Over the last several years, a shift has been taking place in fast food with people straying from the land of drive-thrus and value meals in favor of food assembled on the spot. We’re talking about the emergence of fast-casual chains, and Chipotle Mexican Grill has been a driving force in this trend. Compared to just about every other successful fast food chain on the market, Chipotle takes an opposite approach in its operations. There is no dollar menu or kid’s toys, and people don’t even have the option of ordering a meal that’s already prepared and waiting for them in a warming tray. In the world of fast food, Chipotle is definitely the black sheep.
Chipotle’s approach to food and the success that followed hasn’t come without a few bumps in the road though. The company had a somewhat contentious relationship with McDonald’s, and has weathered numerous food safety scandals. Love it or hate it, here’s the story behind Chipotle’s many ups and downs.
Chipotle’s founder wanted to open a fine dining restaurant
When you consider that Chipotle’s founder, Steve Ells, has an estimated net worth of $200 million, it’s obvious that the burrito business has been very good to him. The success of Chipotle Mexican Grill doesn’t exactly boil down to luck, but building an empire on Mexican street food was hardly the culinary plan that Ells had for himself.
Ells graduated from the Culinary Institute of America in 1990 and began cooking at the legendary Stars restaurant in San Francisco before leaving to start his own business. Burritos were meant to only be a short-term business venture to build up cash for a fine-dining establishment. "This was going to be one restaurant," Ells told NPR (via CNBC). "I knew that full-scale restaurants were a dicey proposition. I mean, they go out of business often. It’s hard to make margins, very difficult to operate. And so I wanted Chipotle to be a backup."
Chipotle, of course, turned out not to be a backup plan and Ells was working every day for two years while his burrito restaurant grew in popularity. "I remember feeling a little guilty every time I opened a Chipotle," Ells confessed. "I remember feeling a little guilty because I wasn’t following my true passion. But that eventually went away. And I realized that this is my calling."
It didn’t take long for Chipotle to become a local hit
If there ever was an overnight success in the food business, Chipotle comes pretty close. Steve Ells opened his first location in 1993 near the University of Denver at 1664 East Evans Avenue. It was hardly the size of today’s Chipotle restaurants — the first taqueria was only 850-square feet with a monthly rental rate equal in size.
"We were very concerned, Steve’s father, Bob Ells told Bloomberg. "We figured there was a possibility that he would probably have to come home and live with us, and we’d have to continue to subsidize his income."
Despite not having any menus, it didn’t take long though for local residents to start buying up burritos. Ells made a few hundred dollars on his first day of business and doubled it on the second day his restaurant was open. A review in the Rocky Mountain News came soon after and it wasn’t long before the first Chipotle was serving 1,000 burritos a day and Ells exceeded the goal he’d set of making a $24,000 profit in the first year.
Ells’ Mexican street food business was proving to be incredibly successful and within just four years, he’d taken over the Denver area with 14 Chipotle locations and was racking up a yearly revenue between $14 and $18 million.
Chipotle’s minimalist design was more about saving money than being cool
Numerous fast food restaurants have been updating the look of their spaces in recent years. From Wendy’s renovating their stores with recycled materials to Hardee’s trying to give their stores a facelift that "celebrates small-town America," minimalism in the fast food restaurant layout is in more now than ever. Chipotle has been adhering to this design aesthetic for years though, with its exposed piping, and abundance of stainless steel and plywood. While the look may be cool nowadays, in the beginning, it was more about saving a few bucks.
"There was not a lot of money for a lot of flourishes,"Ells told Entrepreneur. "We had to make use of some very basic materials but have those materials speak to this brand that I was creating."
Many of the materials for those first few stores Ells bought from local hardware stores in the Denver area. Choosing to use more raw and bare bones building materials is something that the Chipotle founder sees as being parallel with the brand’s focus on its rather simplistic menu. "You see the raw ingredients," Ells said. "Then you elevate these raw ingredients, hopefully into something special."
With over 1,000 restaurants these days, the company now has an architectural firm handle the designs — though Chipotle locations still feature a lot of steel and plywood. It’s sorta their vibe.
McDonald’s was instrumental in Chipotle’s growth
The first Chipotle restaurants were funded with the help of Steve Ells’ parents and family friends. Bob Ells had given his son $75,000 to kickstart the operation and by 1996, Ells had raised an additional $1.3 million — but that money would only take Chipotle so far, and a bigger investor was needed.
Through a friend of a friend of Bob Ells, Steve was able to get himself invited to McDonald’s headquarters in Illinois where whipped up a sampling of Chipotle’s food offerings. The food was an instant hit with the Golden Arches executives and over the course of a year, the details were ironed out and McDonald’s came on board as an investor and committed $50 million to growing Chipotle that first year — with much more monetary investment yet to come. The company not only had buckets of McDonald’s money behind them to help with growth, but had the knowledge of McDonald’s at their disposal when it came to massively scaling that growth.
