Chipotle Grill's Secret Ingredient: Obsession

Last Updated Sep 15, 2010 8:39 AM EDT


Here's my original (and long!) conversation with Steve Ells from 2008:
How did you come to start the business?

It was by accident. I studied art history, and when I graduated from college I wasn't sure what to do. A friend told me about this great cooking school, the Culinary Institute of America. Cooking was my passion; I always loved cooking for friends and having dinner parties, so it seemed like a fun thing to do. So I enrolled in a two-year program at the top cooking school in the country, classical French technique according to Escoffier. And I had a blast. I had never thought cooking would be a career for me. But by the time I graduated, I thought maybe I'd be a chef.

So I went to work in a restaurant called Stars in San Francisco, for a guy named Jeremiah Tower who had been the first chef at Chez Panisse. A lot of the philosophy of seasonal, artisanal, super high-quality ingredients started there. Jeremiah's credited with new American cuisine: call things what they are, don't give them fancy French names, that kind of thing -- all based on seasonality and local food.

So I was there for a few years and really learned how to cook and taste critically. And I started to have ideas about starting my own restaurant. I didn't know much about the economics of restaurants -- only that a lot of them went out of business quickly, or if they didn't, that margins would be thin at best.
I wanted to find a way to fund my restaurant -- to have a cash cow so that I wouldn't have to worry about economics too much. I was in a taqueria in the Mission District of San Francisco -- these places were great. It was Mexican food like I'd never seen before: everything put into these giant tortillas and wrapped up -- rice and beans and meat and cheese and sour cream -- all very authentic. And it just sort of came to me: I could use this format and reinvent this traditional Mexican food and lighten it up. Make it sexier and more relevant: Ciliantro-lime rice instead of heavy red rice. Whole beans instead of refried beans. And emphasize it with seasoning, fresh herbs and citrus -- lemon and lime on almost everything. I'd have an emphasis on bold flavors that have nuance and depth, not just spicy but the nuance that can be achieved from traditional seasonings. Layerings of flavor: cumin and cilantro and cloves and bay and fresh oregano and lemon and lime.

So I moved to Denver, Colorado, and started the first Chipotle on July 13, 1993. It took me about a year to open the first one. I borrowed $85,000 from my dad, and the idea was that this was going to be my cash cow to support my "real" restaurant.

Well, it did really well right from start: it looked, smelled and tasted different than traditional fast food. And it didn't take long before there was a line out the door. Food critics started writing about it! I remember the Rocky Mountain News food critic loved us, He never wrote about fast food, and he didn't hand out praise easily. It was just unheard of for fast food to be written about like that. So then I thought, "Maybe I should just open one more before I do the 'real' restaurant."

We opened the second restaurant in early 1995, and it did even better than the first one: We had lines out the door. And then I thought, "Wow! Maybe I want just one more." Every time I opened one, I thought, "I'm not following my true calling." But I kept doing it. I couldn't help it!

The organization got bigger and we got more attention. For the first one, my father had loaned me the money and done an equity investment. The second was funded by cash flow. The third was funded by an SBA loan. I had never taken business class in my life -- this was all great learning. This was my crash course MBA.

As I started to open multiple restaurants, I told my dad, "I need more money." He put in $1.5 million as another equity investment and it started to be a big business for me. The next time I said, "Let's do it again and open some more," he said, "Why not try to raise some money?" He explained the process to me -- how to get a board of directors and a business plan. So I raised about $1.8 million. But raising money took me away from the business, and I didn't want to do that again. I really wanted a partner who could continue to invest year after year and help grow it and after talking to so many different kinds of money, I ended up sending the business plan to McDonald's, on the advice of Al Baldocchi, who was on the board. He knew someone there in business development. I said, "That is the craziest idea I've ever heard. McDonald's is so different culturally." But in a few weeks, we had someone from McDonald's out here looking at our restaurants. Then they came back with more and more people, and a year later, they made a minority investment.

We opened more and more restaurants. We could tap into their resources. But those resources -- they were great for McDonald's, but they weren't always necessarily applicable to us. Chipotle uses different kinds of food, we have different kinds of employees, we aim for a different kind of experience and culture altogether. So we ended up going our separate ways and sort of had an IPO and then split off. They put in about $360 million over a seven-year period, and they took $1.5 billion out. So they funded the growth, we used some of their resources, and everyone did well from it.

