Advice Line with Steve Ells of Chipotle

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0:37Hello and welcome to the advice line on how I built this lab. I'm Guy Raz. This is the place where we help try to solve your business challenges. Each week, I'm joined by a legendary founder, a former guest on the show, who will help me try to help you. And if you're building something and you need advice, give us a call and you just might be the next guest on the show. Our number is 1-800-433-1299. Leave us a one-minute message that tells us about your business and the issues or questions that you'd like help with. All right, let's get to it. Joining me today is Steve Ells, founder of Chipotle.

1:11Steve, welcome back to the show. Thanks for coming back on. Guy, it's great to be here again. Good to see you. Steve, you've been on the show twice, the first time way back in 2017 when you told us, of course, the origin story of Chipotle, how you were working in a high-end restaurant in San Francisco, and basically you had this idea. to sell burritos in order to save the money so you could start your own fine dining restaurant, which was your dream. But of course, that's not what happened. That burrito place turned into Chipotle. It was started in Denver. And today, of course, it is a massive global restaurant brand at a publicly traded company.

1:46And as always, anyone listening who hasn't heard that original High Belt this episode about launching Chipotle, it's really fascinating. Go check it out. I will We'll put a link to it in the podcast description. Steve also came back on the show in 2023 to talk about a new concept that you were about to launch in New York City. It's called Kernel. And Steve, just to summarize, basically the idea behind it was an entirely plant-based menu. And then basically all of the ordering was done via an app and the meals were assembled by robots. And there were still human employees, but far fewer. But as far as I understand, with Colonel, after about a year, I guess it just didn't work.

2:26Can you tell me what happened and some of the things you learned from that? Sure. I think that's a very good summary, Guy. But I wouldn't say that it didn't work with Colonel. I would say, though, that Colonel didn't appear to be the rocket ship that Chipotle was. And I wanted another rocket ship. And so we closed down the two kernel restaurants after less than a year, spent a couple of months retooling, and opened counter service. And I'll tell you, the reception has been wonderful. It's a sandwich restaurant, right? It is. If you think about the tens of thousands of chain sandwich places in the United States, there are varying qualities of these places.

3:12If you compare that with what we do at counter service, we're vastly different. The bread is only four ingredients, a flour, water, yeast, and salt. And we bake the bread every day. Actually, we don't bake it. We have these amazing artisans bake the bread for us every day. We roast all of our own meats. We're making all of our own sauces. We're chopping fresh herbs. We're squeezing fresh citrus. And there's this demonstrable difference between the world of chain sandwiches and what we do at counter service. Much like back in 1993, there was a big difference between the world of fast food and then what we started to offer at Chipotle.

3:54Yeah. I mean, your whole model was about standards, right? It was like, we're gonna make the guacamole in every location. We're gonna marinate the meat. We're going to grill it. We're going to chop the pico de gallo. And as you scaled, people said, hey, this can't be done. You can't scale this. I'm curious, with Kernel, one of the innovations was to use robots, automated food prep, right? And some pretty big players are working on basically creating kitchens where a lot of the food is made by robots. How do you assess that? I mean, you must have learned a lot about that process with Kernel. Are you bullish on it?

4:37I mean, is that where things are ultimately going to be headed towards? Not everything made by robots, but a lot of things made by automated machines? So, you know, the robot arm did really two things. It picked from a rack the item that was being ordered and put it in the oven. And then when it was done, it took that item out of the oven. So it was part of automating the process to help reduce the amount of labor, but it really wasn't about the making of the food. You know, still in our central kitchen, we have knives and cutting boards and pots and pans, and we're really cooking. And so your question, will robots displace that?

5:28I mean, maybe someday, but certainly not anywhere in the near future. I think what we learned that it's polarizing. I mean, some people were fascinated with the robot arm. Other people said they want people making their food. At the end of the day, in pivoting from kernel to counter service, we learned that the human interaction is very, very important. And when a customer walks into a counter service, they're greeted. There are people there who welcome the customer, who take care of the customer. Now, there are less people in a counter service than a traditional fast casual, and that's by design.

