With the appointment of a new CEO for Chipotle Mexican Grill, founder Steve Ells will surrender day-to-day oversight of his brainchild on March 5 for the first time since opening its original store in 1993. His shift to executive chairman, with a likely focus on ventures such as international development and the company’s burger and pizza side ventures, will end an era for Chipotle—and possibly the whole industry. Ells, a chef by training, has been a disruptor, industry critic, apologist, risk taker, contrarian and culinary traditionalist.
He’s been lauded, cursed, shown respect as a competitor, bashed as an arrogant elitist and even targeted in a derogatory ad campaign by industry watchdogs. But he has undoubtedly been one of the most influential restaurant leaders of the last 20 years. Here’s a look at some of the memorable moments from his 25-year tenure.
From chef to chain creator
Until the recent fine-casual movement, chefs were seldom chain starters, and certainly not in the limited-service sector. Ells, a graduate of The Culinary Institute of America, was working in the kitchen of Stars, Jeremiah Tower’s famed fine-dining restaurant in San Francisco, when he decided to become an exception.
He noticed that a burrito shop near Stars usually had a line out the door. Ells would later recall that he counted the number of people who were waiting for the oversized burritos, which he knew generated an average ticket of about $5, and did the math. The numbers were more impressive than what he was seeing at his fine-dining perch. He decided to try a similar approach, figuring it would generate enough money to start his own fine-dining place.
He went back to his native Colorado, convinced his father to lend him $85,000 in seed money, and opened the first Chipotle. Ironically, it was a jalapeno’s throw from another startup called Z-Teca, which also featured oversized “gourmet” burritos made to order. The concept would later change its name to Qdoba.
McDonald’s comes knocking
Chipotle was immediately a hit, enabling Ells to open a handful of stores in the Denver area. Along with Z-Teca, it inspired other upstarts to embrace higher-end, oversized burritos, an option still little-known in many parts of the country. Soon, the market would be dotted with the likes of Green Burrito, Red Burrito and Baja Fresh.
One day in 1998, as Ells relayed to Restaurant Business soon afterward, a serious suit showed up and said he was from McDonald’s. The burger chain was worried about franchisees building out their territories and exploring other growth vehicles. It was also concerned about the Golden Arches’ relevance to a market that was increasingly looking for fresher, more wholesome, higher art fare.
Chipotle, which had not franchised, looked like a perfect concept to bring aboard as a second franchise vehicle. How did Ells feel about selling a stake in his baby for $360 million and letting the deepest-pocketed enterprise in the business fund his expansion?
Thus began a rocky partnership.
The McDonald’s years
Opposites attract, but in the instance of Chipotle and McDonald’s, not so much. The big burger chain wanted to plane and sandpaper its young acquisition into something that could be offered as a new franchise option to existing McDonald’s franchisees. That meant rigidifying systems, taking skill and art out of the kitchen and reducing costs wherever possible, including in product specs. The direction clashed head-on with what Chipotle was trying to do.
A franchise test didn’t go well, marking what may be Chipotle’s lone experience with that mode of expansion. McDonald’s decided to let Chipotle grow as an all-company-operated endeavor, not an unusual approach before “asset light” became the mantra of investors and franchisors.
Chipotle quickly outperformed its much larger parent. Younger consumers couldn’t get enough of its fresh, customized burritos and tacos, and the concept grew from 16 stores to 500. Meanwhile, McDonald’s ran into considerable trouble, without the diagnosis that would come years later: that it was losing its relevance.
Activist investors urged McDonald’s to recapture its mojo by focusing more intensely on the core burger business and spinning off the distractions of the other concepts it had amassed. By that time, the roster included not only Chipotle, but also stakes in Fazoli’s, Donatos Pizza, Boston Market, Pret A Manger and Red Box, a DVD-vending business.
In 2006, McDonald’s spun off Chipotle in an initial public offering priced at $22 a share. The price would immediately double, and would eventually rise to nearly $500 a share.
Ells found himself with the Wall Street investment community as his new partner. That relationship would prove far more harmonious.
Chipotle’s salad days
Wall Street fell in love with Chipotle, probably because consumers couldn’t get enough of its burritos, bowls and tacos. Even during 2008, the kickoff of the Great Recession, the fast-casual leader posted double-digit sales gains. It would continue to post positive comps even at the depths of the downturn.
Sales and unit counts continued to grow, giving Chipotle’s management a swagger that wasn’t appreciated by the rest of the industry. It declared its fare Food with Integrity, and crowed about how it was proof that fast food didn’t have to be heavily processed matter that bore little to resemblance from what came off farms.
Its marketing was unconventional and purposely provocative. The chain funded production of several short YouTube videos, directed by Hollywood standouts and scored by the likes of Coldplay, to bash the rest of the chain market and promote its exalted approach to food.
In 2009, it funded free screenings of “Food Inc.,” an expose of the U.S. food processing business, in theaters across 32 cities. The full-length film was also promoted in all Chipotle units.
The industry was incensed, but Chipotle continued to outstrip the field with its sales, profits and stock performance.
The joyride ended abruptly during the last quarter of 2015. In October and November, E. coli contaminations were traced to dozens of Chipotle units across nine states. Forty-three units were closed.
In December 2015, 30 students at Boston College, including members of the school’s men’s basketball team, reported getting sick after eating at a nearby Chipotle. This time, the culprit was norovirus.
A few days afterward, Ells went on “The Today Show” to reassure consumers they could eat at Chipotle without risk. He declared that the brand was the safest choice in the industry.
Later that day, Seattle health authorities announced they had closed a Chipotle in their city because of repeated sanitation code violations.
Ells would eventually acknowledge that the food safety incidents had merely catalyzed problems that were festering at the chain—issues such as processes and procedures, and where emphasis was being placed within stores. The concept had lost its focus on the customer, he said, noting that half the chain deserved a bad grade on service.
The fallout from the contaminations wasn’t the brand’s only high-profile problem. Chief marketer Mark Crumpacker was snagged as a customer in a New York City investigation of an organized cocaine distribution ring.Investors reacted with fury to the pay packages that were awarded Ells and his then-co-CEO, Monty Moran, who was subsequently ousted.
The company backtracked from a concept called ShopHouse Southeast Asian Kitchen, its entry into the Asian fast-casual market. It also raised eyebrows by forging ahead with a burger concept, Tasty Made.
On Feb. 13, Chipotle announced that it had hired Brian Niccol, the CEO of Taco Bell, as its new chief, effective March 5.