NEW YORK – Today’s fast-food consumer wants quality and customization, said Steve Ells, chairman and co-chief executive officer of Chipotle Mexican Grill, Inc.
“In a nutshell, I think the old fast-food model, the one that requires cheap ingredients because you have to have low menu prices and that you have to have lots of processed food and lots of mechanization to keep things consistent because you don’t have top performers and you have traffic driving based on limited time offers, gimmicks, all kinds of typical marketing things, I think that's the old model,” Mr. Ells said during a May 28 presentation at the Sanford C. Bernstein Strategic Decisions Conference in New York. “I think people are not interested anymore. They know what that tastes like, they know what that does to their body, and they want something more. And I think the system that allows you to buy great quality sustainably raised ingredients, really the kinds of ingredients that were once only available to the elite at high-end markets or fancy restaurants or perhaps upscale farmers' markets, those kinds of ingredients we think should be available to everybody.”
The Denver-based burrito chain has leveraged its strengths of a made-to-order model in developing its two newer fast-casual concepts of ShopHouse Southeast Asian Kitchen and Pizzeria Locale.
“These new concepts can tap into all of the infrastructure we have built, this very infrastructure that’s unique in the world of fast-food that we’ve built over the last 20 years,” Mr. Ells said. “Pizzeria Locale is as different from all the big brands that you see today as Chipotle was 20 years ago from the fast Mexican food. I mean it's a different approach. Starting with the dough, it's a long fermentation, a long rise, a 24-hour rise, and it's done right in sight of the customers. The first thing the customer sees (are) beautiful ingredients.”
Ingredients such as broccolini, capers, arugula and pork meatballs are among optional toppings at the Neapolitan-style pizza concept, which Chipotle launched last year as a fast-casual format with the founders of the original Pizzeria Locale, a full-service restaurant in Boulder, Colo.
“The pizza takes two minutes to bake and when they've finished assembling their pizza, it goes right into the oven, the customer then continues down the line and might get some sliced prosciutto, some meatballs, they can make a salad, there's a variety of different salads, and wines,” Mr. Ells said. “And then by the time they're at the register and finished paying, their pizza is ready. So, it's a really new way to think about pizza and people are very, very excited about it.”
ShopHouse Southeast Asian Kitchen, which the company launched in 2011, serves noodles and rice bowls at seven locations. True to Chipotle’s “food with integrity” message, ShopHouse offers organic produce when possible and proteins free of antibiotics and growth hormones.
“The flavors here at ShopHouse are bold and bright, a lot of emphasis on vegetables, real meats, roasted meatballs, a beautiful braised tofu, and then finished off with our green papaya slaw or pickled vegetables…” Mr. Ells said. “I mean it's really exciting food, and the way people are approaching it now, the way customers are approaching it really reminds me of the way people approached Chipotle 20 years ago. It was very new and very different.”
Whether Pizzeria Locale and ShopHouse can achieve Chipotle’s explosive success remains to be seen. In fiscal 2013, the Mexican grill posted revenue of $3.2 billion, an 18% increase over the previous year, with a total restaurant count of 1,595.
“I mean, can it be as big as Chipotle?” Mr. Ells said. “We don’t know how big Chipotle can be, so I think it’s fair to say that there’s plenty of growth opportunity with all three concepts.”
Mr. Ells said the two new concepts are growing at a faster pace compared with Chipotle’s initial development. Pizzeria Locale opened a year ago, and a second unit already is under construction with plans for a third location under way.“But we are going to grow the concept as we create demand and also we're going to grow the concept as we develop the future leaders for each brand from within the ranks from within the crew, and that development is happening very, very nicely,” he said. “We're seeing nice sales volume growth at Pizzeria Locale and at ShopHouse also, and we're very proud of our teams. So as we continue with building the sales and continue building the teams, we will continue to add more restaurants and perhaps go into new markets also.”