6:08And so, you know, the system to make these sandwiches has automation in it. It allows us to, you know, more efficiently manage the workflow. And ultimately, it'll allow for a better economic model, which allows us to invest in higher quality ingredients and really make better food. Foundationally, it's very similar to Chipotle. And so I just, I want to do that again. Yeah. Awesome. It's exciting. Steve, what do you say? Should we bring in our first caller? I'd love to. All right. Great. Welcome to the advice line. Caller, please tell us your name, where you're calling from, and just a little bit about your business.

6:48Hi, Guy and Steve. My name is Rebecca Smith, and I'm calling from Streaky Bay in South Australia. My partner, Tony, and I established Streaky Bay Distillers in 2022. And we make small batch gin, vodka, and whiskey in our tiny distillery in a tiny town in a wild remote part of South Australia. Wow. Welcome to the show, Rebecca. You may be the farthest ever. I'm looking at Streaky Bay. It's like, you know, because people think about like most Australians, I think, live on the eastern side, right? Melbourne, Sydney, Brisbane, and there's Adelaide. And then you're like way out there. I mean, Streaky Bay is…

7:27It's a tiny place. Yeah. Okay. So you have a distillery and you make, tell me what you make there. We make small batch gin. We make some vodka and we are just about to release our first small batch whiskey. And are you mainly selling it in the Streaky Bay area to like restaurants and bars and stuff? Yeah, exactly. So we sell it to three sort of high-end accommodation providers who serve it either in their rooms or over the bar, several sort of bars and restaurants, and then some South Australian independent bottle shops, and a couple of gifting businesses. Interesting. Tell me, how did you get into this business?

8:12I mean, is this something you've been doing your whole career and life? Absolutely not. So I was a remote area midwife and a remote area nurse for most of my career. And yeah, we had a family tragedy, the death of my younger sister. And so we were looking for artistic ways to process our grief. And we sort of stumbled into a course in distilling. And then once we'd done the course, we just absolutely fell in love with all aspects of it. Yeah. All right. And tell me about, so where are you selling most of your inventory? So we sell about 14 % online through our website. Okay. And that is probably the most margin.

8:53And then we also have a mobile food and cocktail van, and that's probably about 28 % of our income. And then our wholesale is 57%. Got it. Okay. And tell me a little bit about how the business is doing. What are your sales? Okay, so the turnover for this financial year we're expecting to be about$400 ,000 US dollars and last year it was around$200 ,000. Okay, pretty great. All right, before we get to Steve, tell us your question. Okay, so my question is, since our inception in 2022, there's been an explosion of small family distilleries around Australia. There's at least 650 in the craft spirit sector.

9:39So in this kind of climate, how do we differentiate ourselves and find a point of difference that will resonate with our buyers and be authentic and meaningful to our customers? Okay, I want to bring Steve in. Steve, thoughts, questions, ideas, etc. for Rebecca. Yeah, well, certainly in a crowded market, you do want to let folks know how you are differentiated. I guess that would be my question. How are you differentiated? We've been sort of trying to differentiate ourselves in the connection to place. So we live in a really small community and we swap our gin for local ingredients. So we collect up mulberries, figs, citrus.

10:25We're kind of like the bowerbirds of the distilling industry. And we use some Australian ingredients, you know, Kwandong, Avalone Shell, Coastal Daisy, Coastal Rosemary. And the other way that I guess we do differentiate is we donate, for one of our gins, we donate$5 a bottle to motor neurone disease because of a family experience. And I got a real interest in art, so I do all of the lino printing for the labels. Steve, I don't know if you can see their website, but these are beautiful bottles. I mean, I love the shape of the bottle that you've chosen and the design and you see through it. It's really nice.

