Is Chipotle The New Model For Fast Food? | KCUR

Is Chipotle The New Model For Fast Food?

Dec 10, 2013
Originally published on December 17, 2013 9:53 am

With nearly 200 new restaurants slated to open in 2014 and the fastest-rising stock in the fast food industry, is Chipotle the new model for fast food?

Industry analyst David Tarantino says Chipotle is changing fast food the way Starbucks changed coffee shops and Home Depot changed home improvement.

Slate’s Matthew Yglesias has even compared Chipotle to Apple’s iPhone, writing, “Founder Steve Ells invented a way to maintain the basic speed and experience of the standard fast-food experience and make the quality of the food a little better. The better food costs a bit more money, but consumers turn out to be happy to pay a premium for a superior product.”

Chipotle began using sustainably-raised food about 12 years ago, as part of its promise to deliver “food with integrity.” The company’s critics point out that it’s hard to know what words like “natural” mean when it comes to food, because the U.S. doesn’t have consistent national standards for those terms.

Critics also point out that the starting salary for workers, at about $21,000 per year, is not a sustainable wage. In addition, the company has been cited by the U.S. immigration service for hiring workers with faked work papers.

Chipotle co-CEO Monty Moran joins Here & Now’s Jeremy Hobson to discuss these issues. He says the company has changed hiring practices, and as for wages, the company is structured to help employees move up the ladder within the organization.

  • Have you ever worked in fast food? Did you have the opportunity to move up the ranks, or did you find the wages too low? Tell us on Facebook or in the comments.

Interview Highlights: Monty Moran

On using sustainably-raised food

“It’s hard work to do that. We have a purchasing team who’s dedicated to make sure that we know who we are getting food from. Of course all of our suppliers basically sign an affidavit to ensure that they are raising things the way we would like for them to be raised or grown. But also, we verify that through audits as well. And so, you are always wanting to work hard to make sure that the ingredients you are getting and that you are paying more for are exactly what you expect them to be.”

On how Chipotle workers are paid

“We are in a business where we have a lot of hourly employees working for us, and you know the nature of our business is such that it’s a fairly high turnover business at the crew level. But what we’re giving instead of a high – well we pay higher than most, and we pay higher than minimum wage in all cases – but what we do that I think is extraordinary at Chipotle is, we provide extraordinary opportunities for anyone who starts at the crew level. In fact, 98 percent of our general managers at Chipotle come from crew positions. And an increasingly large percentage of our field leadership, the executives of the company, has come up from crew positions.”

On why Chipotle has stayed predominately in the U.S.

“I think it’s just a question of the opportunities that are available for Chipotle in the United States are so profound still. I mean we have only 1,500 restaurants in the United States, whereas, some of the other restaurants you have mentioned have 10,000 or so. So there is a lot of room left for us to grow in the United States and there are a lot of people writing into our website ‘come to my town,’ and we are trying to fulfill that demand for what we are doing here in the United States as best we can. But that being said, we have begun to plant a few growth seeds in other countries. We’ve got six restaurants in London, England, we’ve got a restaurant in Paris with another about to open, we’ve got a restaurant in Germany now, and we’ve got a number of restaurants in Canada. So we think that there’s a huge opportunity for Chipotle to go to many, many other countries, it’s just a question of time. And we would rather grow smart rather than too quickly. And we would rather grow in a way we can continue to provide a really high quality dining experience, rather than just grow for the sake of growing.”

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JEREMY HOBSON, HOST:

Well, one of the interesting facts we've heard this week from South Africa from NPR's Gregory Warner, as a matter of fact, is that consumer confidence in that country is at a 20-year low, which means the South Africans are more pessimistic about the economy than they have been at any time since Mandela was president.

Here in this country it is a very different story with consumer confidence at a five-month high. And the Dow Jones Industrial Average is set to end this year up more than 20 percent. But there are some companies that are doing even better and we're going to focus on one of them right now.

Chipotle Mexican Grill, the burrito chain started in 1983, now has more than 1,500 locations. Its stock has almost doubled in value this year. The company's co-CEO, Monty Moran, is with us from Colorado Public Radio in Denver.

And Monty Moran, thanks so much for joining us.

MONTY MORAN: Hey, thanks very much, Jeremy. And thanks for having me on the show.

HOBSON: Well, why is Chipotle doing so well - especially compared to other fast food chains like McDonald's and Burger King - in the stock market? You're up 91 percent in the last year.