"They helped us learn how to keep track of our foods and our systems a little better," Steve Ells’ high school buddy and onetime head of social media, Joe Stupp, said. "And I think they helped us understand what it’s like to run a larger chain, which was something that we couldn’t really figure out before then."
Chipotle and McDonald’s didn’t always see eye-to-eye
In 2005, McDonald’s parted ways with Chipotle, took the $1.5 billion it had made from growing the chain, and went back to focusing on burgers and fries. Industry experts and investors have since ruled that move a huge mistake for McDonald’s and pointed out that in less than a decade, that $1.5 billion would have been worth $15 billion. However, it’s likely the business relationship had simply run its course.
Chipotle’s former communications director, Chip Arnold, described the business relationship as one with a bit of friction. "I would think of it in terms of McDonald’s being the rich uncle and Chipotle as the petulant nephew where we take the money and are grateful but are stubborn and strong-willed enough that we’re going to do what we want with it anyway," Arnold said. McDonald’s tried to get Chipotle to install drive-thrus, develop a breakfast menu, even change the name of the restaurant.
"One of the McDonald’s guys thought we should call it "Chipotle Fresh Mexican Grill," because the term ‘fresh’ was such a great term, and Baja Fresh had ‘fresh’ in its name," Chipotle’s then-co-CEO, Monty Moran, said.
Steve Ells simply summed things up as the two companies having very different approaches to food and people. As for McDonald’s pulling out, McDonald’s CEO Steve Easterbrook (who was not CEO at the time) said Chipotle was basically a distraction that pulled attention away from the McDonald’s brand.
Chipotle’s non-GMO policy has been good for business
Fresh produce and meat has been a benchmark of Chipotle’s operation for years, but in 2013 is when the company really started to turn some heads with its approach to food. As part of the company’s "food with integrity" motto, Chipotle announced that it would only be serving foods that had not been genetically modified. "Transparency and giving our customers information about where their food comes from is a core part of who we are as a company, and we felt that GMO disclosure was a key component of that," Food with Integrity program manager, Joshua Brau said at the time.
While serving non-GMO foods was more expensive for the company and did result in an increase in menu prices, the decision proved to be a huge hit with Chipotle’s base. By 2014, same-store sales were up almost 17 percent with a net income increase of 36 percent. The move was lauded at the time by investors for giving millennial consumers what they wanted and helped the restaurant stand out from fast food competitors.
But Chipotle’s non-GMO claims have been called into question
The pushback on non-GMO foods has certainly been a popular one, but that doesn’t mean every aspect of it is grounded in reality. As pointed out by National Geographic, the attention given to the perils of eating GMO foods is often a lot of hype that’s based on bad science. Despite some research finding that GMO-raised livestock did not produce meat, milk, and eggs that was any less healthy than non-GMO raised livestock, Chipotle’s non-GMO push has proved successful… mostly.
In April of 2016, the company was hit with a lawsuit claiming that Chipotle’s non-GMO campaign wasn’t entirely truthful. The lawsuit alleged that restaurants sold meat and dairy products from livestock that had been raised on at least some genetically modified feed and that the soda in its fountain drinks used genetically modified sweeteners. What is and what isn’t a GMO food, however, can be a little dicey, depending on who you ask. Chipotle hit back and argued that "reasonable consumers" understood that some GM feed could be part of a cow’s diet, but that didn’t mean the beef was then genetically modified.
While the issue hasn’t yet been legally settled, the courts haven’t cut Chipotle a break and the company’s requests to dismiss lawsuits filed in California, Maryland, and New York were denied.
Chipotle’s queso launch was a disaster
Queso, whether for dipping tortilla chips or layering inside a burrito, is a beloved component of Tex-Mex cuisine. That said, it’s never a good sign when customers at a chain as popular as Chipotle, label the queso as "a crime against cheese." So where did Chipotle go wrong with what should have been a surefire hit?
Well, it really boils down to Chipotle trying to get too fancy with its queso and force it to adapt to the company’s "food with integrity" mission. Queso is typically made with processed cheeses like Velveeta, and that just didn’t have a lot of integrity in the eyes of Chipotle. "Additives make typical queso very consistent and predictable, but are not at all in keeping with our food culture," Ells said in 2017. "Our queso may vary slightly depending on the characteristics of the aged cheddar cheese used in each batch, but using only real ingredients is what makes our food so delicious."
Only those "real ingredients" were anything but delicious to customers. People tweeted out images of the queso going right into the trash and the company’s stock took a nosedive. Thankfully, the company found a way to improve — depending on who you ask –the cheese consistency of those real ingredients in the queso recipe, and the item remains on the menu.
Chipotle has been hit with multiple food poisoning scandals
A food poisoning scandal can turn off loyal customers for good, and send investors into such a panic that it can put a restaurant’s future in jeopardy. Chipotle knows this all too well, as the company has been battling food poisoning outbreaks from 2015 onward.
