Good morning. Just last month, Chipotle Mexican Grill, Inc. announced that its longtime CFO, Jack Hartung, would retire in March 2025. However, the recent departure of its CEO has altered those plans.
In a surprising move on Tuesday morning, Starbucks revealed that Chipotle CEO Brian Niccol will become the coffee giant’s new chief executive, replacing Laxman Narasimhan. Niccol will assume his new role on September 9, with Starbucks CFO Rachel Ruggeri serving as interim CEO until then.
Chipotle, the popular fast-casual restaurant chain, also announced on Tuesday that Niccol, who has been CEO since 2018, will leave the company on August 31. Scott Boatwright, who joined Chipotle in 2017 and currently serves as chief operating officer, has been appointed interim CEO. The board will conduct an external search for a permanent CEO as a standard governance procedure, Chipotle confirmed via email.
Hartung has agreed to take on a new role at the company indefinitely as President of Strategy, Finance, and Supply Chain. Adam Rymer, VP of Finance and incoming CFO, will report to Hartung.
As Chipotle’s CFO since 2002, Hartung’s deep understanding of the company even extends to the nuances of its ingredients. Last year, when Chipotle, founded by Steve Ells, celebrated its 30th anniversary, I spoke with Hartung about his initial impressions of the company.
“I’d be lying if I said I knew we’d be exactly where we are today,” he shared. “But I was optimistic when I joined Chipotle. It blew my mind that a young chef had started this fast-casual restaurant based on fine dining principles.”
When he first tasted a Chipotle burrito, he was impressed by the ingredients, particularly the rice. “I used to think rice was bland and flavorless,” Hartung said. “But not if you prepare it correctly. If you cook it just right, without being too starchy or sticky, and season it properly with citrus and cilantro, it’s delicious.”
‘In good hands’
Chipotle reported its Q2 earnings on July 24, showing an 18.2% year-over-year increase in total revenue, reaching $3 billion, and an 11.1% increase in comparable restaurant sales. During the quarter, Chipotle opened 52 new company-operated restaurants. Following Tuesday morning’s announcement of Niccol’s departure, Chipotle shares, trading under the CMG ticker, closed down about 8%.
Chipotle is “both in a good place and in good hands” with Boatwright as interim CEO and Hartung postponing his retirement to stay on in his new role, according to Nick Setyan, an equity research analyst at Wedbush Securities, who expressed this view in a Tuesday note. “We credit both leaders, along with Brian Niccol, for CMG’s turnaround.”
Michael Halen, a senior consumer products analyst at Bloomberg Intelligence, and contributing analyst Amir Islam wrote in a note that Chipotle appeared well-equipped to manage Niccol’s departure, as reported by Fortune.
Hartung and Niccol have been “key members of the executive team credited with creating substantial shareholder value,” said Scott W. Simmons, co-managing partner of executive search firm Crist Kolder Associates. “The board is keen to avoid losing both Niccol and Hartung in quick succession,” Simmons added.
“I believe Chipotle needs a CEO with extensive QSR [quick-service restaurant] experience and a proven ability to drive sustainable growth, which is notoriously difficult in the QSR space,” Simmons commented. “It would be a mistake to hire a CEO who deviates too much from the current strategy.”
The following sections of CFO Daily were curated by Greg McKenna.
Leaderboard
Elias Olmeta was appointed CFO of MeridianLink, a software provider for financial institutions and consumer reporting agencies, effective August 26. He will succeed current CFO Larry Katz, who has been promoted to president of the company. Olmeta most recently served as CFO of Mitchell International, a SaaS provider to the automotive and insurance industries, and currently serves on the board of AutoCanada, Canada’s largest automotive dealer group.
Chris Sands was appointed CFO of digital payment company InvoiceCloud. Sands previously held the same role at digital healthcare company IntelyCare and MineralTree, another software and payments business.
Big Deal
Global private equity and venture capital deal value reached $369.51 billion in the first half of 2024, a 26% increase from the previous year, according to data from S&P Global Market Intelligence. Despite concerns about a potential recession and high interest rates, July’s transaction value was $59.26 billion, up 33% and 44% from the same month last year and in 2022, respectively.
The largest deal in July was Sixth Street Partners’ $5.1 billion agreement to take reinsurance company Enstar Group private. Overall, the technology, media, and telecom sector saw the most deal activity, accounting for 380 PE-backed transactions.
Going deeper
“Salary budgets for pay increases will decline in 2025,” according to a new report from compensation software provider Payscale. U.S. employers plan to increase salary budgets by 3.5% next year, down 10 basis points from the previous year, according to an annual survey of over 1,500 clients. The report noted that base pay increases remain higher than the pre-pandemic average of 3%.
Overheard
“Starbucks’ decision to replace CEO Laxman Narasimhan with Brian Niccol is a no-brainer, in our view. Niccol authored Chipotle’s robust turnaround and is arguably the top public restaurant CEO in the U.S.”
