Top 200 analysis: What awaits Brian Niccol at Chipotle?

Top 200 analysis: What awaits Brian Niccol at Chipotle?

A data-driven comparison of how the exec’s new brand compares with his old one

The announcement earlier this month that Chipotle Mexican Grill Inc. had named former Taco Bell CEO Brian Niccol to its top post drew immediate speculation about how Niccol would impact the burrito brand’s ongoing turnaround efforts.

Analysts largely praised the move, saying they expected Niccol’s experience with brand-building and digital innovation at the quick-service brand to translate to fast-casual Chipotle when he assumes the position March 5.

But there are some inherent differences between the brands. Nation’s Restaurant News took a look into our Top 200 data and same-store-sales results to explore the differences in Niccol’s last company and his next one. 

Divergent sales trends

Taco Bell’s preliminary estimated fiscal 2017 U.S. systemwide sales — actual results have not been reported yet — were more than double Chipotle’s, according to Top 200 data, at $9.8 billion and $4.4 billion, respectively, for the Latest Year. The results also showcase Chipotle’s struggles since it was linked with foodborne-illness outbreaks in late 2015. Despite 14.9 percent year-over-year growth in U.S. sales in the Latest Year, the chain’s output was still 1.1-percent lower than in fiscal 2015. Meanwhile, Taco Bell has maintained steady growth, with U.S. systemwide sales up 4.4 percent in the Latest Year on top of a 6-percent boost a year earlier.


Smaller footprint

If Niccol is the type of CEO who worries about every restaurant, he’ll sleep a little easier in his new job, as Chipotle had 4,083 fewer U.S. restaurants than Taco Bell at the end of its fiscal 2017. For fiscal 2017, 2016 and 2015, Chipotle saw net growth in its U.S. namesake system of 165, 227 and 216 restaurants, respectively, while Taco Bell grew its domestic count during those years by 168, 157 and 170 locations, respectively. Though Chipotle in the recent past noticeably outpaced Taco Bell in new-store development, prior to Niccol’s arrival Chipotle management said the chain would add between 130 and 150 units in 2018.


Chipotle’s unit-level sales strength

Niccol definitely will notice the difference in average-store output at Chipotle, as indicated by NRN’s proprietary estimated sales per unit, or ESPU, metric. That chain’s fiscal 2017 U.S. ESPU of $1.93 million was a full 25.7-percent larger than Taco Bell’s $1.53 million ESPU. The ESPU difference might have been even more impressive if Chipotle’s same-store sales had not been impacted by foodborne-illness outbreaks in 2015 and selected store problems in the aftermath that contributed to its ESPU falling by about 24.8 percent from 2014’s $2.44-million level to 2016’s $1.84 million mark, before seeing 5-percent growth last year. 

Franchising is another area of contrast, as all of Chipotle’s 2,363-main brand U.S. restaurants at the end of fiscal 2017 were company operated. In comparison, 90 percent of Taco Bell’s U.S. system, or 5,799 of a total 6,446 restaurants, was operated by franchisees. That Taco Bell structure and Niccol’s previous work at Pizza Hut give him experience in dealing with brand development partners that might be seen as another strength should Chipotle once more explore franchising or some-day consider an aggressive “asset-lite” re-franchising strategy.


Same-store sales snapshot

If Niccol expects respectable growth from his brand — Taco Bell had three consecutive years of low- to mid-single-digit comps growth on his watch — flip a coin about how it might go for him early on at Chipotle, as on paper, the first two periods might be rough. That’s because first and second quarter fiscal 2017 comps were up by 17.8 percent and 8.1 percent, respectively, theoretically making for tough comparisons. Of course, the first three quarters of fiscal 2017 had extremely easy post-foodborne-illness-outbreak comparisons, as the first, second and third quarters of fiscal 2016 saw same-store-sales declines of 29.7 percent, 23.6 percent and 21.9 percent, respectively, suggesting that there is plenty of room for rebound, should it happen. 

Despite what should have been a slam dunk in terms of third-quarter 2017 same-store sales improvement, what with the 21.9-percent negative comps a year earlier, Chipotle managed growth of only 1 percent then, making it clear that what seems easy isn’t always so and that brand recovery takes time, if not new approaches. That news and realization was followed a month later by word from the company that Ells was stepping down as CEO to become executive chairman, while the company looked for a new CEO, setting the scene for Niccol’s appointment.

Explore complete Top 200 data:

Top 100 report
Second 100 report 

Contact Alan J. Liddle at [email protected] 

Follow him on Twitter: @AJ_NRN 

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