Chipotle Mexican Grill (CMG) has put an end to its co-CEO arrangement as it looks to emerge from the biggest crisis in the burrito chain’s history.
The company said on Monday that founder Steve Ells has become its sole CEO effective immediately and that Monty Moran, co-CEO since 2009, was leaving the company altogether early next year.
Under the rare co-CEO arrangement, Chipotle thrived for years, expanding quickly to become a 2,200-restaurant chain and a favorite of consumers for its focus on customizable burritos and natural ingredients. (Whole Foods Market (WFM) recently did away with its own co-CEO set-up too.)
But last year, Chipotle entered what remains the biggest crisis of its history: an E. Coli outbreak sickened dozens of customers in 14 states, sending sales plunging in each of the last four quarters, including a third-quarter comparable sales plunge of 21.9%, with little relief in sight. The drama has also erased its profitability as the company increased its marketing spending to get diners back, and added about 80 operating procedures to improve food safety. That has overwhelmed workers and caused higher employee turnover, which in turn has hurt service.
Chipotle shares have fallen by more than half since the outbreak last October but rose 4% on Monday on news of Moran’s departure.
“Given the ongoing challenges facing the company, the board felt strongly that it was best for Steve to resume leadership of the company going forward. This will ensure that his high standards for the guest experience and his unyielding commitment to the company’s mission are top priorities,” said Neil Flanzraich, Lead Director of Chipotle’s board in a press release.
Ells, a trained chef, started Chipotle in 1993. He was CEO until 2009 when he became co-CEO with Moran.
And now as solo pilot, Ells will have to face the challenge of bringing customers back, satisfying an activist investor in Bill Ackman, the billionaire hedge fund manager who now owns 9.9% of Chipotle and is pushing for big changes, and re-motivate staff. He has also wants to improve the quality of Chipotle restaurants- last week, he told a Wall Street investor he thought only 50% of his restaurants deserved a good grade.
To that end, Chipotle said in its statement it would link employee incentives more closely to customer satisfaction. The company said it now pays starting employees above federal minimum wage with benefits like vacation time, paid sick leave, and tuition reimbursement to all employees.
“It’s incredibly important to me that we create an excellent dining experience in all of our restaurants. That starts with having great restaurant team,” Ells said.