Please ensure Javascript is enabled for purposes of website accessibility

Why Breakfast Could Be Next on Chipotle's Menu

By Jeremy Bowman - Feb 16, 2018 at 6:26PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

After launching breakfast options at Taco Bell, Chipotle's incoming CEO could do the same for the struggling burrito chain.

Chipotle Mexican Grill (CMG -3.22%) stock jumped higher after the company named Brian Niccol, the head of Yum! Brands' (YUM -2.37%) Taco Bell, its new CEO, indicating that investors approve of the fast-casual chain's selection.

Taco Bell, which is known for innovations like the Doritos Locos Taco, is everything that Chipotle, with its "Food with Integrity" platform, tries not to be. But the decision to go with a leader from traditional fast food could signal that Chipotle is ready for a change.

As CEO of Taco Bell for the last three years and president prior to that, Niccol guided Taco Bell's comeback and transition into a lifestyle brand with a successful social media campaign and innovations like the Cantina Bell, Taco Bell's take on fast casual, and introduced mobile order and payment to 7,000 restaurants. 

Niccol said he would "focus on dialing up Chipotle's cultural relevance through innovation in menu and digital communications," in an effort to "attract customers, return the brand to growth, deliver value for shareholders and create opportunities for employees."

While there are a number of reasons that Niccol seems like a good choice, including his experience with a large chain, familiarity with a Mexican food brand, and success with social media, one of his accomplishments stands out among the rest. Niccol was responsible for Taco Bell's launch of breakfast.

A Chipotle steak burrito

Image source: Chipotle.

The most important meal of the day

Chipotle fans have long clamored for the company to offer breakfast, as an egg-filled burrito sounds just as tasty to them as the chain's usual fare, but management has largely resisted calls to open in the morning. The restaurant previously experimented with breakfast burritos at two airport locations, Washington's Dulles Airport and Baltimore-Washington International Airport; however, the company did not find the demand to be strong enough to continue offering them. 

Still, there's no question that breakfast has been a winner for much of the fast-food industry. McDonald's(MCD -1.70%) launch of all-day breakfast in 2015 helped spark a streak of strong comparable sales growth, and breakfast menu items make up about 15% of McDonald's sales. Taco Bell saw a similar bump in sales after it introduced breakfast in 2014, and it's clear why so many brands have been eyeing a piece of the a.m. market.  

The morning meal tends to be more profitable for fast-food chains as items like eggs and coffee generally offer higher margins than the proteins that lunch and dinner center on, like chicken and beef. Fast-food breakfast is also especially popular with millennials, some of whom identify as breakfastarians, or people who eat breakfast foods at all hours of the day. 

The brand effect

Beyond its impact on the bottom line, breakfast could be even more important in resurrecting Chipotle's brand. McDonald's answered customers' longtime demands for all-day breakfast, and the response has been a major driver of the company's recent sales surge. McDonald's said that all-day breakfast led to incremental business by attracting new customers and delivering larger order sizes.

Chipotle has an opportunity to similarly change the conversation with its own breakfast launch, which would give current customers a reason to visit more often and lapsed ones a reason to try the brand again. The demand is clearly there.

After squandering a similar opportunity with queso, the need to build brand excitement with something like breakfast is greater than ever, and Niccol seems like the ideal person for the job with his experience launching breakfast at another Mexican concept. We'll learn more when Niccol officially takes the position on March 5, but demand for breakfast at Chipotle should only heat up, and the morning meal could be his first big initiative at the helm.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
$1,288.87 (-3.22%) $-42.84
McDonald's Corporation Stock Quote
McDonald's Corporation
$242.83 (-1.70%) $-4.20
Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
$113.48 (-2.37%) $-2.76

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.