In September 2015, the company had its own food poisoning scandal when restaurants in Minnesota were hit with a salmonella outbreak due to bad tomatoes. A couple of months later, at least east 35 E. coli cases in Washington and Oregon were linked to the restaurant. Chipotle temporarily closed 43 restaurants, meanwhile, too many news headlines to count only added to the company’s PR nightmare. More food contamination outbreaks followed and the company ended the year with Chipotle stores in nine states grappling with the issue. Steve Ells apologized to those who had become sick, but the damage had already been done and the company saw its stock drop in 2016 because of the mess.
It would be nice if we could tell you that Chipotle took a scorched Earth approach and that was the end of it, but that’s unfortunately not the case. The company has made efforts to eliminate food contamination outbreaks, but has been plagued by them on an almost yearly basis since 2015.
Chipotle workers have their reason for always telling you guac is extra
Tell the person preparing your food at Chipotle that you want guacamole and they’ll most definitely remind you that it cost extra. As if you were some lowly burrito-lover who couldn’t splurge for the creamy avocado goodness that is guac… what gives?!
According to Chris Arnold, former director of communications at Chipotle, employees do this so customers aren’t caught off guard by the extra price. "We don’t want customers to be surprised by the added cost, so we tell people whenever they ask for it," Arnold said in 2015. "Not every restaurant charges extra for guac, so there may be customers who expect that we don’t either." There’s also another reason that boils down to you getting your food quicker.
If employees neglected to inform customers guacamole was extra, it would surely result in a line slow down with many a confused customer asking about the extra cost. As for that extra charge, well, the price of your guacamole is susceptible to everything from weather conditions to government-issued tariffs on avocados from Mexico. Of course, you could avoid the extra charge of paying Chipotle to make your guac and whip it up yourself at home using the company’s own guacamole recipe.
Chipotle managers must adhere to a strict checklist
In order for a Chipotle store to be a success, it must operate like a well-run ship and the manager is the captain making sure the ship stays on course. Chipotle’s managers are reviewed quarterly and are subjected to a 39-point checklist of various pitfalls to avoid during this review process. Former co-CEO, Monty Moran called it "the most important tool" for guaranteeing a manager runs a successful store. Yeah, it’s pretty serious.
So what’s on this 39-point checklist that can make or break a manager? Well, aside from the usual points about food prepping, there are more nuanced things like ensuring the employees are inspired by the Chipotle vision and creating an environment where new employees are set up for success. Repeatedly failing to pass the 39-point checklist obviously would get a manager canned, however, if a manager is so skilled that they can elevate an employee to a managerial level, they get a sweet $10,000 bonus.
Chipotle stores have a carefully curated music playlist
Nobody goes to Chipotle for the music… or do they? According to Billboard, a playlist curator for Chipotle is one of the hottest jobs in the music industry. That’s right, the company doesn’t just throw on any old internet radio station for people to listen to while eating tacos, they have an expert put it together, and that musical mastermind is Chris Golub. Golub has a background in both the food industry and music, which made him a good fit for the position when Steve Ells approached him in 2009 about making playlists for Chipotle’s restaurants.
"What our company does is, what I like to call, creating a musical identity," Golub said. Golub works with other clients via his company Studio Orca, but Chipotle is by far the largest and he’ll sometimes scour through 300 songs before selecting the perfect one that compliments tortilla chips. Finding that ideal song isn’t something that is simply based on having a catchy beat either, Golub has to take into account the restaurant’s building materials too. The concrete floors and abundance of steel don’t always work well with certain musical sounds. Just something to think about next time you’re enjoying your burrito bowl and Peter Tosh is playing over the speakers.
Chipotle tried to go beyond burritos
Chipotle has attempted to do what it did for burritos with both burgers, pizza, and Asian noodle bowls, but alas, these efforts haven’t proven to be as popular as tacos and guacamole.
Chipotle tried its hands at Asian noodle and rice bowls in 2011 with ShopHouse, a chain of 15 stores that were scattered throughout California, Illinois, Maryland, and Washington, D.C. ShopHouse bit the dust in 2017 though, a victim of the company’s struggles with its food safety issues. Next on the chopping block was Tasty Made, a single store burger joint located in Lancaster, Ohio that opened in 2016 in an attempt to capitalize on a concept similar to In-N-Out Burger. Unlike In-N-Out Burger, folks weren’t lining up in droves for Tasty Made and the food didn’t get the best reviews. A brief change up of the menu was made, but it wasn’t enough and Tasty Made flipped its last burger in 2018.
The company does still have its foot in the pizza game with its assembly line-style pizza joints — Pizzeria Locale. The casual pizzerias launched in 2011 out of Colorado and eventually expanded to Kansas City and Cincinnati. Those locations didn’t stick around long, however, and Pizzeria Locale is now back to just two locations in Denver.