When Steve Ells opened a burrito place called Chipotle in Denver, Colorado in 1993, he had no idea it would grow to become a fast-casual chain with thousands of locations in five countries. In fact, his original plan was to make enough money to open a fine dining restaurant. What he did know, though, is that, regardless of what you put on the menu, it’s not just food that matters, but the purpose behind it.
“When Steve started the brand, he didn’t want it to be the typical low-quality fast-food experience,” says Laurie Schalow, chief corporate affairs and food safety officer at Chipotle. “He firmly believed that the way that food is grown or raised truly makes a difference to how it tastes. This principle is called ‘food with integrity’ and the company’s mission is to ‘cultivate a better world.’ It’s still very much alive today, and that’s how we make a lot of our decisions around our food and ingredients.”
Three decades later, Chipotle’s menu hasn’t changed much at all. The chain is still serving staples of Mexican cuisine: burritos (either wrapped or in bowls), tacos, and salads, while quesadillas were introduced later. It also stayed true to its fast-casual concept, which Chipotle is credited with inventing: food is made to order, and diners can customize each item with fillings and salsas as they move along the serving line.
“We only have about 53 ingredients on our menu,” says Schalow. “For us, to do a major introduction like a quesadilla is a big deal, because we’re limited in the space we can have on the serving line. Developing new products is challenging also because we only use fresh ingredients, we don’t freeze anything, and we do a lot of sourcing locally. For example, our queso took years to develop because we didn’t want it to have any artificial colors or ingredients. It’s challenging but we still think it’s the right thing to do.”
A non-franchise model
The success of Ells’ first Chipotle went beyond expectations and convinced him to open more of them, setting aside the fine-dining project.
In 1998 – at the time the chain had 16 stores – McDonald’s invested a significant sum in Chipotle’s business. That was a major turning point for the brand’s growth: “The partnership with McDonald’s might seem strange. They are a very different concept and the quality of ingredients of a fast-food chain is not what you would expect from Chipotle. But Steve’s goal at the time was to open new locations rapidly, and McDonald’s knew how to do that,” explains Schalow.
That partnership worked very well for Chipotle. By the time it ended, in 2006, the chain had grown to about 500 stores. Not long after, it went public and kept growing from there. Today, Chipotle has about 3,200 locations in the US, Canada, Germany, France, and the UK, and the potential for more growth.
All of this was achieved without franchising a single restaurant: “Typically, you’ll start to franchise when you really want to grow and need others in order to scale quickly,” says Schalow. “We don’t need to do that in North America or Westerm Europe because each restaurant is a very profitable business, and Chipotle as a company is profitable too. We don’t have any debt, so we can invest in our business.”
Owning its restaurants has other advantages for Chipotle, Schalow explains: “When we want to make a change, like adding a new piece of equipment, we can do that quickly without seeking approval from the franchise organization. It also allows us to have a direct relationship with our 100,000 employees, whereas sometimes in a franchise model it’s very difficult to communicate directly with them.”
After going public, the chain experienced its greatest challenge to date: a series of foodborne illness outbreaks, first in 2008, and then between 2015 and 2018, the latter leading to a $25m fine.
The crisis prompted the company to drastically improve its food safety practices: “The food safety incidents we had in the past certainly impacted our business both financially and from a reputational standpoint,” says Schalow. “Since then, the brand has worked extremely hard to ensure the safest food possible. We’ve spent millions of dollars and we continue to do that every year, to have food safety practices that we’re quite proud of.”
In the next five to 10 years, Chipotle’s plan is to keep growing: “We want to reach 7,000 restaurants and double the number of employees too,” says Schalow. “If we want
to grow faster than we’ve done so far, we’ll have to speed up the real estate development process and make sure we’re able to source enough ingredients without deviating from the high standards we demand from our suppliers.”
At the end of this growth cycle, Chipotle restaurants might look quite different
from today: “We’ll continue to leverage technology and change how we run restaurants. We are testing Chippy, a robotic device that fries tortilla chips. We make them fresh all day long, but what we hear from our employees is that they really don’t like to stand over the fryer all day.”
Another important change happening in Chipotle’s kitchens is electrification: “As part of our goal to halve direct and indirect emissions by 2030, we have a plan to replace gas grills with electric ones in about 100 restaurants in the next six to eight months. We’re testing solar panels on rooftops and canopies in parking lots, although energy won’t all come from solar,” says Schalow.
What is not going to change, she explains, are the brand’s guiding values: “We take a lot of pride, not only in the restaurants we build, but also on the impact we have on the livelihoods of the communities where we operate, from the farmers that we purchase our ingredients from, to our employees. The purpose around cultivating a better world is important to us. It’s true to our values and to how we run our business, and we take it very seriously.”