11:08Thanks, God. And you've got sort of a backdrop that gives it a beautiful color. Really, really nicely done. Thank you very much. Nice. So it sounds like these botanicals that are from this particular place, these are for the gin, correct? Correct. Yeah. It sounds like that's the differentiated product that you have, the gin. Or would you say that the vodka is also equally as differentiated? No, I agree with you. I think the gins are much more differentiated. I think there's lots of those other distilleries are also making really good vodkas and really good gins as well. But yeah, some of the products that we use only, as far as I'm aware, only we are using.

11:54It seems to me that a company that focuses that that's best in the world at something, and maybe maybe you're best in the world at having these particular botanicals, and you you forage for them, you pick them, it's a community effort, whatever. There's a very nice story to that. And I think a brand that focuses on what they're best in the world at and has a product line that's cohesive might somehow resonate or be more impactful with customers than having, well, we have some botanicals and then we also have a vodka and we also have a whiskey too. Just from a branding standpoint, maybe that makes some sense.

12:37Actually, it really does. Yeah. We had started to wonder whether we were going a little bit off of our original brand. Rebecca, in the early days of Chipotle, when I presented the offerings, people said, well, Steve, you're not offering enough to people. They want more variety. And I said, no, no, no. People can make all different kinds of combinations of the base ingredients. But it was very, very different from the typical fast food approach was to have limited offerings and all different kinds of things. But it allowed us to focus on just a couple of things and do them better than anybody else.

13:11And I see a parallel between your gin making, your botanicals, and foraging for those ingredients. And I really like that. That resonates with me. 100%. You know, I think about some of these like single malts from Scotland that are from very remote places, right? Like Lafroig. It's somewhere that you can't get to easily. But it's a massive international brand because the place became part of that brand, that story. And your place is Streaky Bay, right? It's the taste of that abalone shell or the whatever salt. What is saltbush? Is it a bush that tastes like salt? It's a really prolific bush that grows everywhere in arid climates around Australia.

13:54And it's a salty taste, but you can actually cook it. and it was eaten by traditional Aboriginal people that lived here before. I love that. I mean, just the way you're talking about these things, I mean, literally, could you put a story on the bottle? Could you put a little booklet and just attach it to the neck of the bottle where you read that? You find out what you're doing, what you're tasting. You're tasting the coastline of southern Australia. That's where you get that sense of place. And then the hand crafting and the foraging really is. Yes. Do you import to the United States? No, we haven't looked at any kind of.

14:40Is it possible? Is that something that's easily done? Or is this, do you think, going to be a product for Australia? Would absolutely love to do it. I think it's a very complex thing to do. But, you know, anything's achievable. Well, I just wonder if it's easier to break away from the pack if you came to the United States. I think about a lot of bars and the bartenders doing craft cocktails and then trying to have ingredients that really stand apart from the others. And I can see this gaining traction, and it might be worth exploring the expense and the headache of trying to break into the United States.

15:22Yeah. Here's my suggestion, Rebecca. go to i'm sure there are australian bars in los angeles in new york city right where most australians probably live i would think you know i just went to a a tequila bar in san francisco every every bottle is small artisanal mexican brand they had brands you've never heard of beautiful bottles and i wonder whether it'd be worth just going with a suitcase of this stuff to LA and, you know, connecting with some of these bars or Australians hang out there. I'm sure there got to be Australian bars, like they're Irish bars, and see if they would, you start there, just carrying them.

16:00That's a fantastic idea. It at least sounds like a lot of fun. It does sound like a good one. I don't think you can go wrong. And you got a story about Streaky Bay. Now I want to go to Streaky Bay. It looks awesome. Yeah, it's very remote and it's very rugged. But we have empty beaches and it's a really beautiful place. Yeah. Rebecca, congratulations. What a fantastic brand you have. Thank you so much, Steve. Rebecca Smith, the brand is Streaky Bay Distillers. Thank you so much for calling in. Thanks, Guy. You know, the thing about things like gin or even tequila, let's say whiskey too, there is, I mean, what she's doing, there's that element of tasting notes and flavor profiles and things that make it really interesting.

