Please read the case Chipotle needs to change and answer the below:

1. What is the underlying problem in this case from CEO Brian Niccols perspective? (2 marks)

2. What type of change Niccol need to inspire- reactive or proactive? Explain

(1 mark)

3. Using Fig 10.1 on page 380, describe what forces for change exist both inside and outside Chipotle. (1 mark)

4. Utilize Lewins change model (Fig 10.2 on page 384) as a blueprint and describe how Niccol can inspire change at Chipotle? (1 mark)

* Please type the answers.

* Answers must be unique as you need to use your own words.

* Total words needed is 500 minimum.

CASE:

Chipotle Needs to Change

Chipotle Mexican Grill started in 1993 with a single restaurant and now operates in 2,400 locations, including in Canada, England, France, and Germany. The fast-food chain had approximately 60,000 employees and revenues of $4 billion in 2017.153

Steve Ells founded Chipotle and served as its CEO until 2018. Ells wanted to differentiate his brand from that of other fast-food chains, so he focused on fresh, high-quality raw ingredients free of antibiotics and pesticides. Meals were prepared using classic cooking methods and were served in choose-your-own style so diners could get the individual ingredients they preferred.154

Then the companys growth and profitability were stunted by outbreaks of foodborne illnesses. Customers were sickened by E. coli, norovirus, and salmonella at dozens of Chipotle restaurants around the United States between 2015 and 2016. 155 The restaurants stock

never recovered as shares fell nearly 60 percent between 2015 and 2018. 156 Lets examine what led to the burrito makers fall from grace.

AS CHIPOTLE GREW, SO DID ITS PROBLEMS Chipotle rose to greatness because customers were offered a straightforward set of options, food was prepared on site in an open kitchen, and diners felt they were eating something healthy. The company had success with this model early on, but the system started to crack as Chipotle grew. Inconsistent food preparation was the first stressor. The open kitchen proved a difficult model to scale, and poor food handling most likely led to the outbreak of foodborne illness. According to the Chicago Tribune, Chipotle has been growing too quickly, and without a game plan. The restaurant chain was plagued by inconsistency and inefficiency. 157 Foodborne illnesses continued to haunt it almost two years after the initial outbreak. In 2017, The rate of food poisoning reports attributed to Chipotle continues to be multiples higher than peers, said Business Insider. 158 These statistics are especially troubling for a brand that prides itself as providing Food with Integrity.

The restaurants menu reflects another crack in its vision and strategies. Chipotle offers burritos, tacos, burrito bowls, and salads. This simple menu attracted customers for over a decade but is now seen as stale, according to an analyst with the Tribune. 159 Ells began offering queso in September 2017 in an attempt to spice up Chipotles menu. The results were not promising. Only 15 percent of orders included queso, compared to the 40 percent of orders that included guacamole. Business Insider reported that queso-related traffic died off after peaking the first week the new item was available.160

These problems have created opportunities for other fast-casual restaurants such as Qdoba and Moes, which are opening locations all over the United States. According to a UBS analyst, . . . these concepts are exhibiting significant growth rates while also increasing competition for attractive market/site selection. Chipotles once unquestionable market leadership is on shaky ground.

CHIPOTLES NEW CEO WAS SUCCESSFUL AT TACO BELL Chipotle named Brian Niccol CEO in 2018. Niccol had been Taco Bells chief marketing officer from 2011 to 2015 before taking over as its CEO. 161 He was hired at Chipotle because of the successful turnaround he had overseen at Taco Bell.

A disgruntled customer had filed a lawsuit in 2011 alleging Taco Bells taco mixture was more filler than beef. The suit was later withdrawn, but it took a toll on Taco Bells reputation and sales. Niccols change efforts focused on repositioning the chain as a youthful lifestyle brand. He did this by welcoming ideas from restaurant employees and introduced new menu items, including breakfast. 162 These changes produced impressive results. Taco Bell posted an average of 4 percent sales growth during Niccols time as CEO. 163 The fast-food chain also beat out Pizza Hut and KFC as the most successful restaurant in the Yum Brands portfolio.164

NICCOLS CHALLENGE AT CHIPOTLE Niccol faces three challenges at Chipotle. The first is the menu and potential resistance to changing it from the companys senior leadership. The second is increased competition taking advantage of the companys past problems, and the third relates to Chipotles food preparation practices and their contribution to foodborne illness.