MORAN: Well, it's neat to see results like that, but really all of that is just because we're just doing a few things and doing them, I think, pretty well. And, you know, when we look at our food culture, we're really concerned with every single aspect of what we do - from the food side of things. It's part of our philosophy that we call food with integrity, which has us, you know, sourcing the very best ingredients we can find with an eye towards better animal husbandry, environmental stewardship, healthfulness, preservation of the rural family farm, and of course taste.

And, you know, we work very hard to find better ingredients and more sustainable ingredients. And the secret or part of the secret of our success is that those ingredients just taste better.

HOBSON: And you think people want to know that what they're buying is sustainable or is grass fed beef, or organic vegetables or whatever the ingredients may be? You think that that helps people decide to purchase something?

MORAN: You know, I mean we'd like to think that that goes into people's decision-making because the more people care about that kind of thing, the more we think that they will favor Chipotle. But the truth is most of our customers come to Chipotle because they love the food. They love the taste of the food. And, you know, and the sort of design of our restaurants and the fact that it's a true dining experience - not just a place to come and load up on calories.

HOBSON: Of course, you are also benefiting from the fact that Americans are getting a real taste for Mexican food.

MORAN: Well, you know, that may be part of it. But we don't think that's a significant part of it. You know, what we're trying to do is change the way people think about and eat fast food, and we're passionate about this mission. And it's something very, very different than traditional fast food, which is really geared towards the cheapening of overall(ph) ingredients; you know, buying things cheaper and cheaper and cheaper, serving them in convenient packages but not with a real goal of making them taste delicious, or having any great respect for the ingredients.

It's a very, very different formula. And what we're trying to do is not just open a chain of restaurants, but open restaurants that truly provide a dining experience that really connects with people in a way that continues to be authentic.

HOBSON: Well, then I wonder if you've tapped into something in this economy that is specific to the time we're living in right now; which is that Americans want to pay prices that are fast food prices because they don't have as much money as they need to, right now, to get by in this economy. But at the same time, they want to feel like they're getting more of a luxury product than, say, a burger or a quarter-pounder at McDonald's.

MORAN: You know, absolutely. And, you know, I think that people do want a value for the money they're going to spend, and they deserve to have a value for that. And what we do that's different at Chipotle is that our food is incredibly customizable.

So we prepare the food, you know, to the line, but as the customer moves across the line, they can customize it in any way they want; for their dietary preference, for the way they, you know, the amount of food they want to eat, for the amount of carbohydrates or proteins, for example. And so that customizability it's something very different.

HOBSON: Some people have asked, and you've mentioned the sustainable side of your business many times now, how exactly you confirm the facts about where and how your animals are raised or whether things are in fact as you present them?

MORAN: Yeah. Well, it's a good question, and it's hard work to do that. We have a purchasing team who's dedicated to make sure that we know who we're getting food from. Of course, all of our suppliers, you know, basically, you know, sign an affidavit to assure that they're raising things the way that we would like them raised or grown, but we also verify that through audits, as well.

And so, you know, you're always wanting to work hard to make sure that the ingredients you're getting and that you're paying more for are exactly what you expect them to be.

HOBSON: And, of course, there are no national standards for the terms natural and humane, so I guess we kind of have to trust you.

MORAN: Yeah, you know, I mean, there are standards for words like organic and, of course, we use organics where we can, and natural has some minimal meaning, but we do goes well beyond that. And in fact, we usually use the term now responsibly raised because we're trying to set a much higher standard than that which would be required by the term natural.

HOBSON: One of the big issues in the fast food industry recently has been the amount of money that employees are paid. Now, you at Chipotle do give health insurance to your employees, but the average starting salary for workers is about $21,000 a year, which I don't think anybody would consider a living wage.

MORAN: Well, you know, we are in a business where we have a lot of hourly employees working for us and, you know, the nature of our business is such that it's a fairly high turnover business at the crew level. But what we're giving instead of a high - Well, we pay higher than most and we pay higher than minimum wage in all cases, but what we do that I think is extraordinary at Chipotle is we provide extraordinary opportunities for anyone who starts at the crew level.

In fact, 98 percent of our general managers at Chipotle come from crew positions, and an increasingly large percentage of our field leadership, the executives of the company have come up from crew positions.

HOBSON: But what's your reaction to workers in the industry who are saying the starting salary should be $15.00 an hour, which would still only be about $30,000 a year?

