416: Chipotle Founder Steve Ells

0:28This episode is brought to you by Resi and American Express. And so the way this works is every hour we load a tote or totes full of the beautifully prepped items and then load that onto a wagon. It's pulled by a bicycle and six minutes later we're loading that prepped food into the production system.

0:51This is Taste. I'm your host, Matt Rodbart.

0:59Today on the show, I welcome in Steve Ells. Now, Steve is the founder of Chipotle, 4 ,000, 5 ,000 restaurants in America, a real visionary when it comes to QSR. Well, he has a new restaurant called Colonel, and I've had the pleasure of dining at it, and we talk all about Colonel. We also talk about some new menu items and how he has a robotic arm in the restaurant. It's not as creepy as you think. It's actually really cool. We also go back to the days of Chipotle, founding this iconic restaurant group in 1993. Some of his big menu hits, some of his misses, and really how he was able to grow that brand and how that brand has inspired many restaurants today.

1:39I'm looking at you, Sweetgreen. I'm looking at you, McDonald's. It's so cool having Steve Ells in the studio, and I hope you enjoy this conversation.

1:56Steve Ellis, welcome to This is Taste. What a pleasure to have you into the studio. Matt, thank you for having me. This is great. We were just talking off mic. I think I've been to like four of your restaurants that you've been involved with. There are 3 ,000, over 3 ,000 chapolas, and you've only been to four. I've been to four concepts, I'll say. I've been to four. We'll go over all of them in this interview, and really, lots to cover. But first, I like to ask a lot of guests, what is good in New York restaurant-wise? You live here, you're eating out often, you have your restaurant, which we'll get to, Colonel.

2:24but what's good restaurant wise for you? So, I mean, I have a lot of friends in the business. And so it's hard to name, you know, just one. And I just, I don't want to go through the laundry list, but I will say that Ron Yan's Chinese restaurant called Tolo Lower East Side is fantastic. And he was the chef at Parcel and worked with Grant Reynolds. And Grant's, of course, you know, a wine expert. And so Tolo not only has fantastic Chinese food, but an amazing wine list. Wine list to go with it. And so we sat outside and that was an amazing experience a couple weeks ago. I love that. I'll definitely mark that.

3:04I've not made it to Tolo yet. It's fun. It's just such a great New York scene. You're sitting out in action in Lower East Side. What a great place to have a meal in the summertime. Super fun. Downtown. Let's go back to your time. You worked at Starz. And I feel like maybe some of our listeners know you best as the founder of Chipotle, as a restaurateur, as a big ideas guy. But you also went to culinary school and you worked at STARS with Jeremiah Tower, important chef. What's your time like at STARS in San Francisco? STARS was great. So I did two stints at STARS. So after college and before STARS, I went to the Culinary Institute of America.

3:44And halfway through that program, it's a two-year program, halfway through the program, you do what's called an externship and you choose a restaurant to go gain some experience. And you leave the school for about four months and you work in this restaurant. And I chose Starz. And it's a funny story because this is 1989. And I find the number for the kitchen at Starz. And so I call up and I say, is Jeremiah there? Just going, like going for it. I love it. Not even chef. Someone said, someone said, who's, you know, who's this? I said, oh, it's Steve Ells. I'm at the Culinary Institute of America.

4:30And, uh, uh, hold on. And, uh, a few minutes later, uh, Jeremiah gets on the phone and asks, who is this? I said, that was Steve Ells. I'm at the Culinary Institute of America. I'm a student and I'd like to do my externship at, at stars. He goes, oh, we don't do that program. I said, no, no, no, no. I, you know, I've been a, I've been a customer. I'm a huge fan. Um, I've really got to do this. Um, uh, listen, if you don't, if, if, if, if, if you don't do that program, you don't do that program. if you don't like me, just tell me to walk and I'm out of there. Just give me a shot. He goes, okay, fine.

