Chipotle CEO on the ‘Chipotle economy’ and expansion

Jeremy Hobson May 15, 2012

Chipotle CEO on the ‘Chipotle economy’ and expansion

Jeremy Hobson May 15, 2012

Jeremy Hobson: Today the Commerce Department will tell us how the nation’s retailers did last month. And the expectation is that sales probably slowed down a bit, as consumers remained cautious.

When it comes to individual retailers, some have been doing well this year; others — not so well. But one has seen seven consecutive quarters of double digit earnings growth. There’s something about it that seems to fit this economy just perfectly. I’m talking about Chipotle Mexican Grill, which operates more than 1,200 restaurants and opens a new one every few days.

Steve Ells is the company’s CEO and he’s with us now from New York. Good morning.

Steve Ells: Good morning.

Hobson: Now, as we cover the global economy on this show, I’ve sort of come to the conclusion, whether you look at clothing stores or car sales or restaurant sales, that we’re in what you might “the Chipotle economy,” which is that people want to feel like they’re paying McDonald’s prices but they’re getting Chili’s.

Ells: Well, I’ve always made the argument that just because we’re serving fast food doesn’t mean it has to be a typical fast food experience. I mean, we’ve elevated traditional fast food, and it’s certainly not a luxurious, Michelin three-star experience — and that’s not the intent. The intent is that we’re providing the ingredients that were really only available at high-end restaurants or gourmet grocery stores just a few years ago. We’re making these kinds of ingredients available to everybody.

Hobson: But I do want to mention that when you get one of those big, juicy burritos at Chipotle, it typically has more than 1,000 calories in it. Are you trying to get that down in any way?

Ells: I don’t know if I would say it “typically” has more than 1,000 calories; I think it can range. We have a lot of customers who come in and want to eat light.

Hobson: But they’re missing out on the sour cream and the guac there.

Ells: Well, what’s great about Chipotle is you can create exactly what you want — not only for taste, but for diet also.

Hobson: You got into some trouble about a year ago for employing some illegal immigrants. Now you have more than I think 35,000 employees in your restaurants. How do you make sure that they are legal workers?

Ells: Well, so, you know, we’ve always followed the letter of the law when hiring, and actually going beyond what was required. Unfortunately, the system’s not perfect, and we found ourselves in this situation where we were being audited, and some undocumented workers were found at Chipotle. Since then, we have started using what’s called E-Verify, which is an extra level above and beyond that’s not required, but that we’re participating in to ensure that we have workers with proper documentation.

Hobson: And it’s obviously not just Chipotle, but do you think there’s any way to ensure that all the workers are legal in the end, or will there always be some who are getting through the cracks there?

Ells: Well it’s tough to answer that. I mean, you know, whatever systems you have for anything really, there are always going to be people who try to game the system. But I think we’re going above and beyond right now in two significant ways to ensure that we’re complying with the immigration.

Hobson: There’s obviously a big taste for burgers all around the world, which is why McDonald’s and Burger King have expanded worldwide. You are starting to expand in other countries, and I noticed that in London you’re opening a few restaurants. Is the rest of the world ready for Mexican food?

Ells: We just started European expansion, and we’re going to focus on that for a while. But you also have to realize that our major growth opportunities are still in the United States and that we’re just seeding Europe right now. Asia is certainly a possibility, but we don’t have any definite plans for that right now.

Hobson: Steve Ells is CEO of Chipotle. Thanks so much for talking with us.

Ells: Thank you.

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