MORAN: I'll tell you, you know, my reaction would be, you know, go talk to the people who are working behind the counter at Chipotle, and, you know, and here's the deal. You know, most of the people who are working behind the counter at Chipotle, what they're excited about is their opportunity.

What they're excited about is that they can have an influence on the lives of the people around them, meaning their co-workers, but also have an influence on the lives of customers who walk into our restaurants. And there is so much room, given how fast we're growing, for each and every one of our crew to move up into more senior leadership positions where they can touch more lives, have a greater impact, but also where their financial compensation can become quite extraordinary.

HOBSON: We're speaking with Monty Moran, the co-CEO of Chipotle Mexican Grill. And if you used to work in the fast food industry or you do, let us know what you think of the wages and what your experience has been like at our Facebook page, hereandnow.org. This is HERE AND NOW.

(SOUNDBITE OF MUSIC)

HOBSON: It's HERE AND NOW. Let's get back to our conversation with Monty Moran. He's the co-CEO of Chipotle Mexican Grill. Its stock has nearly doubled in value this year. And we were speaking a moment ago about wages and whether the company ought to pay its starting employees more. And I want to push you a bit further on that, Monty Moran. Would it really hurt the bottom line of Chipotle to raise the starting wage?

MORAN: Well, you know, I mean, sure. I think that any time, you know, you raise the cost of labor, it will decrease the margin, you know, to some degree. But the question is where do you want to put your resources, you know, in terms of taking care of your people? And our answer is we want to put those resources into making sure that the people who are most powerfully influencing those around them to be better and who are providing a great dining experience, are the ones who are taking advantage of the financial opportunities but also the leadership opportunities that come with moving up into management positions at Chipotle.

HOBSON: Back in 2011, the U.S. Immigration Agency said that you had hired a number of workers at restaurants who in fact had phony-looking work papers. You had to fire hundreds of workers in Minnesota for the same reason. Have you dealt with that problem, and what have you done to make sure that you are hiring legal workers?

MORAN: Well, I'll tell you, it's a long story, but even at the time where we - the bottom line is a number of workers in our workforce had, unbeknownst to us, given us papers which while they appear to be valid on their face, upon running them through the government's database turned out not to be valid.

So it was a heartbreaker for us because, you know, we lost a lot of people that we loved and that were a very important part of our Chipotle family. So it was a sad time. You know, since then we've, you know, even before that happened we had been complying with all laws with regard to immigration, but we've tightened things up even more, in terms of using the governments, you know, E-verify system and putting in place additional employees who, you know, make sure that the paperwork is absolutely what it needs to be.

And so, the government investigation on Chipotle has continued, and we continue to cooperate with that investigation, but we're confident that the more people find out, the more they'll see that at all times we were doing things the right way.

HOBSON: One of the downsides to Chipotle, and I've noticed this in cities that I've lived - in Los Angeles, in Washington, D.C., in New York and in Boston - is that if you go in at noon, there's going to be a line coming out the door. Why do you have such a problem with capacity in those places?

MORAN: Well, I'll tell you, it may look like a problem, but if you talk to customers who's...

HOBSON: Right, not for you, right?

MORAN: Well, I mean, you know, a very important part of what we do is provide great throughput, and what that means is being able to serve customers quickly during peak hours, but also in a way that still allows for the customization and the great dining experience that they've come to expect from us. It is one of our most important initiatives to make sure that we continue to serve customers quickly, especially during those peak hours, and I'm happy to say we're better at it today than we've ever been.

And I would say, also, that we are faster at serving customers than any of our competitors, in terms of how fast we get people through the line. And the people who know us, they know that. So they're willing to get in the line even if they're 20th or 30th or even 40th in line, 'cause they know it's still just a, you know, five, six, seven minute experience to get all the way through the line, and that's very important to us.

Some of our restaurants are better at that than others, and we're trying to help all of our teams get really, really good at making sure that we can serve people not just great food but serve it to them quickly in a way that's convenient.

HOBSON: Why has Chipotle stayed mostly in the United States? Why haven't you expanded across Europe or Asia as other fast-food restaurants have done?

MORAN: Well, I think, that it's just a question of, you know, the opportunities that are available for Chipotle in the United States are so profound still. I mean, you know, we have only 1500 restaurants in the Unites States, whereas, you know, some of the other restaurants you've mentioned have, you know, 10,000 or so.

So there's a lot of room left for us to grow in the United States, and there's a lot of people writing into our website saying, come to my town, and we're trying to serve, you know, fulfill that demand for what we're doing here in the United States as best we can.