4:59When are you going to start? When do you need to come? And I gave him a date. I think it was the beginning of July. And so a couple of months goes by and I get ready. I come with my knife kit all ready for my first day at Starz. And I show up, I said, hey, I'm Steve Ellis. I'm here to start. I just talked to Jeremiah a couple of months ago. And they're like, who? Who are you? No idea. Jeremiah wasn't there. No one had any idea. So they put me in the basement on prep. Yeah. And I made tomato concassé out of about 10 cases of tomatoes. First day. It was my first day. But you knew production. But I loved every moment of it.

5:37And I spent the four months there. And then they invited me back after I graduated. So that was the. And then you ended up working Garmanger in those roles. I worked all the stations. Yeah. Through my, you know, almost three years there. When you're working at STARS and you're also a student at the CIA, are there some ideas that are popping around your brain that would end up informing how you founded Chipotle in 1993? So the idea of sort of local, seasonal, artisanal, very, very important. You know, the provenance of the food was paramount at stars back in the – starting in the mid-80s. It wasn't typical to have listed where the lettuces came from or, you know, where the beef was from.

6:29And so this was a really new idea, and I loved it. And I had the opportunity to visit farms and understand more deeply about the importance of ingredients. And I think ultimately that's one of the things that really helped make Chipotle a special brand, that we brought very high quality ingredients to the world of fast food, where before it was always about the cheapest ingredients. Yeah. And you did it for real, like at true scale. It wasn't like this idea that you're going to bring high quality, like you literally achieved it, which I think is the biggest testament to that brand. It was great.

7:12And what I'm so proud of now is that there are so many fast, casual concepts who have followed in Chipotle's footsteps who are doing the same thing, who are bringing really great ingredients now so that everybody gets to eat better. We'll get to some of those later. I want to know in 1993, you're opening on the campus of University of Denver nearby and you're opening your first shop. What's that first year of 1993 like for you? What are some of the big hits and misses that you that you offered on your menu? And like, did you at that moment, 93, believe that this was going to be a big thing? That it was going to be a big thing did not cross my mind.

7:46I wasn't even convinced it was going to be a small thing. Right, right, sure. It was scary. The menu as you see it today was largely the same. I at one point experimented with little pastries, little empanadas. Because, you know, I remember using the barbacoa as a filling for those. That lasted maybe a couple of days. Too much labor involved in making them every day? Yeah, the oven wasn't appropriate for baking. But what you see today is basically the menu. And I hit it, you know, luckily from day one. So you hit it. I mean, let me ask you about getting to the point where you knew you could open a second location.

8:37Is that like a week one thing, like in terms of demand for this idea of an assembly line, the idea of customization, that things that you really innovated that we see today at Chipotle and many other restaurants? Well, so it's interesting because today at Kernel, we're asking a lot of our customers. It's so different. It's the restaurant is different in almost every way. And so we're asking a lot, but it reminds me of 31 years ago, I was asking a lot of my customers at Chipotle. Let me give you an example. So a customer would walk in and they would walk up to the cash register because that's what you do at a fast food restaurant.

9:18Well, in 1993, yeah, we'd have to point to say, no, no, you start over where the tortilla presses are. And so, okay. And they'd walk over there and, and, and, and, and we'd say, well, what would you like? and they'd say a chicken burrito. Okay, well, would you like black or pinto beans? People say, well, what does it come with? It comes with whatever you want. And so they would ask about the difference. And the same thing with the salsa or cheese or sour cream and so many questions. And it was a lot of friction for customers, a lot. And folks were giving me advice and they said, Steve, you need to put up signs, order here, pick up here, verbiage that would explain the different choices and how the process worked.

10:02And I didn't want that clutter. I knew that would be clutter. And I knew that eventually people would figure it out. I'm glad that I stuck with it because imagine seeing all that clutter in all of the fast casual restaurants today. And I promise you, nobody walks up to the cash register today in a fast casual restaurant. Everybody knows the drill. And I remind myself of that as we're continuing to show new customers something completely different at Kernel. We're going to build towards Kernel. You have one location now, but there's expansion plans, and there's a lot of innovation there. We're going to get to it.

