Three months after Brian Niccol’s unexpected departure from Chipotle Mexican Grill, the burrito chain has decided that Chief Operating Officer Scott Boatwright can permanently fill in the former chief executive’s shoes.
The company appointed Boatwright, 51, as interim CEO in August when Niccol revealed his move to Starbucks. On Nov. 11, Boatwright was appointed to the top role effective immediately.
“We view Boatwright as a talented executive and consider him to be a good choice for CMG’s next CEO, particularly when considering how closely he has worked with Brian Niccol since 2018,” Baird Senior Research Analyst David Tarantino wrote in a note to investors on Oct. 29.
Boatwright takes over a company with more than 125,000 employees at 3,600 restaurants and a goal to reach 7,000 stores. He also succeeds Niccol, who is so highly thought of that Starbucks’ market cap rose $21 billion on the day of his announcement in August.
“I am passionate about our menu and energized by our people and believe that I, along with our esteemed bench of tenured leaders, will deliver on our priorities and achieve our long-term growth goals,” Boatwright said in a statement.
Chipotle shares were relatively unchanged on the day of the announcement. When Niccol’s departure was announced on Aug. 13, the shares that day dropped 7.5%.
Since then, the share are up 14%, with an $80 billion market cap, keeping it the most valuable publicly traded company with headquarters in Orange County.
A Housecleaning Survivor
Boatwright arrived at Chipotle in May 2017 when it was in disarray due to hundreds of cases of food poisoning that led to falling sales.
He had previously spent 18 years at Arby’s Restaurant Group. As senior vice president of operations, he was responsible for over 1,700 Arby’s restaurants.
When Boatwright started at Chipotle as chief restaurant officer, he was responsible for the operations of around 2,300 company-owned restaurants at the time. He was charged with improving the customer experience, developing and leading field leadership teams, building solid in-restaurant teams and enhancing overall operational efficiency.
A year later when Chipotle hired Niccol as CEO, he cleaned out many of the top executives.
Boatwright survived the housecleaning; he also followed Niccol to OC, who moved the headquarters from Denver to Newport Beach.
“Boatwright played a critical role as part of the leadership team that created and executed the turnaround strategy that has delivered incredible results since it began in 2018,” according to the company.
Last week, Chipotle credited Boatwright for leading new tech integration and achieving “industry-leading” retention rates as COO.
Chipotle’s online strategy is often credited with helping the company stay ahead of competitors – particularly during the pandemic – and causing the company’s stock surge.
“We conducted a thorough and rigorous external search process that confirmed Scott is absolutely the best person to lead the next stage of growth at Chipotle,” Chairman Scott Maw said in a statement. “Today’s announcement is an affirmation of both Scott’s leadership capability and our internal succession planning process.”
Restaurant analyst John Gordon said succession planning is crucial as the industry is experiencing a shortage of high-caliber CEOs. Many executives retired after the pandemic. Going with an internal candidate who knows the brand made sense for Chipotle, he noted.
“There really wasn’t anybody better on the Street to go into Chipotle, so they promoted from within,” Gordon said of Pacific Management Consulting Group.
“And it’s not a Chipotle problem. It’s an industry problem that we’re just not producing enough new vibrant CEOs.”
Niccol left Chipotle in good shape, so he doesn’t need to do much fixing, Gordon added.
“The brand itself is on very good trajectory. It’s getting in [locations with] very desirable demographics,” he said. “It’s still generating very good store-level margins.”
From 2017 to Now
In the past seven years, Chipotle’s average unit volumes (AUV) has grown from $1.8 million to $3.2 million in the recently completed third quarter.
Comparable restaurant sales, a key metric in the industry, increased 6% from the same period last year.
According to his LinkedIn, the COO established the COVID-19 response team at the restaurant chain in 2020 and helped the pivot to digital only orders. He’s also implemented food-safety measures, a key issue for the company.
One venture that didn’t survive the last several years was the Chipotle-backed Pizzeria Locale concept in Colorado, which was led by Boatwright until 2023.
The company had plans to expand before closing all five locations and dissolving the business last year.
When he started, the stock traded around a split adjusted $4. It’s now trading at about $60 apiece, making it a 15 bagger.
Maintains 7,000 Restaurant Promise
For now, Boatwright will continue implementing the strategies his predecessor left behind.
“It is an honor to serve as the CEO of this purpose-driven brand and I look forward to providing greater opportunities for our employees, generating value for our shareholders and ‘Cultivating a Better World’ for our communities,” he said in the statement.
“The board overwhelmingly believes Scott will deliver on the key strategies in place and position the company for continued success,” Chairman Maw said.
In the most recent third-quarter, total revenue increased 13% to $2.8 billion. Chipotle also opened 86 new company-operated restaurants and one international licensed restaurant.
It was another quarter “with positive transaction growth every month,” Boatwright said in his first earnings call at the end of October. He also maintained Chipotle’s long-term goals of international growth, domestic expansion to 7,000 restaurants, increasing unit volumes to $4 million, and expanding restaurant-level margins.
Analyst firm Baird thought Boatwright could be “an effective leader” after the call, saying he’s “impressive.”
“Boatwright emphasized CMG will continue focus on the same strategic pillars that were established under Brian Niccol, and also noted aspirations to make Chipotle an iconic global brand (with development in Europe potentially on horizon),” analyst Tarantino added.
The general analysts’ consensus for future annual revenue at Chipotle is 14% growth to $11.3 billion in 2024 and a 13% increase to $12.8 billion in 2025.
Analysts Praise Chipotle’s Bench
While surprised, analysts said they were not too worried about the loss of Chief Executive Brian Niccol to Starbucks Corp. in August, citing the leadership team that remains.
“We still view Chipotle as a powerful growth concept, and we are optimistic the foundation is in place for the company to show healthy operating momentum for many years to come despite the loss of Niccol,” according to Senior Research Analyst David Tarantino at Baird.
“As such, we view his departure as a tough loss for CMG but would not consider the news to mark the end of a good growth story,” Tarantino said.
“We believe the remaining executive team at Chipotle has the skills and expertise to carry forward much of the foundational work implemented by Niccol.”
Raymond James analyst Brian Vaccaro wrote in a note to investors that “they suspect Niccol’s departure likely reflects an offer ‘he could not refuse’ to build on his legacy and turnaround an iconic brand such as Starbucks, but importantly do NOT believe it is a negative read on Chipotle’s current fundamentals or long-term growth prospects.”
At the time of Niccol’s departure, Chipotle “expressed confidence in its current senior leadership team, each of which has been with the company since 2018 (or earlier) and played a critical role in the company’s turnaround and very strong performance through the pandemic,” Vaccaro added.
Tarantino included Baird’s belief that Scott Boatwright was “the most logical candidate” to succeed Niccol.
The analyst was later reassured of the possibility following the executive’s first earnings call in October.
“Good showing by Boatwright,” Tarantino wrote.
