Starbucks is replacing its CEO with the head of Chipotle as it seeks to revive flagging sales and appease outside investors.

Starbucks announced Tuesday morning that Brian Niccol, who has led the burrito chain since 2018, will take over the coffee giant starting next month.

Laxman Narasimhan, who took over as Starbucks’ CEO in March 2023, is leaving the company.

People outside a Starbucks in Los Angeles on July 12, 2022. –Frederic J. Brown / AFP via Getty Images file

Starbucks’ stock closed more than 24% higher, while Chipotle shares fell more than 7%.

Starbucks has struggled this year, hurt by weak sales in the U.S. and China. It had also faced increasing customer complaints about declining service quality and rising prices. It had recently come under pressure from so-called activist investors who’d purchased large stakes to force changes. Starbucks shares were down nearly 20% this year before Tuesday’s trading session.

Chipotle has faced similar gripes: It raised prices this year and also confronted a wave of social media criticism over uneven portion sizes. But Chipotle has better weathered those issues, recently reporting strong earnings that bucked a broader industry slowdown. Heading into Tuesday, its stock was up over 20% this year.

In its release announcing the change, Starbucks said Niccol had ‘transformed’ Chipotle.

‘His focus on people and culture, brand, menu innovation, operational excellence, and digital transformation have set new standards in the industry and driven significant growth and value creation,’ Starbucks said. It added that Chipotle’s stock price had increased nearly 800% during his tenure, ‘all while increasing wages for retail team members, expanding benefits, and strengthening the culture.’

Mellody Hobson, who stepped down as Starbucks’ chair to become lead independent director as part of Tuesday’s leadership shake-up, told CNBC on Tuesday that the board had been thinking about replacing Narasimhan for several months.

“Our board, a couple months ago, started to engage in a conversation about the leadership of the company, and I made an overture through someone to Brian, and he took the call,” Hobson said on CNBC’s “Squawk Box.” “We thought we had the opportunity to engage with one of the biggest names in the industry, someone whose track record is just clearly proven, not only through the spectacular results that he’s had at Chipotle, but also before that at Pizza Hut and Taco Bell. He knows this industry, and we thought he would be the right leader for this moment.”

Hobson acknowledged that Narasimhan faced some challenges coming into Starbucks without restaurant experience but added that he helped decrease turnover and address supply chain issues. However, it appears that the board has more confidence that Niccol will be able to turn the business around quickly.

“What we saw with Brian was someone who’s, quite honestly, been there, done that — through all sorts of market environments, all sorts of cycles. When I talked to him, I remember him saying, ‘I know what to do,’” Hobson said.

In a statement, Starbucks chairman emeritus and former CEO Howard Schultz, who had been critical of the company’s recent performance, praised the change.

“Having followed Brian’s leadership and transformation journey at Chipotle, I’ve long admired his leadership impact,’ Schultz said. ‘His retail excellence and track record in delivering extraordinary shareholder value recognizes the critical human element it takes to lead a culture and values driven enterprise. I believe he is the leader Starbucks needs at a pivotal moment in its history. He has my respect and full support.”

Starbucks Chief Financial Officer Rachel Ruggeri will step in as interim chief executive until Sept. 9, when Niccol officially takes over the top job.

Chipotle Chief Operating Officer Scott Boatwright will serve as interim CEO of the burrito chain. Chipotle CFO Jack Hartung, who had planned to retire next year, will stay on as president of strategy, finance and supply chain.