10:41But first, I want to ask you about Pizzeria Lucali, which I went to in Boulder. I love that place. Why did it not quite take off the way maybe you wanted to, or maybe I'm just wrong. Well, so it's interesting. So I did a couple of other brands. I did Pizzarillo Cali and Shop House. Yeah. Big fan of Shop House as well. Oh, thank you. So Pizzarillo Cali is sort of a Neapolitan style pizza. We sort of evolved that to a more cooked and firmer crust over time. And Shop House, a Southeast Asian quick serve concept. Both were really, really good. And if you looked at the success of those concepts in a vacuum and looked at the loyal following and the quality of the food and overall the economics, I would say that they were very good indeed.

11:37But when you compare them to the engine that Chipotle had become, they were lagging. And so why invest in something that doesn't do as well as the mothers? You're a victim of your own success, Steve, it sounds like. It really wasn't. And I started these as a hedge because I thought, well, how many Chipotles could we actually build? And as it turns out, the team now is predicting, I think, 7 ,000 or something domestically. And I don't doubt that for a moment, but we didn't need other concepts to grow chipotle as it turned out uh and we learned some some things uh and it was it was a nice experience but we sold them off and and they're in other people's hands yeah and and like obviously pizza rilicali has been done many times over you were very early but you get blaze and other brands that do that quick fire pizza but southeast asian at at shop house i want to ask you like that those flavors we talk on the show all the time we're like why aren't they bigger why aren't they had done at scale.

12:36Do you believe that a Southeast Asian concept can be as big as Chipotle? Well, I don't know. One of the reasons for Chipotle's broad appeal is because you can make combinations from all of the ingredients. There aren't combinations that you could make at Chipotle which would be bad or off-putting. And that wasn't true for ShopHouse. ShopHouse, there were some some very distinctive curries and tamarind vinaigrettes and things like, you wouldn't necessarily mix all of those things together like you can mix and match at Chipotle. So I think just foundationally, Chipotle is sort of a very broadly appealing flavors and textures and different types of components.

13:35Yeah, less prescriptive, frankly, it seems. And that's why a lot of fast casual and fast food QSR works really well and certain flavors don't. Well said. Thank you for sharing that. Let's move on to Kernel. I really have a bunch of questions about your new plant forward concept. There's robotic arms there. There's incredible plant-based chicken. I love that dish. Great cookies. You've got Andrew Black there cooking. But first off, Steve, why do this? You don't need to open restaurants. You don't need to do this just on the surface from my point of view, but I could be wrong. Why open, Colonel?

14:10Well, so need to, I'm not sure. I think there's a need for kernel. If I look at the struggles of operating fast food restaurants and fast casual restaurants today, it's mainly around labor. Um, the, the turnover rates are astronomical. And in the three decades, uh, the last three decades that I spent, uh, running a large chain, you know, it only got worse and I predict it's going to continue to get tougher. Um, and I think, I think the reason you see such high turnover, uh, and these reasons fall into two buckets. One is pay and the other is the work itself. So unfortunately, the economic model of these places does not allow for higher pay.

15:02I think most operators, owners of restaurants would pay more if their economic model allowed. It just doesn't. It's a low margin business inherently. Margins are tight, right? Yeah, yeah. Very tight. And we all know that. But the other problem is just the work itself. I think people today are less interested in flipping burgers and making fries or all the other equivalent. Taking out the trash, doing the recycling, doing the end of day. People have other options. And to me, there's no question that a lot of this work can be automated and someone's going to figure it out. Someone's going to crack the code.

15:43And so I think we have a really cool system at Kernel that does a few things. It allows us to make better food than the fast-casual model or the fast-food model for sure. But it allows us to make better food than the fast-casual model. It allows us to lower turnover dramatically because we can pay a lot more and we've reinvented the work and we will continue to evolve the work. So it's something that will become desirable. And it's also a system that's highly replicable. It's very easy to roll these out, much easier than the traditional fast, casual or fast food equivalents. Lots of follow-up questions.

