Chipotle Mexican Grill Inc. has been flying high lately, with double-digit increases in traffic and three brands with plenty of room for growth.
Positioned in the pilot’s seat is founder, chairman and co-CEO Steve Ells, a Culinary Institute of America graduate who two decades ago decided to reinvent the notion of quick-service food with the launch of Chipotle.
While Ells would likely argue there is much change needed within the industry, Chipotle has certainly set the wheels of change in motion as a growing number of concepts borrow heavily from the build-your-own burrito/bowl/salad/taco model.
Chipotle’s stellar performance in the past year has only fueled that fire.
In the September-ended third quarter, for example, Chipotle reported a nearly 57-percent increase in net income, and same-store sales shot up nearly 20 percent, with traffic up 11.3 percent.
It was the highest same-store-sales increase since Chipotle went public in 2006, and a sharp contrast to the flattish-to-negative trends across the industry.
Without naming names, Ells in the most recent quarter call with Wall Street analysts recently offered sharp criticism for the traditional quick-service sector, saying it has “traded food quality and taste for low cost and ease of preparation. It has aggressively marketed low prices to entice customers to visit more often, which has resulted in the need to reduce cost by cheapening ingredients and by compromising the overall dining experience.”
Chipotle, by contrast, has proven that a restaurant chain can spend more on better-quality ingredients and charge a fair price, while still generating outstanding business results, Ells said. Perhaps more than anything else, Chipotle’s ability to prove out that model has been and will continue to be a tremendous catalyst.
When he opened the first Chipotle in Denver in 1993, Ells’ idea was to use authentic ingredients — with his own twist — cooked in-house, and assembled quickly, in order to elevate quick-service food. The concept took off.
In 1999, a visit to some Iowa pig farms inspired Ells to make a shift to more sustainably raised ingredients, and he gradually shifted the entire system to all-natural ingredients by 2010.
Chipotle’s Food With Integrity platform is fully integrated into the brand DNA and has hit a sweet spot with consumers. Ells has long argued that the reason is simple: It tastes better.
The question remains: Did Ells have the vision to tap a growing consumer desire for better food, or did Chipotle train a hungry audience to expect it? Regardless, a growing number of competing chains are jumping as quickly as they can on the better-ingredient bandwagon, shifting to meats raised without antibiotics or growth hormones, and local and organic produce.
Ells is currently incubating two more concepts that he contends will also prove the success of the better-food-is-good-business model.
ShopHouse Southeast Asian Kitchen debuted in 2011 and has eight locations. Last year, Chipotle made an investment in the Colorado-based fast-casual pizza concept Pizzeria Locale, which opened its second unit this year with a third planned for 2015.
The core Chipotle concept is also growing both domestically and overseas, with 190 to 205 units planned in 2015.
The former outlier Ells now sets the industry standard. As long as Chipotle continues to show results, the industry will follow.