Starbucks is betting big that Chipotle's CEO can make it special again. He'll have his work cut out for him.

• Starbucks on Tuesday announced a surprise CEO change, picking Brian Niccol as its top executive.
• Starbucks has struggled lately with sluggish sales and operational issues.
• Niccol will join Starbucks from Chipotle, where he led a turnaround in sales and reputation.

Everyone, from customers to activist investors, agrees: Starbucks needs to make some changes.

Brian Niccol, the coffee chain's soon-to-be CEO, has a record of doing exactly that.

Starbucks said on Tuesday that Niccol, the CEO of the Mexican grill chain Chipotle, would take over as its top executive on September 9. Laxman Narasimhan, Starbucks' current CEO, will step down effective immediately from his roles as CEO and a member of Starbucks' board of directors, the company said.

The Wall Street Journal reported last month that the activist investor Elliott Investment Management was in discussions with Starbucks management about ways to boost the company's stock price.

And the Journal reported on Friday that a second activist investor, the hedge fund Starboard Value, also took a stake in the coffee chain and was pushing for changes.

It's unclear how Niccol's appointment will affect Starbucks' negotiations with Elliott or Starboard. Neither investor responded to requests for comment from Business Insider on the change.

But Niccol is no stranger to breathing new life into restaurant brands that need a refresh.

Niccol has a history of making big changes

In 2011, Niccol became Taco Bell's chief marketing officer . On his watch, the chain debuted its "Live Más" slogan and Doritos Locos Tacos, the Journal reported in 2022.

When he joined Chipotle in 2018, the company's stock and sales had slumped after an E. coli outbreak at its restaurants that sent some customers to the hospital.

In his tenure at Chipotle, Niccol made several changes.

He moved Chipotle's headquarters from Denver to Orange County, California, and he beefed up the chain's food-safety measures.

He also oversaw an expansion of Chipotle's online-ordering options just before delivery and pickup became essential to the restaurant business early in the pandemic.

In a few years, Chipotle customers, used to having to order in person at a restaurant, became able to place their order online and then swing by a drive-thru window just for online orders — which the company dubbed a " Chipotlane ."

All that helped turn around Chipotle's financial results. The chain's stock price has tripled over the past five years. On Tuesday, it was trading 12% lower, at $49.43, after the news of Niccol's departure broke.

"Chipotle has outperformed the quick-service-restaurant space the past several years, and we'd expect new products and advertising campaigns to be a focus early in his tenure at Starbucks," said R.J. Hottovy, the head of analytical research at Placer.ai, which analyzes foot traffic at restaurant chains.

The road ahead at Starbucks

At Starbucks, Niccol will face some challenges similar to those he took on at Chipotle. Same-store sales for Starbucks' latest quarter slipped by 2% in the US as the number of orders fell.

Starbucks' sales in China , which is home to nearly one-fifth of the chain's stores, also fell by 14%.

There are also operational issues. In the US, Starbucks cafés are often crowded as patrons decide what to order from an extensive menu and then wait for their order.

The company is trying to improve operations at its stores, including by revamping its drink-production process at thousands of locations through something it calls the Siren Craft System .

But Starbucks is hoping for more changes as it prepares to welcome Niccol.

"Brian is a culture carrier who brings a wealth of experience and a proven track record of driving innovation and growth," Mellody Hobson, the chair of Starbucks' board, said in the company's statement announcing the CEO change on Tuesday.

The BTIG analyst Peter Saleh said on Tuesday that Starbucks' network of stores is more complicated than Chipotle's. While Chipotle's roughly 3,500 stores are all company-owned, Starbucks has close to 39,000 locations globally, with some owned by the company and others licensed to other operators.

Still, Saleh said, the surprise announcement represents "a significant victory for Starbucks."

"Mr. Niccol has earned the respect and confidence of the investment community and will be given the much-needed leeway to make investments and time to turn around Starbucks," Saleh wrote.

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