At a Glance
The line at the Chipotle Mexican Grill in suburban Cleveland stretches to the door, but instead of stewing impatiently, I stare benignly ahead, gazing at the menu board, the hip-looking young diners, the bustling activity on the production line. Even my hulking teenage boys, who typically growl like grizzlies when forced to wait more than a minute for a meal, stand docile as doves. For some reason, the line doesn't really faze us, nor does it seem to bother other customers. Maybe that's because we "get" the message here: Fast casual fare made with the freshest ingredients, all prepared on site and to order, is worth a bit of a wait.
I eye plump marinated chicken breasts sizzling on the grill, inhale the aroma of herb-infused, succulent Niman Ranch pork (carnitas) braising in its juices. I know the vibrant green guacamole was hand-mashed today and mixed with fresh-chopped cilantro, jalapenos and red onions. And, at five bucks and change for a 20-oz. bundle, I feel like I'm getting a deal on a meal that's not only tasty and satisfying, but good for my family, too.
The line crew constructing the endless stream of burritos, fajitas and tacos moves like a well-drilled military unit, only loose and friendly, bantering with customers as they work.
The gospel according to Chipotle (pronounced Chi-POAT-lay) is spreading. From its beginning in 1993 as a single 20-seat burrito joint in Denver to more than 320 restaurants in 19 states today, Chipotle is on the march. Last year, through its partnership with McDonald's, it placed on the Technomic list of America's Top 100 Chains.
Talking with founder and c.e.o. Steve Ells, 38, who'd rather detail the intricacies of humane animal husbandry practices and the plight of the family farmer than same-store sales figures, one can't help but marvel at his single-minded conviction and drive.
Ells, a classically trained chef and CIA grad, conceived Chipotle after frequenting San Francisco Mission District tacquerias off hours from his job at Stars restaurant. He loved the fat burritos prepared to order, everything wrapped in giant flour tortillas. So, with his father's financial backing, Ells opened his first Chipotle on the outskirts of hometown University of Denver. It was a hit from the start.
And talk about chutzpah—consider this—back in 1997, after Ells opened his second Chipotle and was mulling expansion possibilities, he sent an unsolicited business plan to the Mecca of the industry—McDonald's—and the giant responded. The timing couldn't have been better.
When I started Chipotle, it was all about fresh. But we found that fresh is no longer enough anymore. We also want to offer food with integrity.
According to an account in The New York Times, domestic sales at McDonald's were flattening and executives were looking for ways to jump-start growth. Within two weeks, the company met with Ells and bought into his start-up, eventually acquiring 90 percent ownership. Ells discounts rumors that McDonalds is selling off the chain, as it recently did with its Donatos Pizzeria chain.
And control of ownership hasn't translated to control of the concept, insists Ells. "This is our plan, our strategy and we operate autonomously," says Ells. "We always have. And I imagine if we continue to perform as we have in the past, then that will remain the same."
It's the best of both worlds for Chipotle—freedom to set its own course when it comes to concept development—backed by a big-money partner's sophisticated distribution system and operations know-how.
That freedom is imperative to Ells, who has a single-minded vision for every aspect of the business—from sourcing and store design to labor and marketing.
On the Menu
Man on a Mission
"We're on this journey to find the very best raw ingredients possible, a program we call 'Food with Integrity'," says Ells. "When I started Chipotle, it was all about fresh, but we found that fresh isn't enough anymore. You really have to understand how animals are raised and how produce is grown and the impact not only on how items taste but also on the environment.
"Every week, there's news about the supply chains and our sources of food in the U.S.," he says. "We're excited to be a part of this revolution and to contribute to eating better-quality food. I think more restaurants will move in this direction because the customer will demand it."
Hence, the chain's partnership with purveyor Niman Ranch. (see below). In 2001, Chipotle became the first national restaurant chain to serve free-range pork.
The challenge in sourcing these specialty purveyors is finding enough supply to meet the needs of a chain Chipotle's size. Niman Ranch has kept up with Chipotle's growth, signing on more family farms as demand has grown. It's been more difficult, however, to source the kind of chicken and beef that Ells is determined to see on his menu.
"The flavor of our food is complex, but we use very simple ingredients," explains Ells. "There aren't a lot of moving parts on our menu, so we can focus on grilling the perfect chicken, steaming the perfect rice, slow-cooking the best beans and finding the freshest avocados to mash into guacamole."
Chipotle recently began serving naturally raised (no antibiotic use and a vegetarian diet) Bell & Evans chicken at a few units in Ohio, New York and Washington, D.C. "As they (Bell & Evans) grow their business—and they're growing rapidly— we'll add that chicken to new and existing restaurants on the East Coast," says Ells. "We're also working on a deal with another supplier who follows the same protocol as Bell & Evans.