We did [benefit from] some of their resources -- like their distribution system, which we still use. It isn't owned by McDonald's, but it was a fantastic resource for us. It was a good relationship -- we learned from each other -- and now we've been on our own for about three years or so, and mostly we do things on our own.

Where did your love of cooking come from?
II enjoyed being in the kitchen cooking when I was very little. I learned to scramble eggs when I was very young, and I just liked being in the kitchen. I started cooking with my Mom and then for friends. I remember watching all the cooking shows instead of cartoons: Julia Child, Galloping Gourmet. And I love to eat!

What was your dad's business background?
Dad didn't have any background in restaurants. He worked in pharmaceuticals his whole life, first for Eli Lilly and then Syntex, where he was a senior executive. He retired, and after a few months he started a pharmaceutical active-ingredient plant in Taiwan. He became an entrepreneur after seeing me.

We were always close, but we didn't understand each other. He was a by-the-book kinda guy. He was a good student, he always did what teachers wanted. I always did things my own way and was quite rebellious and not a good student. I was the daydreamer; I was always trying to do things my own way or a different way. I could start Chipotle and break all the rules because that was my nature, and so my father finally appreciated those qualities. Before, I don't think he realized the importance of those qualities.

How much were you aware that you were breaking the rules?
I knew right away, even before the first restaurant opened. I would talk to friends in the restaurant business. They said, "Mexican food is cheap, and you're charging around $5 for burrito. What about Taco Bell, where they're selling for 79 cents?" And I'd say, "This is completely different. It's real food, the highest quality food. Taco Bell isn't real food!"

And then they'd say, "You can't have an open kitchen, you can't let people see raw beef, raw chicken, people fussing with food." But I wanted them to see the whole environment! I wanted it to be like a dinner party, where everyone wants to be in the kitchen, watching what's going on.

They said, "You have to tone it down. Not everyone likes cilantro and spicy food. And you're ONLY offering tacos and burritos. You'll have to offer more choices, and milder stuff."

And then they said, "You have to have a menu where people can order a single thing. People want to be able to order by number and not have to make a whole lot of decisions." And I said "NO, you have to go through the process."

And then they said, "You can't have it look like this, raw plywood and barn metal -- who wants to sit on plywood like that?" And I said, "I like them! It says something about what we do: basic materials, you can see the integrity of the parts. It's just like the food: they're basic ingredients, and it's how we put it together that's so important. There is a sympathetic relationship between the place and the food."

And then they said, "People don't want to line up in a single line and be herded."

But you know what? They wanted it ALL -- but they'd never been asking.

All along the way, I made decisions. I thought, "I want to use pork that comes from pigs that are raised from pasture." After I learned that most pigs are raised in confinement, I didn't want our success to be based on that kind of exploitation -- I just don't want it. If you think about dining, it's about more than just putting calories into your body. It's about nourishing -- not just nourishing through calories and all the things the body needs, but nourishing the soul. When you sit with family and friends and think about where your food comes from and where you know the farmers, you get close to the food. Why can't we start offering that? Most people in America don't have this accessible to them. So we want to be able to bring everyone the kind of foods that normally are only available in the finest grocery shops.

But then people said, "No one will pay for it, people want cheaper food. But people didn't understand where their food came from. If they understand what goes into mass-produced commodity food -- the degradation of the environment, the loss of independent family farmers, the loss of rural communities -- they wouldn't want that to be part of their 79-cent food. We have a chance to change the way people think about fast food. That is an important mission. The majority of American people eat fast food because it's convenient. But just because it's fast and convenient doesn't mean it has to be exploitative or made from cheap ingredients. It can be great quality food.

You seem to have been very much in tune with changing tastes in food. Was this just luck -- or zeitgeist? How do you think that happened?
When I started the first Chipotle, I wasn't thinking about any of this. I was sourcing like everyone else -- not thinking about the provenance of raw ingredients. All that is the result of being curious, always trying to be better, challenging the system, challenging myself and others to be better and ultimately being able to take advantage of opportunities. Opportunities are everywhere, but being able to avail yourself of them -- that's the hard part.

Was I lucky? Yes, because I was able to take advantage of the opportunities I've had. But I also prepared myself. By going to cooking school and understanding classical cooking technique, I prepared myself to make really good burritos. Usually if someone wants to make a good burrito, they don't necessarily learn classical French food.

