It’s tempting when turning around a business to radically overhaul it and look for ways to expand it.
But Chipotle’s CEO of almost five months, Brian Niccol, is showing that it pays off to stick to what you know best—but just do it better.
Niccol, who previously orchestrated a highly successful turnaround of Yum Brands’ (YUM) Taco Bell, has focused his efforts on reinvigorating Chipotle’s marketing—with a loyalty program to be announced next year—adding menu items that are complementary to Chipotle’s existing offering without adding strain to the kitchen’s operations, and revving up digital sales. One example: Chipotle’s new ads are hipper and more focused on ingredients, the very thing that propelled Chipotle in the first place.
His initiatives include testing more snack items, as well as a “happy hour” deal between 2 p.m. and 5 p.m. where customers can buy $2 tacos with beer and margaritas, and a similar offering for later in the evening. The idea is to generate more business outside of peak eating times. The new items Chipotle will test include quesadillas and chocolate shakes. The company will also test a new layout for its restaurants.
At the same time, the company is being cautious not to go down too many roads, lest it lead to new operational complications. McDonald’s (MCD) learned that a few years ago when it found its sprawling menu was leading to bottlenecks in the kitchen and slowing service.
Chipotle is also earnings accolades for what it is not doing—including not going into a category like breakfast, where it would face stiff competition, and not opening new restaurants until he has rejigged existing Chipotles. Indeed, Niccol is closing some 55 to 65 restaurants, understanding that stepping back can help him set Chipotle up nicely for its recovery.
And so far, so good. Chipotle’s same-store sales in the second quarter rose 3.3%, beating Wall Street expectations for 2.7%, according to Consensus Metrix. That sent shares, already up 55% so far in 2018, up another 7% on Friday.
Chipotle also raised its full year sales forecast a tad. And that was despite menu price hikes, showing Chipotle that many customers are willing to pay more for a product they want. So it’s promising that Niccol is focusing on just that: what Chipotle customers want.
