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“I Didn’t Know What The Fast-Food Rules Were”: Steve Ells

Chipotle threw out the rule book and wrote its own.

“I Didn’t Know What The Fast-Food Rules Were”: Steve Ells
Steve Ells, Chairman and Co-CEO Chipotle Mexican Grill Inc. [Photo: Victor J. Blue, Bloomberg, Getty Images]

The building that houses Chipotle Mexican Grill’s local headquarters in New York is not impressive. Aside from the scaffolding, the vestibule entrance is small and dim–you can’t really call it a lobby–with nominal security, no branding and two small, dingy elevators. But when the doors open on the third floor, there is warm, dark wood and glass dividers, creating a clean, airy feel. A small dog named Jack is running around unattended. You certainly feel like you’ve arrived someplace distinctive.

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CEO Steve Ells meets me in a conference room with double-paned windows that block out the street noise. Ells is wearing a short-sleeve polo shirt and short pants. Even though it’s August, the look is unexpected for the head of a dynamically successful restaurant chain valued at more than $21 billion. Then again, much of Chipotle’s success has been unexpected: taking on fast-food giants without pushing dollar-menus and drive-thrus, offering a slim range of meals at relatively high price points, and yet posting industry-leading sales growth. The stock price has more than doubled over the past two years.

I’d come to ask Ells about Chipotle’s mission as a business. He shares the company’s founding story: his background as a chef, how his passion for fresh ingredients evolved into an embrace of humanely-raised and antibiotic-free meats. He talks about what he calls the “exploitation” inherent in traditional fast-food. He deploys the company’s signature phrase, “food with integrity.”

But he also talks a lot about profitability, and a business model with efficiency and leverage. When it comes to discussing what attracts shareholders and customers, all the intangibles fall away. “Our investors are in it for only one reason,” Ells stresses: “Great returns. They want to make money.” As for store customers, the people buying millions of burritos across the country, “They care about taste, value and convenience. Somewhere down the line, they care about great customer service. They care about the design of the restaurant, the music. They care about lots and lots of little details.” As for that food-with-integrity mission, “is it ever going to be the reason people come into the store? ‘Oh, I want to eat food with integrity right now.’ I don’t think so.”

And yet what makes Chipotle different has everything to do with that mission. It is what animates every decision the company makes, every strategic move (even if it isn’t always obvious). When I tell Ells about the mission statement shared by the CEO of another large company–a mission that revolves around being the “best” in its industry–he cuts me off: “What kind of a mission is that?” he spurts out. “I don’t want to shit all over his mission. It’s his mission. He can have whatever he wants, but that kind of thing wouldn’t work for us.”

At another point, I ask about his direct competition. If traditional fast-food chains begin changing their practices, in reaction to Chipotle’s success, would he see that as a good thing overall, because it broadens the food-with-integrity culture? Or would he view it as a threat? “It’s a joke,” he replies, “You know those guys, right? They can’t change. The culture is just too ingrained. Which bodes very well for Chipotle.”

Some militant food-with-integrity advocates may question the authenticity of Chipotle’s mission. Demand for Chipotle’s burritos has grown so rapidly, sometimes the company cannot locate enough sustainably-raised meat to satisfy it all. Perhaps some leaders would pull any unavailable items from the menu. Instead, in what it calls “blackout” situations, Chipotle puts up signs in affected stores announcing that the normal meat supply is unavailable and that traditionally-sourced meat is being substituted in its place. This is the same meat that Ells might otherwise be railing against as exploitative. Consumers by and large, Ells reports, continue to order the items anyway.

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Does this decision make Ells a hypocrite, a leader who sacrifices his mission to maximize financial rewards? The way Ells sees it, his mission actually dictates this course of action. The more successful Chipotle is, Ells argues, the more resources they have over time to encourage farmers to adhere to their standards and increase the integrity of the food supply. Turning away customers could impede that larger goal.

“It’s a judgment,” Ells explains. “When I’m talking about having a blackout, maybe we’ll have a blackout in one market for a period of days or weeks. Customers appreciate that we’re letting them know it’s conventionally raised meats and the vast majority still order it anyway. Does this mean they don’t care about our mission? No. I don’t think so. I think they are happy that we’re committed to serving better food. To eat chicken that was raised with antibiotics is safe, right? But long-term, relying on antibiotics as part of our livestock production is probably not the right thing to do. To not serve chicken means that there’s not an economic engine that’s making it possible to build up a supply of antibiotic-free meat. Our customers are there with us, I think.”

Ells argues that everything about Chipotle’s business model is different from typical fast food: “The kinds of food we purchase, that we’re cooking in front of customers, that we serve in this interactive format. We have two day-parts, lunch and dinner. We don’t have breakfast. We don’t have drive-thru. We don’t have late night. We don’t have 24-hours.”

“You know, I hate to borrow Apple’s tag, but think different. Really. From the very beginning. I didn’t know what the fast-food rules were. I got my training at the Culinary Institute Of America, and then I opened up a fast food place according to fine dining rules.”

“We’re not best in the world at burritos and tacos. What we’re best in the world at is building a people culture, sourcing really great ingredients, cooking according to classic cooking techniques, understanding the corresponding economic model and how to tweak that and drive that and provide this really great, new fast food experience. That’s what we’re best in the world at.”

About the author

Robert Safian is editor and managing director of the award-winning monthly business magazine Fast Company. He oversees all editorial operations, in print and online, and plays a key role in guiding the magazine's advertising, marketing, and circulation efforts.

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