16:46It's not just a gin. It is a abalone shell gin, right? Like that, you know, gin and tonic is great, but an abalone shell gin and tonic sounds even more interesting. Yeah. Well, and so as she started, as I heard about the pitch, I was thinking like, oh, not another spirit, right? It's like, huh. But her story is so authentic. And that she is highly differentiated in the ingredients of this place. You know, a product that speaks to a place is very powerful. And then when you combine that with the hand foraging, I just, I really think it's cool. And then the packaging is cool. And it's so anti-corporate also.

17:30I think it'll resonate with folks. All right. We're going to take a quick break, but we'll be right back with another caller and another round of advice. Stay with us. I'm Guy Raz, and you're listening to The Advice Line right here on How I Built This Lab.

17:57Welcome back to The Advice Line on How I Built This Lab. I'm Guy Raz, and my guest today is Steve Ells, founder of Chipotle. And we're taking your calls. And Steve, you ready for another call? Let's go. All right, let's bring our next caller. Welcome to The Advice Line. Tell us your name, where you're calling from, and a little bit about your business or your product. Hi, I'm Sri Halima, the founder and CEO of MatZero. I'm calling from London. We make low voltage and safe heating mats that warm the person and not the space. A simple yet radical idea to save energy, cut emissions and bring warmth to where it's needed the most.

18:34Awesome. Well, thank you for calling in, Sri. So, OK, MatZero, this is a tell me what this is. Describe what we're talking about here. Essentially, it's a heated mat, something that you sit on, lie on, sleep on, and it heats up you directly. Our mats are powered by USB-C. It can be powered either by battery, mains, or solar if you're completely off-grid. And it's the size of a yoga mat, something like that? We actually have three different sizes. So our largest one on the flagship product is like a yoga mat size, but we have a mini as well, which is around sort of your seat size. I'm sitting on one right now to stay warm.

19:10Got it. And I'm assuming this is for, it's just a more efficient way to stay warm when you're camping? Like, tell me, how did you come up with this idea? What's the story? Originally, I grew up internationally. I had parents in the humanitarian sector. And it's there where I really witnessed firsthand the disparity in energy access and saw how people struggled in the winter to stay warm. I moved to the UK to study product design and engineering, and that's where I designed this concept of safe electrical heating for those scenarios. I also really hated being cold and was totally not acclimatized to the UK weather.

19:50So the idea was and is, if I'm reading the lines, for disaster relief, like you would basically, instead of handing out blankets or, you know, these would be available to people and they could efficiently heat themselves by lying on these mats. Exactly. So instead of using gas or burning whatever they can get their hands on, this is a safe way not only for the people but for the planet too. So Sri, before we bring in Steve, tell us your question. So originally intended for the humanitarian sector, our products are showing real traction in the outdoor, camping, and consumer and even healthcare sectors.

20:29All of these make sense but need focus, time, and resource. So when your product genuinely fits multiple markets, how do you decide where to put your focus without losing momentum and drifting away from the reason you built this in the first place? And this is a for-profit business, right? This is not a non-for-profit business. Yeah. No, we're for-profit. Okay. And so I think this is part of the challenge here as well is balancing the fact that we are commercially led, but have a mission ultimately behind that vision as well. And getting that balance is a tricky one. How much does the MAD cost?

21:06So our largest is 295 pounds and our smallest, the mini one, is 109 pounds. Okay, I think that's probably about$150 to$350, something like that. So they're not cheap, but they're not out of range. All right, Steve Ells, I want to bring you in here. Sri's making these mats, comes from a family of humanitarian aid workers, but there are different use cases here. And she's trying to figure out how to keep doing what she's doing without drifting from, I guess, from the mission, in a sense. Yeah. Exactly. Yeah, yeah. I think it's fascinating. And I love that there's a real purpose behind what you do.

21:46But at the same time, there needs to be an economic model to make this a reality for those in need. And so this tie-in with this potential outdoorsy camping kind of a product might make sense. I'm a skier. And so over the years, it started with heated boots, and then it became heated socks and heated gloves. Now I have a heated vest, all battery operated with rechargeable batteries. They're incredibly effective. They're expensive. I mean, they're really expensive. People pay a lot. And so I think there's this really interesting way to market your product to the outdoor enthusiast who is willing to pay a lot for really good gear.

