Chipotle CEO Steve Ells Steps Down; What His Replacement Must Do

(Bloomberg Gadfly) -- Chipotle Mexican Grill Inc. founder Steve Ells was able to turn his mom-and-pop burrito business in Colorado into a fast-casual dining juggernaut. But after the chain got into trouble, it became increasingly clear he lacked the right recipe for a comeback.

So investors should cheer the news that Ells is clearing the way for someone else to clean up Chipotle's mess.

The company announced Wednesday that Ells plans to leave the CEO role as soon as Chipotle can identify a successor. Ells will then take the role of executive chairman, with a "primary focus on innovation."

Now the pressure is on Chipotle's board to identify a new leader who can do what Ells apparently could not: Heal the bruises from the chain's food-contamination scares, while also adapting to a fast-changing competitive environment.

To Ells's credit, he took several smart steps -- some co-engineered with Monty Moran, co-CEO until the end of 2016 -- to address the food-safety issue, including dedicating a senior executive to the issue and revamping food-preparation procedures. 

Ells followed that up with a major marketing campaign to assure people Chipotle was a safe place to eat. More recently, he has tried to lure diners back by adding queso to the menu and running a temporary rewards program, among other things.

But in the roughly two years since its food scare, Chipotle has seemed incapable of multi-tasking. While it worked to restore diners' trust, for example, customer service slipped. Executives acknowledged last year that patrons often encountered long lines, messy tables, and "make lines" with missing ingredients.

And it kept barreling ahead opening dozens of new restaurants, with seemingly little regard for signs of market saturation. Its ShopHouse Asian Kitchen concept never found its stride and was shuttered earlier this year.

Chipotle needs a leader that can tackle all these challenges and opportunities at the same time.

Ells's departure will only do Chipotle real good if the board can lure a restaurant rock star to replace him. And Ells must truly embrace the executive chairman's role and resist encroaching on the newcomer's job.

The fate of the brand he created hangs in the balance.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Sarah Halzack is a Bloomberg Gadfly columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

To contact the author of this story: Sarah Halzack in Washington at shalzack@bloomberg.net.

To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net.

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