Activist investor Bill Ackman may press for changes in the board and the franchising model at Chipotle, say analysts. Fred Katayama reports.
Wall Street's betting Wednesday that Bill Ackman will successfully pressure Chipotle to cook up the right recipe to turn itself around. The influential activist investor unveiled Tuesday he had bought a big stake in the burrito chain. Investors sent Chipotle's beleaguered stock sharply higher. Ackman could shake up the board and change the way the stores are run, says Morningstar senior analyst R.J. Hottovy: SOUNDBITE: R.J. HOTTOVY, SENIOR RESTAURANT ANALYST, MORNINGSTAR, (ENGLISH) SAYING: "I think that the board has been pretty static over the last couple of years. And some times, consistency is a good thing, but I think this is a case where some new insight, particularly people with experience, not only driving recovery in a brand that has potentially gone through circumstances like this." Chipotle's shares have fallen 42 percent over the last twelve months after being rocked by outbreaks ranging from E. coli to the norovirus. The chain has given away burritos and implemented food safety measures in a bid to win back customers, but revenue has fallen for three straight quarters. Ackman has also had a tough year. His fund suffered a loss with investments in Valeant and Herbalife, but analysts note he has a good track record investing in fast food restaurants such as McDonald's and Burger King.