The story behind the first gourmet fast food restaurant – something between McDonalds and sit-down restaurant – Chipotle has created an industry of copycats. Read the story behind how Chipotle came to be from the founders, key executives, and more.
Chipotle: The Definitive Oral History
By Kyle Stock and Venessa Wong | February 2, 2015
Read on Bloomberg
The builders of a $22 billion burrito empire—the founder, his father, his college buddies, key execs, and a couple of pig farmers—open up about how they won the fast-food future. And yes, they dish about McDonald’s.
By restaurant industry standards, Chipotle Mexican Grill does countless things wrong. Its outlets aren’t in the busiest locations. It spends too much money on food. It doesn’t serve breakfast; it doesn’t do drive-throughs, franchises, or even much in the way of advertising. It almost never adds anything new to its menu. Employees still cut all the tomatoes — hundreds of thousands of pounds a day — by hand. It is, in so many ways, the anti-McDonald’s.
Which is strange, particularly when you consider that Chipotle spent roughly eight years under McDonald’s corporate arches. McDonald’s early investment in the burrito chain gave it capital to grow, an inside look at ultra-efficient supply-chain economics, the know-how it needed to manage its expansion from 13 stores in 1998 to almost 500 in 2006. For its investment — roughly $340 million by the time of Chipotle’s initial public offering — McDonald’s got a nice little return. It turned out to be the short end of the stick.
In the years since their split, Chipotle’s rapid growth and consistently astonishing financial results have made it a darling of investors. Its commitment to fresh, high-quality ingredients at only slightly higher prices has helped to define a new wave of “fast casual” dining. And McDonald’s … well, everyone knows what’s happened to McDonald’s. As consumers’ tastes changed, the chain became the poster-child for America’s obesity epidemic. Sales slumped, and, recently, the stock price followed. Last week, McDonald’s announced that Chief Executive Don Thompson would step down on March 1 and be replaced by Chief Brand Officer Steve Easterbrook. The incoming CEO has one job: to get the iconic chain back on some kind of track at a time when Chipotle and its disciples are ascendant.
The story of Chipotle’s meteoric rise is also the story of McDonald’s failure to adapt to the changing American appetite. To understand both, we interviewed dozens of people involved with Chipotle, from its inception in founder and CEO Steve Ells’s Colorado dining room through its time at McDonald’s to today. McDonald’s declined to make current leaders available for this story, but we were able to talk to many of the company’s former executives, including several who now work for Chipotle.
In Ells’s telling, the company has thrived on high-quality food and engaged workers — and because Ells created a highly efficient way to cook, one that had nothing to do with the established, freeze-heat-and-serve fast-food model. The funny thing is, Ells never really wanted to spend much time in the burrito business at all.