But that being said, we have begun to plant a few growth seeds in other countries. We've got six restaurants in London, England. We've got a restaurant in Paris with another about to open. We've got a restaurant in Germany now. We've got a number of restaurants in Canada.

So we think that there's a huge opportunity for Chipotle to go to many, many other countries. It's just a question of time and we'd rather grow smart rather than too quickly, and we're rather grow in a way that we can continue to provide a really high quality dining experience, you know, rather than just grow for the sake of growing.

HOBSON: The French like Chipotle?

MORAN: Yeah, they love it, yeah. And it's a wonderful restaurant. It's on Boulevard Montmarte and Houseman in Paris, and I would encourage anyone to go try it. I think you'll find it to be a terrific experience.

HOBSON: How often do you eat it?

MORAN: Chipotle generally or Chipotle in Paris?

(LAUGHTER)

HOBSON: No, Chipotle generally.

MORAN: You know, actually me and my family, we eat at Chipotle about four days a week.

HOBSON: Wow.

MORAN: That's as a family, but then there's also a bunch of smatterings of other Chipotle meals that I get while I travel throughout the country to go visit our restaurants, which I do a great deal of the time.

HOBSON: I have two questions about statistics that I'd like to ask you, because I'm sure you have those at your fingertips. Number one, what is the most popular thing that people get at Chipotle right now?

MORAN: OK. Well, it used to be the chicken burrito, but now the most common thing we sell is the chicken bowl. People just love them, and it's a significant part of our sales.

HOBSON: Trying to get rid of those carbs.

(LAUGHTER)

MORAN: Well, you know, I think, again, you know, what we do is very customizable. Some people want to hold a warm burrito in their hands and eat it right out of the foil. Other people like to put food in the bowl and be able to kind of pick and choose how they constitute each bite. And so, there's something for everyone, we think.

HOBSON: What is the best performing store in the U.S.?

MORAN: Well, it moves around week to week, and I'll tell you, they send e-mails boasting about how they're doing. But our busiest market in the United States is in Washington, D.C., and we have a number of restaurants there that are extraordinarily busy. But we have stores that are at the top of the heap in California, in New York, and many other places as well.

HOBSON: One of the things that I'm sure you have had to deal with over the years that we have heard here in our office as well is that nobody seems to know exactly how to say the name Chipotle, which, I assume, that since you're saying it the same way I am, we're saying it correctly. But you must've heard some crazy, you know, Chipotle, Chipotle, Chipotle over the years.

MORAN: Absolutely. We've heard all of those. You now, it's a funny story. My co-CEO Steve who started Chipotle and who created this great concept, you know, when he started it he asked me to come try the first burrito at his house in Boulder, Colorado, and I had a chance to go and eat this burrito.

I had been not excited about going to his house for dinner for a burrito because he's such a great cook, I thought he'd do something more interesting. But he said, no, come try it, and I was blown away by this burrito. But I said, you know, the one thing, Steve, is I'm not sure Chipotle is the right name for the restaurant. I mean, what is that? You know, what does that mean?

And anyway, the rest is history. It seems to be a name that people...

(LAUGHTER)

MORAN: ...that people enjoy and actually most people seem to pronounce it correctly, like yourself. At least if you're not pronouncing it correctly, neither am I so we're in deep trouble.

(LAUGHTER)

HOBSON: Right. Monty Moran, co-CEO of Chipotle, thanks so much for joining us.

MORAN: Hey, thanks so much, Jeremy. Take care.

HOBSON: And we invite your comments about this at HERE AND NOW's Facebook page, Facebook.com/hereandnowradio. We're already getting some. Ella Davilla Hernandez (ph) writes: As a nurse with a four-year degree, my starting salary was only $17 an hour in fast food, although I think living wage is an issue. I do not think that $15 an hour is appropriate, considering people with four-year degrees are making about the same amount.

Josie Barr(ph) writes: I worked in fast food as a teenager. I think the minimum wage is fine for teens and this kind of work is good for them, but I do not think that fast-food establishments have been fair to their adult employees who are raising families. We invite your comments at Facebook.com/hereandnowradio.

While we're talking chain restaurants, by the way, one more note. We should note that Applebee's is going to install tablets in all of its restaurants so customers don't have to wait for the check. The CEO of the parent company told CNBC today that customers will be able to order appetizers and desserts and pay the check all through the tablet and that a server will still take the orders for the main meals. You're listening to HEREANDNOW. Transcript provided by NPR, Copyright NPR.