16:31Thanks for taking me through it. And I think the big part I take away is the labor, the idea of automation. I think you have a robotic arm in the restaurant, which has gotten some press. I don't want to dwell on that per se. I think there's a lot of other cool innovations happening with automation. But tell me, you know, I love the fries. Like, first off, like those fries are incredible. Like, truly the food quality is high. But how do you see this working at scale? Because I think that's ultimately what you want to do. Because right now I'm seeing great food at one location. How do you replicate that?

17:02Yeah, Matt. So the basic model is on a foundation of a hub and spoke. Hub and spoke, right. So we have a hub, which is our prep. And if you think about the importance of prep, well, so in 93, when I opened Chipotle, fast food did not have, and it still doesn't, but fast food didn't have knives and cutting boards and pots and pans. So there was no real cooking there. They had scissors, right? Pretty much scissors in plastic bags. So Chipotle really forged the way for real cooking. And now all the fast casual models have followed and people are eating better because of that. But the fast casual model has a limit in that the prep space, the amount of people it takes to do the prep, and the amount of training required, especially given the extraordinarily high turnover, stresses the system.

18:01And you can only have a certain level of prep at these places now. And so, but at Colonel, we have a chef and his small team doing prep all day long in a space built for prep with beautiful equipment. And we can do a lot of production and we can leverage that over multiple restaurants. So our first central kitchen is downtown on 14th Street between 5th and 6th. And so it can easily handle all the downtown restaurants. Our first restaurant at 24th and Park is a mere six-minute bicycle ride. And so the way this works is every hour we load a tote or totes full of the beautifully prepped items and then load that onto a wagon.

18:54It's pulled by a bicycle. And six minutes later, we're loading that prepped food into the production system. So, Matt, when you place an order on your app, the robot arm engages and puts things into the oven. And the system, the automation, some of it's robotics, the automation handles all of the disparate pieces that make for an order and times it perfectly so that things are done on time consistently. And I spend most lunches at the restaurant talking with customers and talking about what they're eating and looking at the food. And the consistency of our composed vegetable side dishes or our sandwiches or salads is mind-blowing.

19:46They all look identical. And you know the typical fast food picture or fast casual picture of food. It doesn't look like the thing that you unwrap. Well, at Colonel, it does. It's really kind of blowing me away. And those hourly runs from the commissary is helping achieve this model, right? And you're able to cut down on your labor in store. There isn't even a register. You're buying it on your app, which is not common. You find that anywhere, McDonald's to Sweetgreen. But then you're not really interacting with anybody. You're literally picking it up out of a cubby. Well, this is where I got it wrong.

20:19I thought we could have three people back in the production area and no people up front and that customers would just know how to use the app and they would know how to open the cubbies and they wouldn't want to interact with people. That's a big assumption there. And I got it wrong. I think eventually there will be more customers than not that will use restaurants like that. But today, I think this notion of hospitality with a human is important. And so I'm there a lot. We have greeters who are there every day. I see. And we're engaging customers. I like to see that. My feedback initially was that maybe it could be a little more friendly, I guess, have a little more vibe.

21:05And now it is. I think that's great. And so we've learned our lesson. Now, here's what will happen over time, though. As new technology comes out, we'll be able to move people from the back of the production cell more customer facing so that the kernel employee of the future will be engaged in hospitality and maybe from the front of the house will be reading a dashboard, understanding how the system is functioning. Again, it's really reinventing the McJob. Again, gone are the days when people want to flip burgers and make fries. And instead, we need to empower them with the ability to be engaging with customers and operating sophisticated technology in a way that allows them to oversee the entire operation.

22:03And I'm going to assume that you're going to be paying over minimum wage. So we're starting people now at$27 an hour and with full medical, dental, vision. From day one. Paid vacation from day one. Yeah. And our chief people person just started last week. She's great. And we're actively working on an equity program for hourly folks. And, you know, in the industry, you hear, ah, you can't give hourly folks equity. It's too complicated. They don't value it. And I don't believe that. I think you have to design something that resonates with folks, that they can monitor and understand and see how it appreciates.