22:37And so, but there are a lot of, also a lot of outdoor companies that give back to the community. So they'll give back a percentage of their revenue to different causes, which is super cool. And so I see this as a perfect fit. You know, you can market to the enthusiast. They're certainly willing to buy your product. and you let them know that not only are they getting something really great, but it's giving back to your cause. I think that's a great tie-in. It's good you say that because we've actually got mats at Everest Base Camp at the moment keeping that exact audience warm. That's great. I agree with Steve on this.

23:20I mean, you have – there are so many use cases here, you know, camping. Imagine slipping this into a sleeping bag or a tent. I mean, people are already sleeping on these sort of inflatable mattresses in tents, those little ones. Ice fishing, mountain guides. Exactly. People who camp, hunters who are hunting in the winter. Even disaster preparedness kits. I'm in California and everyone's got an earthquake kit. I think people will find all kinds of uses. I mean, I can imagine outdoor sporting events, you know, having the small one where you sit on one of these mats. Stadiums. And that would make a huge difference.

23:57Exactly. So there are all kinds of use cases. And I think that the – it's not one or the other. It's not about, oh, I should only do this. I think that you got to – you know this. You got to build a sustainable business. So you need to get into those places where people are going to spend the money on them. And then over time, you can have some career program where you give them away. Or maybe you bake that in where, you know, for every 10 sold or 100 sold or 50 sold, we give one away because once you achieve scale, then you can do two businesses. You can have the mission sort of nonprofit side and you've got the for-profit side where people are actually love this thing and are using it for all their fun outdoor activities.

24:42That's great. I love this idea. How will production occur? Do you have facilities now that can scale this? Yeah, absolutely. We've chosen specific manufacturers. Everything's contracted that they can scale with us. So from originally making samples through to tens and thousands of units. And all the production is actually based in Europe as well. And presumably, I mean, these get pretty warm, right? Like you can, I mean, let's say you're ice fishing in Minnesota, you know, and it's like minus 10. And you're in a tent with one of these things. It's going to keep you warm? Yeah, absolutely. We've done lab testing to negative 20 here in the UK and sort of like climate control chambers.

25:25But on the ground, we've had units and we have units in Ukraine and that gets to negative 20 quite easily. So we've had the real world and lab testing in those really harsh conditions. Same with Everest and along the Himalayan regions. You get extremely cold temperatures. it's amazing that's you know as a user of battery operated socks and gloves and things i like to make sure that that i extend the life and so i always adjust it not so that i feel the warmth but that i don't get cold and there's a difference there right if you if you turn it turn it on to a temperature where you're actually feeling warm it drains it pretty quickly but you can adjust it so you don't get cold and it lasts a little bit longer.

26:09Well, actually, there's no need to do that with our mats because we have built-in sensors. They automatically regulate yourself. So you can have it on mats, but it won't be drawing constant power from your battery source because it will keep you sustained at that temperature through the feedback system. That's cool. Amazing. Amazing technology. And I mean, it seems like there's also an opportunity to partner with some of these expeditions. You say you're already at Everspace Camp. I mean, I would look out for like polar expeditions also, or like Antarctic expeditions, and see if you can partner with some of these people who are really posting about their travels and their adventures and blogs and social media, because that's just another cool thing to be part of, right, to be affiliated with.

26:57Yeah. It's awesome. Matt Zero is the name of the brand. Congratulations, Sri. Good luck with it. Thanks for calling in. Been a pleasure. Thank you. Super cool. Yeah, thank you. So, Steve, you ski with all of that stuff, and I'm thinking, like, how cold do you get? I mean, you know, the technology of skiing. I don't get cold. But the jackets that are made today and the clothing is so good. The quality is so high now. But you're wearing like battery powered socks. Well, so yeah, my feet do get cold, but the vest is an interesting one. So, you know, when you're active and you're in the sun and it's the middle of the day, you don't have the vest on.