Chipotle leaving Denver, plans HQ move to California
After nearly 25 years in Denver, Chipotle Mexican Grill is saying so long to its hometown, announcing Wednesday that it will move its headquarters to Southern California, where its new CEO lives.
The fast-casual restaurant chain, which has had a rough few years financially, will settle in Newport Beach, near fast-food neighbors Taco Bell, Del Taco and In-N-Out Burger.
In a news release, the company said it will spend the next six months moving corporate staff — from finance, HR and other corporate functions — to California and Ohio. But not all of its 375 corporate employees in Denver will be offered relocation or retention packages. Restaurant employees and field operations workers are not impacted by the move.
“The consolidation of offices and the move to California will help us drive sustainable growth while continuing to position us well in the competition for top talent,” said Brian Niccol, who became Chipotle’s CEO in February. Niccol previously served as CEO of Taco Bell, based in Irvine, Calif.
In the news release, Chipotle said that the Denver and New York offices will be consolidated into either the remaining office in Columbus, Ohio, or the new headquarters in Newport Beach. The company declined further comment.
Chipotle founder Steve Ells opened the first restaurant near the University of Denver in 1993. The location, at 1644 E. Evans Ave., was recently renovated and reopened just as fall classes began last September. DU assistant professor Paul Seaborn, who has done a case study on Chipotle with students, called it “an essential part of the campus tour when people come to visit DU.”
“For non-Coloradans, this is almost a non-event,” said Seaborn, who teaches in the Department of Management at Daniels College of Business. But here, it “sends a message to Colorado that this is not the Chipotle we grew up with.”
Just a few years ago, Chipotle’s growth streak seemed untouchable. Its stock price hit a record of nearly $750 a share in July 2015. But an outbreak of E. coli in late 2015 caused shares to tank, and sales shrank. Ells apologized to customers, but the restaurant chain found it difficult to regain its growth trajectory.
The company, which operates more than 2,300 Chipotles around the globe, missed earnings, even after introducing new menu items, including queso. Criticism from activist shareholders such as Bill Ackman of Pershing Square Holdings culminated in Ells’ decision in November to step down as CEO to become executive chairman.
In December, the company had signed a 15-year lease for five floors of the brand new downtown skyscraper at 1144 15th St. At the time, the company said it would move its corporate headquarters there by the end of 2018 in order to consolidate its 450 corporate employees under one roof.
Hines, the real estate firm that owns the new building, said Chipotle, through its real estate broker Savills Studley, acknowledges its lease obligations and will coordinate with Hines to sublease the space or find a replacement tenant.
“Like all of Denver, we are disappointed that Chipotle made this decision to relocate its corporate offices outside of Colorado, but we also know that other premier tenants wanting to be in the best office building downtown will now have the opportunity to do so,” said Hines senior managing director Jay Despard in a statement.
New leadership, new initiatives like drive-through service, and a new home near other fast-food chains in southern California all signal a major cultural shift is underway, observers said.
“It seems like this is another signal from the company to employees that they want to make a break from the past and create a new Chipotle,” said Seaborn. “Secondly, Chipotle is positioning itself as more of a traditional chain that is more similar to other fast food chain management teams, as opposed to a company that is going to zig where others zag.”
J.J. Ament, the CEO of the Metro Denver Economic Development Corp., said he found out about Chipotle’s decision to move after landing Wednesday in San Francisco on a trip to check up on companies in the Bay Area that have expanded in Colorado.
“We didn’t have any notice that this announcement was coming,” Ament said.
Whenever a company brings in a new CEO who lives in another community, as Chipotle did, a relocation is always a possibility, he said. Niccol reportedly lives in Newport Beach, where Chipotle will make its new base.
“This is a huge blow for Denver as they are losing a fast-casual institution,” said Nancy Luna, a senior editor who covers Chipotle for Nation’s Restaurant News. “Coming back home to Southern California, if he even left permanently at all, serves two strategic purposes for Niccol: He has better leverage in recruiting talent from Taco Bell, which is based only a few miles away in Irvine, … and more importantly, it gives the struggling brand a chance to reboot its culture in a new community.”
Colorado lost one of its largest companies, First Data Corp., in 2009, after the departure of longtime CEO Charlie Fote, who brought the headquarters to metro Denver. The new CEO, Michael Capellas, moved the company to Atlanta despite a full push by economic development officials to get him to stay. State officials, however, were able to persuade Frontier Airlines to stay here.
The move comes as Colorado makes a push to attract a second headquarters for online retailing giant Amazon. Metro Denver is among the 20 finalists that the Seattle-based company named this year.
Chipotle is Colorado’s seventh-largest public company in terms of market value, at $12.1 billion. That value, depressed by the food-safety problems in recent years, has risen 36 percent since Niccol took over in March.
And while the company doesn’t generate enough revenues to make the Fortune 500, it did rank No. 557 on the most recent Fortune 1000.
Chipotle is the largest and best known of several fast-casual restaurant chains that have grown up in the metro area. Other brands include Mad Greens, Smash Burger, Noodles & Co., Quiznos, Boston Market and Modern Market.
“For some crazy reason, we have become the fast-casual incubator for so many brands,” said Carolyn Livingston, a spokeswoman for the Colorado Restaurant Association. “Chipotle wasn’t the first, but they were the biggest.”
Gov. John Hickenlooper, whose wife, Robin, serves on Chipotle’s board of directors, did not answer a question of whether he knew Chipotle’s departure was coming. But he shared this remark: “We wish Chipotle all the best. Colorado’s fast-casual food industry remains strong and should offer opportunity for those workers who are displaced. Our Department of Labor and Employment has already reached out to offer those services to their workers.”
Ament said that while he is disappointed, Colorado is grabbing more jobs from California than it is losing to that state. There are plenty of companies interested in locating operations, even headquarters, to the state, and Denver will always be part of Chipotle’s DNA.
“The current CEO can move the company to California,” he said, “but he can’t take away its birthplace.”
Update, 9:55 a.m. May 24, 2018: This story was updated to correct the name of restaurant chain Modern Market.