Earlier this week, in response to a recent rash of new CEOs at restaurant companies, we put together a list of the companies that changed their chief executives so far in 2024. It was an extensive list. And almost immediately it was incomplete.
That’s because the next morning, Checkers & Rally’s named Chris Tebben its CEO. And then on Wednesday, Greg Levin stepped down as CEO of BJ’s Restaurants.
Two dozen companies have changed their CEOs this year, including two companies in MOD Pizza and Red Lobster that changed their chief executives twice.
It also includes nine publicly traded restaurant companies, or nearly a quarter of such companies.
CEO changes happen with relative frequency most years in the restaurant industry, because there are a lot of restaurant companies, and companies change CEOs all the time. Average tenure for CEOs globally was 8.1 years, according to the consulting firm Russell Reynolds.
But this is shaping up to be an above-average year for such moves, especially among publicly-traded companies. The number of CEO changes at public companies already exceeds the number of such changes all of last year, when there were seven such hires.
Which makes this yet another sign of the industry’s overall volatility along with weak traffic, circling activist investors and bankruptcy filings.
What’s more, most of the new hires come from outside their companies. Two-thirds of the new CEOs at public companies this year were outsiders. Last year, more than half the CEO hires at public companies were promoted from within.
For that exercise, we considered interim chief executives insiders if a permanent chief executive has yet to be named and said interim had been involved with the company beforehand. That includes BJ’s, which named board member Brad Richmond, a former Darden executive, the company’s interim CEO.
Companies hire outsiders when they want to bring in new blood or when the transition was not planned. It could be viewed as a sign that the companies making the move feel that performance was not up to standard.
To put the number of changes at public companies into perspective, 11% of S&P 1500 companies changed their CEOs in 2023 (and 2022, for that matter), according to the executive search firm Spencer Stuart.
That said, among consumer companies, the turnover rate was 24%, which makes this year a bit more normal, though a quarter of the year remains.
The best explanation for the turnover is simple: Stock prices are down. The median stock price in the restaurant industry is down 12% through close on Thursday. By contrast, the S&P 500 Index is up 19% over that time.
Declining valuations put pressure on company boards to make changes, particularly if activist investors come sniffing around. And some of those companies have hired chief executives from other restaurant chains, creating something of a chain reaction or a merry-go-round.
The best example comes from Starbucks. The Seattle-based coffee shop chain conducted an extensive search in 2022 for a new CEO, hired Laxman Narasimhan for the job and had him spend six months as a CEO-in-training.
He was doing fine for the first year. But then in April Starbucks reported badly disappointing earnings, which sent the stock price plunging more than 15%. The company attracted attention from two major activist investors and the board opted to replace Narasimhan with Brian Niccol, the CEO of Chipotle.
As such, Chipotle hired an interim chief executive in Scott Boatwright, an internal corporate hire.
Then there’s the Shake Shack-Papa John’s-Wendy’s merry-go-round.
In January, Wendy’s somewhat unexpectedly replaced CEO Todd Penegor with PepsiCo executive Kirk Tanner.
In March, Shake Shack plucked Rob Lynch away from Papa John’s to replace Randy Garutti, who announced his retirement last year. Papa John’s later hired Penegor for its open CEO seat.
A couple of the outsiders have come from outside the restaurant industry altogether, such as Wendy’s Tanner. The most interesting such name was Michael Spanos, hired recently to be CEO of Outback Steakhouse owner Bloomin’ Brands. Spanos came to the operator from Delta Airlines.
Companies with sales and profitability challenges have also changed CEOs multiple times this year.
Early in 2024, MOD Pizza named Beth Scott CEO. She would not even finish the year as the company she took over had severe financial challenges that would ultimately force its sale to Elite Restaurant Group. Scott has since left, but the traditionally quiet Elite has said nothing publicly about her replacement.
Then there is Red Lobster, which hired a chief restructuring officer early this year, Jonathan Tibus, to be CEO. Tibus was in reality an interim chief executive, as he was in the job to oversee its restructuring. Red Lobster has since named former P.F. Chang’s CEO Damola Adamolekun the permanent CEO.
But the seafood chain, which filed for bankruptcy this year and is being sold to the lender Fortress Credit, has had four chief executives in the past 14 months.
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