Niccol was the CEO of Taco Bell before he became the chief executive of Chipotle, in 2018. He had watched Chipotle’s launch and rise with fascination and had enjoyed its burritos and bowls. But now he saw that it needed to get its business back on track fast. Customer lines were moving slowly. Some workers didn’t seem properly trained. The marketing was unmemorable. Niccol and his team focused on strengthening the company’s culinary culture and harnessing the power of digital to enhance its fledgling mobile app. They reconfigured the restaurants to allow for skip-the-line pickup of online orders and created a second “kitchen” to prepare those orders, freeing the regular staff to attend to in-person customers. And they shifted marketing spend from a defensive, expensive, promotion-focused approach to social media and television, where the message has become much more resonant. Chipotle’s to-go and delivery operations have been a vital source of revenue during the pandemic, with digital sales representing 46.2% of all sales in 2020.
It’s not often you find your next job because of a breaking news alert from the Wall Street Journal, but that’s exactly how my journey to becoming CEO of Chipotle began. The U.S. fast-casual Mexican food chain had been facing challenges since 2015, when several of its restaurants were implicated in a series of E. coli and salmonella outbreaks. In November 2017 it announced that it was looking for a new leader to improve its operations, digital strategy, and marketing. When I saw the news, I thought, That’s interesting.
I had spent the past six-plus years working for Taco Bell, as chief marketing and innovation officer, as president, and then as CEO. Although the two chains compete in different arenas (convenience, low prices, quick service, and a constantly updated menu for Taco Bell; fast-casual, fresh-ingredient-focused, customizable offerings for Chipotle), I’d watched Chipotle’s launch and rise with fascination. I enjoyed its burritos and bowls, and I knew it still had a great brand with a loyal customer base. It just needed to get its business back on track fast. Within a few weeks I had connected with the recruiting firm that was handling the CEO search, and we began a conversation about the turnaround I might lead.
Only three years later, with help from an amazing team that predated me along with those who came on after my arrival, we’ve joined the Fortune 500, grown our digital sales, launched a rewards program that now has 24 million members, raised our average minimum wage to $15 an hour, and opened 200 new restaurants. We also ensured that the business not only survived the Covid-19 pandemic but emerged stronger.
A Plan Takes Shape
Before joining Taco Bell, in 2011, I’d spent nine years in brand management at Procter & Gamble, studied finance in the MBA program at the University of Chicago, and worked for five years at Pizza Hut. I came to the marketing and innovation role at Taco Bell with big ambitions, and we executed on three important things: We significantly strengthened our social media and digital marketing. We launched new menu items, including Doritos Locos Tacos. And we made the brand more relevant, creative, and youthful. During those years Chipotle was becoming very popular for its tasty hormone- and antibiotic-free food and customer-friendly culture, and I loved going there myself. When friends and acquaintances mentioned Chipotle, I’d always ask lots of questions to better understand its appeal. (When working on Scope mouthwash at P&G, I did the same sort of intelligence gathering on Listerine.)
As I began talking to the recruiter for Chipotle, I wanted to learn more about what was going on inside the company’s restaurants. I visited some near my home in Southern California. Anytime I was traveling to other parts of the country, I’d stop in at a Chipotle location. I began to get a sense that its operations weren’t as smooth as they ought to be. Eventually I asked the company’s founder and then-CEO, Steve Ells, to make a few of those visits with me. The restaurants wouldn’t know we were coming.
The first thing we noticed was positive: Customers were lined up. However, the lines weren’t moving very quickly. When we reached the front, where the team members were assembling our food, it was obvious that they could benefit from additional training and guidance. The restaurant managers seemed a little overwhelmed, which is a big problem: If the manager isn’t confident, that will carry over to the team and show up in poor execution. This wasn’t very surprising, because Chipotle has always had a more complicated strategy than its peers have. Chain restaurants compete on four dimensions: quality, value, speed, and customization. Most focus on just one or two of them, but Chipotle offers all four.
The food-safety incidents were one symptom of that difficulty. Unlike traditional quick-service restaurants, which typically prepare their food at a central commissary and simply reheat and assemble orders on-site, Chipotle requires that fresh meat and produce be cooked from scratch at every location, which necessitates extremely high levels of care.
The company had been working on those issues since the health scares. It introduced what it calls the Food Safety Seven, a checklist to ensure that managers and employees were following best practices, but that system hadn’t yet become routine. I saw that we would need to work on implementation and reinforcing good habits.
Another strain on Chipotle’s operational capabilities and culture was the speed at which it had been growing in the years before my arrival – adding approximately 200 restaurants a year. That pace of expansion was laudable – and customers couldn’t get enough. But the company’s ability to hire and train staffers wasn’t keeping pace. Customer service was further stymied by a new mobile app that allowed people to order online but didn’t give them a way to skip the long wait in line that Steve and I encountered. Finally, I noticed that although Chipotle was spending $150 million a year on marketing, its messaging wasn’t very prominent.
In my mind, and in conversations I had with Chipotle’s directors, a turnaround plan began taking shape. When I accepted the chief executive role, in March 2018, I and the team began working to implement it.