Niccol first needs to address Chipotles menu problem. According to a CNNMoney analyst, They need something that gets people talking about the brand again. The analyst says that Chipotle should consider adding new menu items such as nachos or frozen margaritas. Niccol may be positively disposed to this suggestion because he was also the architect of Taco

Bells positive move to offer breakfast and Doritos Locos tacos. 165 Other analysts have concerns about the company venturing too far from its core offerings.166

Those who are skeptical about changing the menu include Chipotles founder and current executive chair, Steve Ells. Ells still yields significant power and is known as a hands-on leader and perfectionist, according to The Wall Street Journal. 167 He told The New York Times, Its not like you can put a whole new thing up on the menu board andlike at a typical fast-food place. 168 This view is supported by Ellss earlier strategic failure of adding queso to the menu.

Niccol is likely to experience resistance to some of his ideas because Ells does not believe Chipotle is like Taco Bell. Chipotle is more vulnerable to suppliers changes in the price of items such as avocados and chicken. Other fast-food brands can push increased costs to franchisessomething Chipotle does not have. Ells also refuses to compromise on quality as part of any change. I dont think youre going to see a situation where someone says, To hell with food with integrity. Were going to buy cheap commodity meat now and really turn this thing around, he told the Times. 169

Chipotles second challenge is increased competition, and the biggest threat here is Panera. Panera is outside Chipotles cuisine niche, but it is competing with its promise of fresh, additive-free ingredients. It also has an exhaustive menu that rotates seasonally. Chipotle customers who are tired of its big-four menu will easily find a Panera nearby; Business Insider reports that 87 percent of Chipotles compete with a Panera Bread within a 10-minute drive.170

Niccol will have to do more than change Chipotles menu if he wants to compete with Panera. He needs to address his third challenge, which is stopping people from getting foodborne illnesses at his restaurants. The new CEO might accomplish this by slowing the chains growth and focusing on safer operations. For example, each of Chipotles approximately 2,400 locations does its own prep work, such as washing lettuce and chopping tomatoes. 171 Although this practice is part of Chipotles operational vision, an analyst from the Tribune suggested that [Chipotle managers have] to keep to their core values . . .but need to find a way to be more consistent and efficient. The analyst recommended that Chipotle wash and prep food in a central location and send it out to nearby stores.172

Such a food preparation change will significantly alter Chipotles restaurant structure. Customers may no longer walk into a restaurant and see employees grilling meat and chopping vegetables behind the food line. This setup has been part of the chains vision and heritage and represents something Ells holds near and dear. Niccol will likely face an uphill battle in uprooting some of that heritage, as hes stepping into a role occupied by a founder for the past 25 years, said an analyst to Business Insider. 173 Can Niccol inspire change and save Chipotle?

How do managers know when their organizations need to change? The answers aren't FIGURE 10.1 clear-cut, but you can get clues by monitoring the forces for change-both outside and Forces for change outside inside the organization. (See Fleure 101.) and inside the organisation Outside Forces Inside Forces Demographic characteristics Human resources concerns Age Unmet reeds Education Job dissection Slove Absenteen & tummover Gender Prodott migration Parction gestion Technological advancements Managers' behavior Manufacturing automation Con . dommation Technology Leader Rewad Shareholder customer, & market changes Sucurieron Changing customer preferences Domestic motion.comotion Mergers & acou Social & political pressures War Vis Leadership THE NEED FOR CHANGE Lewin's Change Model: Unfreezing, Changing, and Refreezing Most theories of organizational change originated with the landmark work of social psychologist Kurt Lewin. Lewin developed a model with three stages-unfreezing chang ing, and refreezing-to explain how to initiate, manage, and stabilize planned change. (See Figure 10.2.) FIGURE 10.2 Lewin's model of change Unfreezing Create the motivation to change Changing New information models, & procedures Refreezing Support & reinforce the change