Are you a perfectionist?
Yes. It's hard as the organization gets bigger to figure out how to focus on the right things.

Can you give me an example?
The first step of the process when you order at one of our restaurants is you start with a big tortilla or a bowl. If you start with the tortilla, you put it in a press (which is two hot plates, like a waffle iron but flat on both sides). It sounds simple. But none of them has worked well - we've looked at all the manufacturers and they all have shortcomings. A few years ago, I talked to an engineer friend of mine and we got together and I asked them to think about a tortilla press for me. They make super high-tech industrial equipment (for things like lifting jet engines off planes), and they were intrigued. What was wrong with the presses you have? Everything. It doesn't heat well, not evenly, there's no perfect seal. It has to be able to gimble to accommodate the width of the tortilla, and the ones out there won't do that. So now, the one they designed -- it heats it so evenly and precisely that all of the moisture heats at same time and it soufflés up. And steam comes out. It's absolutely brilliant, but it's still not finished after two years! They're perfectionist and so am I. Every day that goes by, we are buying old-style presses, and it just kills me.

We open two new restaurants every week, and every restaurant needs three presses, and so every day we are buying a press that doesn't work. And it just tears me up that we have to buy these things that don't work. The quality of food off the new presses is so much better: better texture , better heat, better pliability, the tortillas wrap better. I become obsessed by these details. We have 700 restaurants, and they all need better presses.

So if you're buying the inferior presses, when will you get to the point where you're happy enough with the ones your friends are designing that you can start ordering those instead? Or won't they ever be good enough?
Oh, I can finally make the call. I have the ability to make decisions quickly and be confident, but I also have the perfectionist side. We are nearly there.

You know, there are lots of contradictions that you have to be able to live with. Like: we make fast food, but it's great food. We use techniques that are used in the finest restaurants, but we serve it quickly. Having your cake and eating it is important. You can have disparate things working together at the same time. Just because our food is fast and convenient, doesn't mean it isn't extraordinary.

What makes it extraordinary?
When you take a bite, you're tasting everything at the same time, but when you season food, you season each individual ingredient. That's what gives it a real depth of flavor.

Take the beans. Our customers don't see this, but you start by sautéing them with smoky bacon. You render the bacon, then you add chopped onions, some chipotle chilis, and some chopped oregano and garlic. As soon as you get that waft of cooked garlic, then you stop the cooking process and add the beans and the water immediately. You have to pay attention to each step. We toast the cumin seeds. You put them in the skillet and shake them around, and they start to smoke. Then they have to go into the mortar and pestle to stop them cooking too much. We still do that for every batch of beans, even though it's done in a giant kitchen now. With our food, it's still done just like a chef cooking in his restaurant, the same old-fashioned techniques.

You say that you are "revolutionizing the way America grows, gathers, serves and eats food." Why -- what's wrong with it as is?

I think the first thing I saw that was wrong was industrial pig production. You look at anything: how different it is from the way we grew food 50 years ago. Now you have restaurants chains that are trying to change this.

We don't want to be preachy; if I started going on a campaign, people would tune out. But I can make sure we are buying the best ingredients, make sure we are cooking it the best ways. Even if people are going to eat fast, I want to do it as well as possible and pay attention to the details. I don't want it to be a model based on exploitation. So I want people to pay a fair price for food.

Do you think you can ever wean Americans off of fast food?
I hope Americans will be weaned off of food that isn't raised sustainably. That is a worthy goal, and an achievable goal. I don't think it's about abandoning fast food. The way we live today, convenient food is a necessity. Not everyone has time to go to the farmers market and spend hours preparing it. If you can, that's great. When I have free time to shop for wonderful ingredients and prepare them, that is pure luxury. But between meetings maybe I have 15 minutes and I want something to nibble, and I want them to be good nibbles. If they are, I'm not ashamed of fast food.

How often do you eat in one of your restaurants?
I've eaten in a Chipotle Grill almost every day for the last 15 years. I've eaten a lot of burritos!

What would you like to cook tonight?
I would want to walk through a farmers market and see what looks great, so it would depend on what I saw. I have never really cooked Mexican food at home -- it isn't something I ever did. I like making a lot of pastas; I'm very influenced by Italian food lately.

Did anyone ever give you grief over the name?
Oh yeah, that was the other thing I did wrong! "Nobody'll understand it, nobody'll be able to pronounce it."

