Burrito Goes Gourmet
Chipotle combines organic ingredients and unique floorplans for a fresh, fast-casual concept.

Before there was a burrito joint on every corner, Chipotle Founder and CEO Steve Ells got the idea for his taco/burrito concept from the hole-in-the-wall taquerias of San Francisco’s Mission District. A graduate of the Culinary Institute of America in Hyde Park and former chef at Stars, a renowned San Francisco restaurant, Ells decided to put his own spin on the concept with Chipotle (which is a smoked jalapeno pepper), combining his classical French cooking skills with fresh ingredients to create a very gourmet burrito and taco enterprise.

Ells borrowed money from his father and opened his first Chipotle location near the University of Denver 11 years ago. But Chipotle’s growth really started between 1993 and 1997, when Ells opened 12 new stores. Aggressive growth came in 1998, when the privately held company partnered with McDonald’s as an investor; McDonald’s now owns 90 percent of the chain.

“We’re very autonomous in what we do and how we do it and in our whole management structure,” notes Rex Jones, director of real estate for Chipotle. “McDonald’s has been, and still is, a very good partner.”

Like some of the other booming quick-serve burrito chains, at Chipotle, customers select their own ingredients for a custom-built burrito or taco. What’s different is the food, which is kept fresh and simple. Chipotle uses fresh chopped herbs, instead of dried; it makes fresh guacamole daily and makes its own chips and taco shells. The company searches for the highest quality organic vegetables, beans and cheeses and is already using free-range naturally raised pork in its tacos and burritos. Ells hopes to see naturally raised chicken and beef as well in all 375 of his restaurants.

Chipotle is currently opening a little more than 100 restaurants a year around the country and hopes to reach 400 by the end of the year. The chain has stores in 21 states, plus Washington D.C., and is opening in one or two new states each year. Currently, Chipotle restaurants have hit every major market, with the exception of Boston, Philadelphia, St. Louis and the Carolinas, which will likely be targeted in the next year or so. The company recently opened its seventh store in New York City and is currently working deals in Miami and Detroit for early to mid-2005 openings.

Although no two Chipotle restaurants are alike, employees call the design “Cantina Moderne,” with common materials, like birchwood, stainless steel and barn metal, used in unconventional ways.

“You’ll see the same palate of materials and design elements in every location,” says Jones. “But like our food, we’ve taken simple ingredients and assembled them to create something very unique and unusual for each location to fit in with the architecture and the theme of the building.”

Restaurants average around 2,500 square feet and can be designed to work in an endcap, freestanding location or urban storefront.

“We’re really not locked into a certain type of real estate,” says Jones. “Our design group is very creative; we can take any kind of building in the context where it sits, whether it’s urban, historic or a brand new strip center, and design a location that fits well and blends in with the architecture and the surrounding environment. So we’re very lucky that our store type is broad and allows us a lot more flexibility in where we go and how we enter markets.”

Seven out of 375 Chipotle restaurants have been tested for franchising, but right now the plan is to focus solely on company-owned growth.

Availability of prime real estate is always one of the biggest challenges, says Jones. “We are competing not just with the quick-casual and fast-food restaurants, but with the copy users, cellular phone shops and banks that are very aggressive and looking for the same real estate. But now that we’re national in scale and getting a lot of great press and rave reviews from food critics in our markets, it builds awareness with landlords, and we’re becoming the first choice for a lot of landlords. It’s just taken a few years to get to that awareness level and preference level.” 

And that awareness has paid off. According to Technomic, a Chicago-based restaurant consultancy, Chipotle’s 2003 revenues were estimated at $321 million, and its comps were at 24 percent. Beyond the fresh and organic food, much of the company’s success can be attributed to Chipotle’s clean and unique designs, says Jones.

“We do what we can to work with centers and developers to fit in with their centers,” he says. “We have a very clean, upscale look, and we’re the quick-casual concept that has had the most amazing success financially and is bringing customers that these centers have never had before. There are no two restaurants alike, and landlords love that because it’s their own.”

— Susan H. Fishman