Food With Integrity
Our first goal was to focus even harder on maintaining a great culinary culture. As part of a marketing campaign dubbed For Real, we transparently featured our full ingredient list on our website, in our restaurants, on our social media channels, and in our advertising. We rolled out an educational training program and told managers to encourage their team members to begin thinking more like chefs. We provided all our employees with a pocket guide about our ingredients and our expectations for delivering on our purpose and our promise of “food with integrity.”
Now they know to taste the food they’re cooking – to make sure there’s enough salt in the rice and not too much cilantro in the guacamole. We taught them that the flavor of avocados and limes can vary by season, so they need to constantly test and recalibrate the ratios they use. Of equal importance was bringing back our customer focus. Managers reminded their teams to ask guests what they thought of the food, whether the balance of rice and chicken was right, whether they had enough sauce, and then really listen to the feedback.
I also recognized that Chipotle would greatly benefit if it could harness the power of digital. Our fledgling mobile app would be a plus for customers only if we reconfigured our restaurants to allow for skip-the-line pickup. So we created grab-and-go shelving next to the cash registers in every restaurant, and we educated customers about how to find their food.
We also solved another problem that had been hurting our reputation: Those waiting in line could see when employees stopped serving them to put together an online order, and it annoyed them. So we created a second “kitchen” in the back of the restaurant, managed by a separate staff, that focused exclusively on online orders. And we added a new computer system that fed those orders into an easy-to-read screen. Those steps may sound like simple solutions, but doing them in 2,400 restaurants was no small undertaking.
We were able to accomplish it because even though Chipotle is a $6 billion company, it still has the feel of a start-up. There’s very little bureaucracy. Six months after I started as CEO, we held our annual conference for general managers – about 3,500 people altogether. And although that sounds like a big number, it felt intimate and casual. I could also sense that everyone was already enthusiastic about implementing these changes.
The other area I’d identified for improvement – marketing – continues to evolve. In the wake of its 2015 food-safety issues, Chipotle had begun heavily promoting local buy-one-get-one-free deals to lure customers back into its restaurants. It was a very defensive, expensive, promotion-focused approach, and giveaways weren’t what the brand needed. So we shifted our marketing spend to social media and television, where our message – for example, For Real – has become much more resonant.
The rewards program is another important piece of this. Today we have more than 22 million members in our database, and we’re gathering information to better understand what motivates them to come into a restaurant to eat or to place and pick up an order, and how we can encourage them to do both more often. Chipotle was a bit late to this game, but the upside is that we’ve been able to look at what everyone else is doing, learn, and draw on the best components of other companies’ efforts. We’re still in the early stages of rewards, driving enrollments and starting to personalize and customize offers. Over time, I expect, the understanding and insight we achieve from this work will deliver a big return.
One area in which we haven’t done much tinkering is the food. I give my predecessor, Steve, a lot of credit: He created a menu on which every combination really works. Even if you’re eating vegetarian or keto or paleo or Whole30, Chipotle has something for you. So instead of adding lots of new items or promoting items of the month, our limited-time offers emphasize twists on familiar offerings – proteins such as smoked brisket, for example – and lifestyle bowls (available with one click online) as diet-driven options. We did add carne asada, and we created a new recipe for our queso dip, which needed improvement. But unlike most other restaurants, we didn’t – and still don’t – need to revamp our menu to drive traffic.
Pivoting For The Pandemic
Before March 2020 Chipotle was already investing in digital access, but we accelerated that in the face of Covid-19. Despite the difficult backdrop, we were able to pivot and adapt to the rapidly changing needs of our guests – a testament to the durability of our business model and the strength of our team members.
During the pandemic we’ve conducted wellness checks and offered employees paid sick leave to ensure the safety of our team members and our guests. We also increased restaurant wages and expanded our partnership with Guild Education, which allows our employees to pursue college degrees. Chipotle covers 100% of tuition costs for nearly 100 degree options, and we have a tuition-reimbursement program as well.
At the onset of the pandemic we quickly rolled out additional third-party delivery partnerships with Uber Eats and GrubHub and aimed all our marketing messaging at free delivery and safety protocols. The business remained open, and those protocols were reinforced by earlier investments, including advanced air-filtration systems and sanitizers throughout the restaurants. Our digital sales grew by 174.1% year over year to $2.8 billion, representing 46.2% of all sales in 2020. About half that food was delivered, benefiting from our expanded partnerships. Ordering ahead and the convenience of more drive-through “Chipotlanes” accounted for the remaining sales.
Over the past few years Chipotle has illustrated how a business can be revitalized through refocusing on its original core values – in our case, culinary excellence and great customer service. When I arrived at the company, some people were asking whether we should be expanding into breakfast, or switching to frozen food to enhance safety, or offering combo meals the way the burger chains do. We knew not to do any of those things. We just needed to get even better at doing what people already loved us for.
Three years later, it’s gratifying to have helped make that happen.
originally posted on hbr.org by Brian Niccol | About Author: Brian Niccol is the CEO of Chipotle.