It's a great story how Chipotle is creating this demand and supply. "We're seeing the same kind of movement with beans. This year 10 percent of our beans will be organic and more farmers are committed to growing for us.
"There's a revolution going on in fast food," continues Ells. "It's the same thing that happened when people decided a cup of gourmet coffee was worth foregoing the office coffee pot and paying three dollars for something made in front of them. People will pay for quality."
Setting the Pace
Keeping up with Chipotle's growth will, indeed, be a challenge. The chain, with the financial muscle of McDonald's, plans to open about 100 stores this year, up from 76 opened last year, and mostly in existing markets. It recently added Portland and Orlando, and will be moving into Tampa and Seattle this year. Some of its highest-volume markets include Washington, D.C., Minneapolis and Cleveland.
While Ells won't divulge sales figures, he reports same-store sales growth of 24.5 percent last year, and Chipotle's success has potential franchisees champing at the bit to get in on the action.
They'll have to wait. Currently, just three (McDonald's) franchisees operate seven of the 320 units. "Right now, we're running a very successful company-owned business," says Ells, "and franchising is not a growth vehicle for us. That's not to say that it can't be or won't be in the future, but we want to make sure we do this right. We're learning how these restaurants would operate in a franchise model."
Like everything else he's involved in, Ells has strong opinions on two other key components of Chipotle—the concepts design and the quality of its labor force.
From his first Chipotle, Ells had a vision of the concept's design, which mirrors his food philosophy—simple ingredients used in creative ways elevate the ordinary to extraordinary.
"I didn't want the store to look so much like a Mexican restaurant, but more like a funky little joint," says Ells.
While all Chipotle restaurants use similar materials to achieve a sparse, urban look, no two are alike. "I've always wanted the environment at Chipotle to speak to the kind of food we're serving," says Ells. Just as the simple ingredients are elevated through careful preparation and classic cooking techniques, "the same can be said for the environment. It's plywood, steel pipes, utilitarian light fixtures and galvanized ductwork; basic materials made into something more substantial through great design by our team of architects," led by Brand Gould, who's been with Ells since the second unit was developed.
As for labor, Chipotle demands more from its 6,500-person work crews than most fast-casual concepts. "We're doing a lot more from-scratch prep than most concepts," says Ells. There's a lot of pride that goes into the prep and a lot of the prep is done in front of the customer, so there's this great dynamic. The customer appreciates what he or she is getting and the crew feels a sense of pride in delivering something special. I think these are reasons our turnover is about half the industry average.
"But it goes beyond that," adds Ells. "We offer a culture and language program that not only teaches English to Spanish-speaking employees, but also teaches Spanish to English-speaking employees to bridge the gap." The program also includes life skills. It celebrates cultural differences, and that helps build better communication.
"We want people to be able to bring their personalities to the job. Not only is this better for our employees, but, ultimately, it delivers a better experience for the customer. It's a real experience, not necessarily a chain experience."
A Passion for Pork
When Ells visited his first Niman hog farm, there were 75 farms in operation. Niman Ranch was a relatively small purveyor, known primarily for supplying meats to some of the nation's finest restaurants, includng Chez Panisse in Berkeley; Charlie Trotter's in Chicago; Tra Vigne in Napa Valley; and Daniel in New York City.
Family farmers raise Niman Ranch hogs in open pastures without the use of antibiotics or other artificial growth additives. Hogs are fed only grains and grasses and no animal byproducts. Pork is selected for taste; hogs capable of living outdoors carry ample fat as insulation against cold and heat. Heavier "back fat" brings with it superior marbling, flavor, tenderness and palatability, claims the company.
"Chipotle went through an extensive process of tasting and combining the right parts of the animal to get the result Steve desired," says Niman. "He tasted 20 different cuts of the animal, zeroing in on three to five muscles he wanted in the mix, which yielded a darker, more flavorful meat.
"The question when we started talking was, 'Can these small heirloom family farms produce enough pork to meet the growing needs of Chipotle?'" recalls Niman. "Every time they open a store, we need to add a new farm to support it." Since the chain started specifying its pork, Niman Ranch has kept up the pace, and today boasts 300 farms in 10 states.
"Through its efforts, Chipotle can do more to influence what's happening in the rural landscape, in terms of providing an alternative to the industrial factory-raised pork, than any other movement going on today," says Niman.
Specifying free-range pork means above-market prices, but that didn't deter Ells or negatively affect sales at Chipotle.
"When they converted to us, they raised the cost (for a pork burrito) by over a dollar, and unit sales still went up two-and-a-half times at the higher price," says Niman. "That is a fantastic testimony. They educated the customer about the product with a fabulous campaign, and I can't wait to see them do the same for other things they source, from beans to cheese."