chipotle said the Next Kitchen restaurant in New York, used for menu experimentation, will continue to test products after the R&D center opens in Southern California.
Don’t expect LTOs
Brandt promises more menu innovation at Chipotle, but don’t expect the brand to be churning out limited-time offers every six to eight weeks.
“It’s not what our brand is,” he said.
Brandt said many chains, particularly in quick-service where limited-time offers are common, would love to get off the treadmill of doing LTOs devised to lure customers for a short period of time.
“It’s such a drain on the organization,” he said. “It’s kind of like renting consumers for a while.”
Food safety changes
Under the leadership of food safety officer, James Marsden, Brandt said “incidents are way down” at Chipotle.
However, Marsden retired last week. He was replaced by Kerry Bridges, Chipotle’s new vice president of food safety. The former Walmart executive joined the company in January and “has had a successful transition with Marsden over the last few months,” Chipotle said.
The company said over the last several years, the chain has “evaluated all aspects of our restaurants and supply chain and identified certain control points to ensure that our food is safe.”
The company has an internal food safety team, as well as a Food Safety Advisory Council comprised of some of the nation’s top food safety authorities. The company also implemented an 8-step process for continually managing food safety. Steps, for example, include supplier interventions, restaurant inspections and ingredient traceability, the company said.
Last year, Chipotle also deployed Zenput software to audit restaurant operations remotely, including tracking food safety protocols to ensuring standards are met at each location.
“By managing this process and creating new protocols, we have been able to significantly impact the occurrence of incidents and become a leader in the industry for delivering healthy real food,” the company told NRN in a follow-up statement.
Brandt said Chipotle is “one of the safest places you can go.”
“And it has to be because what we are doing with real ingredients is harder than what anybody else does so we have to be better,” he said. “Not only are we light years better than we were, but there is a plan to keep getting better.”
NRN senior data and events editor Alan J. Liddle contributed to this report.
Contact Nancy Luna at [email protected]
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