22:47Do you offer equity at day one? Is that a big part of it? Well, we don't offer that yet. We don't have the program designed. And so we're in the process of doing that. But I feel strongly that people should have a piece of the action. You know, one of the principles that the platform is based on is lean manufacturing. And so part of lean manufacturing is feedback from the folks who are actually in the production system, whether it be an assembly line or what have you. It's often – we often refer to lots of the – like Toyota, for instance, is a user of the lean system. And so there's feedback from the folks who are actually working on the line to help make the system better.

23:28And so we're actively engaging our folks in a huddle at the end of every shift to make sure that the system is optimized. And anything that they can recognize that can help make the overall system better, we're employing that into the overall platform. I see this working out really well. I see theoretically this working out really well. You only have one location. I think that we've certainly changed our habits of just the way we consume and we order from our app. We pick up at Starbucks, Sweetgreen, McDonald's. It's become less friction. There's been less friction the way that we are ordering on the front end, the way we're picking it up.

24:07So us as consumers, we've been programmed to have less friction just to go in and leave. So I can imagine in the back of the house, it's going to be the same, this idea that you don't need to show up and flip burgers. It's going to be coming from a commissary. There's going to be few people working there, and it's going to run itself through efficiencies that you're going to pick up at the end of the day with the huddle. Now, I guess the question is, how big does this get in the next year? Does this idea scale pretty quickly? So one of the benefits of this platform is that the thing that you're replicating, the restaurants, are very easy to build.

24:46Right. So they don't require the same sort of infrastructure that a typical fast food or fast casual restaurant or, for that matter, any restaurant requires. We don't require gas service. I have less than a 200-amp electrical service. Amazing. That is so cool. We don't require exhaust hoods or fire suppression systems. And so basically with a light veneer applied to the existing space, you bring in the physical platform. And that is the design. That is the architecture, if you will. and that happens in just a couple of weeks. I see the future here, Steve. And I go back to what you said earlier about how when you launched Chipotle in 1993, you did a lot of things that felt uncomfortable for diners.

25:35And I think when you walked in, and I'm glad to hear you have a greeter because I think you need human interaction, but seeing a robotic arm work, it's different. There's probably some snark out there. Some people are like, that's just a robotic arm restaurant, but you fully believe this is the future. I do. I think it's the future because it solves some problems. We're using a lot less energy. We're able to cook better food, more complex food, more interesting food. We're able to serve it to customers more accurately, more consistently, hotter. And we're able to use smaller spaces. Yeah. And that's going to be the key with real estate issues, finding the right spots.

26:20And then I think most importantly to me, we're offering folks an opportunity, a job that's really meaningful. Yeah. It's more interesting. Meaningful compensation and they get to have part of the action. How did you and Andrew Black connect? I know he's friends with my co-author, Dookie, back from JG days. But I think that Andrew is such a talent. And let's go over a few of the menu items at Colonel right now. Just give our listeners a sense of what you're cooking. Yeah, the menu is pretty straightforward. And it's the kind of food that I think people want to eat every day. So lots of vegetables.

27:02And we have vegetable side dishes that are composed, if you will, and they have four components. They have the vegetable itself plus a grain or a legume plus a sauce plus a crunch. So, for instance, the way carrots work, it's roasted carrots and dates. And then it has a salsa verde. And the crunch is spice toasted almonds. And the grain is farro. So it really is. It's a very sort of like a balanced side dish, right? And so, again, the combination of grains, legumes, vegetables, sauce, crunch really elevates the typical vegetable experience. What about Andrew? How does he play in this world? So Andrew was my second employee, or I should say he was my first employee.

27:57Yeah. You're the first, right? And Andrew was my personal chef and had been for a few years and is extraordinarily talented. I mean, such a well-rounded chef, an amazing palate, really organized, and just a very disciplined thinker in the kitchen. And so when I started working on this idea, I was asking him for help making some different vegetable plant-based patties for sandwiches. We experimented with all different kinds of fermentation and mycelium and things like this. And so after some time, he kept, you know, overhearing my discussions with others about what I thought this concept could become.