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What It Means That Chipotle CEO Steve Ells Is Resigning

By Motley Fool Staff - Dec 5, 2017 at 12:42PM

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The key point to consider is how the restaurant chain founder’s exit will be?

In this segment from the MarketFoolery podcast, host Chris Hill and Motley Fool Asset Management's Bill Barker consider the news that the head of much-troubled fast-casual chain Chipotle Mexican Grill (CMG -0.04%) is given up the CEO job. Investors likely figure that whomever replaces Steve Ells will be an improvement. But that new person may have more than Ells' legacy to overcome: They may also have to maneuver past him in his role as a board chairman.

A full transcript follows the video.

This video was recorded on Nov. 30, 2017.

Chris Hill: Chipotle!

Ron Gross: Yeah, I knew you would have some thoughts.

Hill: Yes. In fact, I got emails and tweets from listeners --

Gross: I'm sure you did.

Hill: -- yesterday when the news broke that Steve Ells was going to be stepping down. Like, "What do you think," and all those sorts of things. Mac hosted yesterday. I just wanted to share a couple of thoughts, one of which is that Sarah Halzik, and I don't know Sarah Halzik, but she writes for Bloomberg. I thought she nailed it yesterday with a column she wrote. She said the key question -- and this really is important, because I think, for people who want to have the gut reaction of Steve Ells is the founder of the company; he's had a couple of years to really get things straight, and he hasn't done it, so any new CEO is going to be an upgrade. As Sarah pointed out, no, the key question here is, what kind of chairman is Steve Ells going to be?

Gross: That was my thought exactly.

Hill: Is the next CEO, whoever that person is, are they going to have the latitude to do whatever they want? Or is he going to be constantly looking over their shoulder?

Gross: I wrote that down, that exact thing. See?

Hill: Yeah. And you know who I thought of, and this is not someone who is in contention to be the next CEO of Chipotle, John Flannery at General Electric. I don't know if anything he's doing at GE is going to work. Here's what I do know -- that dude is 100% in charge of that company. He is executing his vision. He has come in and said --

Gross: Yeah. I think it's time for an operational guy.

Hill: Or gal.

Gross: Or gal. It's not time for a visionary; it's not time for an ex-chef -- Ells is a trained chef. There's nothing wrong with chefs. But I'm saying it's time for a real operational guy to come in and get things done. Otherwise, this is going to continue to go down, and they're either going to end up being an acquisition candidate or they're going to just flounder.

Hill: Right, and that's the thing to see. Who is this next CEO, and what kind of latitude do they have?

Gross: And it can't be someone from inside the company.

Hill: No.

Gross: They have to hire from outside. I hope.

Hill: And partly because I think it would work, and partly because I think it would be fun to watch -- it would be great if Sally Smith said, "I'll take this job for five years."

Gross: That would be so good. "No money. Give me stock."

Hill: "No money, give me stock, and the first thing I'm going to do is breakfast."

Gross: Boom.

Hill: And just start nailing it that way. I'm very curious to see who it's going to be. In fact, I know there are a couple of people on the board who are heading up the search committee, and I'm not saying Sally Smith is necessarily the person for the job, but they should absolutely talk to her and find out who she thinks they should be talking to.

Gross: I'm sure they're talking to lots of folks, for sure.

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