When it comes to innovation, are you a quantum leaper or an incrementalist?
Absolutely the incrementalist. That's the nature of our business. I've visited the commissary where we make our beans. I was looking at how they chopped the oregano. They were washing it and not drying it, so when they chopped it, it was clumpy. This is wrong! We need it to be dry and fluffy when you chop it. So we put together a drying procedure. Could the customer tell the difference? Probably not. But if you do 100 things like this, they can tell the difference. In 10 years we will be selling better food because of hundreds of improvements like that.

Ever since I had the revelation about buying sustainable food, all of our pork is raised in pasture or barns with no hormones or antibiotics, and they're all on vegetarian feed. All of our chicken meets the same protocols, and 60 percent of our beef. The beef is more of a challenge because of supply issues. We've started buying local veggies sourced closer to our restaurants. And I think 25 percent of our produce is organic, and that will keep increasing. 30 percent of our beans are organic, and we will keep adding to that. So we are really on this quest to look at every ingredient and making sure it is as good as it can be. I don't think we will ever be finished. There is always opportunity -- not one of these changes is going to change everything at once.

What -- so far -- has been the high point of running the company?
We have the potential to impact food culture for the better in this country. I wanted to have an exclusive restaurant, one of those high-end restaurants where I would make great food for a few people. Now I get to be part of an organization that can impact food culture and give EVERYONE access to sustainable real food that doesn't exploit: that is the high point.

Many entrepreneurs when asked that question would say their IPO.
From a customer perspective, the IPO didn't matter at all. It doesn't make better food or a better restaurant experience. I had fun going on the roadshow, but I don't want to do it again! It was new and I learned a lot, but that's not what excites me.


What was your lowest ebb when running this business?
[Laughs.] The IPO! No, I don't know. There are challenges every day. Every day you feel there are too many details, there's no way we'll get to all of it, I don't know how we're going to do this! Every day is like that.

I don't think of the business as highs and lows, we're just keeping it on course -- which is not to say we're not changing. We are always improving. There is always more to do.

What is the single smartest thing you've done while running the company?
There wasn't one best decision. We've made bad decisions: hiring and keeping the wrong people, making bad real-estate decisions, going into a market the wrong way. But we learn from our mistakes and aren't afraid to make them. Luckily we haven't made any critical mistakes.

You strike me as a person who doesn't suffer from a lot of self-doubt.
Self-doubt? I think generally the idea of Chipotle is the right idea -- that we can feed people sustainable food. There are people who would argue and give you all kinds of reason why chemicals and inputs and hormones and trying to cheat the system would be a better way to feed the world. I don't have doubts about that.

What do you know now that you wish you'd known when you started?
In a way, I'm glad that I didn't know a lot back then. Ignorance is bliss. I know what a hard business it is and the failure rate -- I don't think I would be as good now at starting it again. I think it helps to be bold and unafraid!

What is the greatest strength you bring to the business?
I wish I knew! I think I should know. I wish I knew the best way to spend my time. I talk a lot about food, but I should be able to answer this question. I think I do spend time on the right things. I think about what the business will look like in 10 years. And I really think about what we should be doing in 10 years.

And what does the business look like in 10 years' time?
In 10 years: As a public company we have to be careful. The company has proved that people are willing to pay a fair price for food. I think we'll see a growing emphasis on local, fresh, cleanly brought up food. All these labels -- organic, properly reared -- many of them are really unclear. But the point is that these are more sustainable models than the commodity alternatives, the mass-produced factory models based on shortcuts, which often results in exploitation and therefore aren't sustainable. I'm less concerned about what it's called but more focused on the idea of sustainability and looking back to old-fashioned ways.

Can you feed the whole world that way?
I think there's a big question to be asked about whether we are using our current land properly to feed people. Food is more expensive today than it was a few months ago. Recent trends are that people trade down. That goes across all consumer spending. I think people will keep coming to us, because it's great quality food.


So do you think you'll ever open that fancy restaurant?
[Laughs.] Yes -- that's what I do now. Every week we open more Chipotle Grills!

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    Margaret Heffernan has been CEO of five businesses in the United States and United Kingdom. A speaker and writer, her most recent book Willful Blindness was shortlisted for the Financial Times Best Business Book 2011. Visit her on www.MHeffernan.com.