December 12, 2016 / 2:16 PM / 3 years ago

Chipotle founder Ells takes over as sole CEO at burrito chain

(Reuters) - Chipotle Mexican Grill Inc said founder Steve Ells will retake the helm as sole chief executive officer after co-CEO Monty Moran stepped down on Monday amid intense pressure to turn around the burrito chain which has struggled to recover from a string of food safety lapses that have damaged its sales and reputation.

A Chipotle Mexican Grill is seen the day before it announces its first quarter results, in Los Angeles, California, United States, April 25, 2016. REUTERS/Lucy Nicholson

Ells, who has confirmed that the chain is in discussions with billionaire investor William Ackman about shaking up its long-serving board, told Reuters the Chipotle would “soon” name “a few” new directors. He declined to elaborate.

Ells, 51, also said he would remain board chairman, even as Amalgamated Bank and CtW Investment Group urge fellow shareholders to name an independent chairman to replace Ells as leader of the board.

“That’s the plan right now,” Ells told Reuters.

Shares in Chipotle added 3.3 percent to close at $382.48 on Monday. Chipotle’s shares traded above $750 before the chain was linked to a series of foodborne illnesses in late 2015.

“Given the ongoing challenges facing the company, the board felt strongly that it was best for Steve to resume leadership of the company going forward,” Neil Flanzraich, the company’s lead director, said in a statement.

“Having two CEOs did not serve Chipotle well once the food safety crisis hit, so this is only a modest step forward. Lots more needs to be done to refresh the board,” said Keith Mestrich, president and CEO of Amalgamated Bank.

“It still doesn’t resolve the question of independent oversight,” said Derrick Wortes, director of equity strategies at CtW Investment Group.

Ackman, who reported a nearly 10 percent stake in Chipotle in September, wants several board seats, sources have told Reuters. A spokesman for Ackman’s fund declined comment.

Ells was Chipotle’s CEO from 1993 until 2009, when Moran was named co-CEO.

Moran, 50, was Chipotle’s chief operating officer prior to being named co-CEO and continued overseeing restaurant operations following that promotion.

Moran, a friend of Ells’ since their student days, also stepped down as a director on Monday. He will be an adviser to the company until 2017, when he will retire.

“Given Chipotle’s mostly self-inflicted and significant challenges of the last 12-15 months, it would have been unusual if no top person at the company hadn’t undergone a transition such as this,” Instinet analyst Mark Kalinowski wrote in a client note.

Chipotle’s same-restaurant sales have fallen for four straight quarters, dropping 21.9 percent in the latest quarter, even as the company has issued millions of coupons for free and discounted meals.

Ells and other executives said on a conference call that service speed has slowed since the company was linked to high-profile E. coli, salmonella and norovirus outbreaks last year.

Staff turnover and complaints about running short of white rice or chicken are also up, they said.

Ells told Reuters he would oversee a program aimed at improving and streamlining crew hiring, training and incentives with the end goal of improving the customer experience, the appearance of dining rooms and service speed.

Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Anil D'Silva and Lisa Shumaker

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