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Hello and welcome to How I Built This Lab. I'm Guy Raz. So this is the place where we tell the stories of companies that are working on big, world-changing ideas. And it's also where we bring back previous How I Built This guests for an update.
Steve Ells was first on the show way back in 2017 and at the time he told the story of how he built Chipotle from a single restaurant in Denver to a massive chain that really changed the restaurant industry and kind of created this whole concept of fast casual dining.
It's actually an amazing episode and if you haven't heard it, I definitely recommend that you go back in your podcast feed and give it a listen. But we invited Steve to come back on the show this week because he's now working on a new concept that he also believes could revolutionize the industry.
Essentially, it's a chain of very small, highly automated restaurants that will serve a vegan menu. It's called Colonel, and he's planning to open the first locations in New York City very soon. And when we left off with Steve back in 2017, Chipotle was dealing with a pretty major crisis. A string of foodborne illness outbreaks had caused some customers to get sick.
And things got so bad that Steve would actually end up stepping down from his role as CEO of the chain that he started back in 1993.
When the foodborne illness issues were going on, I mean, this was some of our toughest, toughest times at Chipotle. And coming off of extraordinary success and kind of nothing but success, it's quite a shock. It's quite a slap in the face. And when people are getting ill from what you're feeding them, you take that very personally. It's nothing you want to see happen.
And so you're only thinking about how to solve the problem. What caused the problem? How can we make sure it never happens again? How can we make sure that Chipotle will be the safest place for people to eat? So that's what's on your mind, not thinking about my position.
However, after we got through reinventing our safety protocols and making sure that we were putting the best practices in place, it was taking a while for sales to come back. The public was wary and I can't blame them.
For so long we had promised food with integrity and and then something like this happened. So I knew You know, it was pretty obvious to me that we needed to jumpstart The company and and new leadership is one of the things that that needs to be part of that. Yeah Steve the last time we talked this is in the fall of 2017 And I guess at the time you were you were already having conversations about your future as the CEO of Chipotle
I think just about a month after that interview aired in November of 2017, you stepped down as CEO and you became Executive Chairman. Everything I've read about your statements, you are super supportive of Brian Nickel who took over and very gracious, but from a personal perspective, like from the Steve Ells as the guy who
saw mission burritos in San Francisco and the steaming plates of beans to the guy who starts this restaurant in Denver and then scales it, how did it feel to stop running it? That process is gut wrenching to have a loud, under your watch, a foodborne illness is not easy.
Looking in the mirror and knowing that having new leadership to restart the brand, it's the right decision. These are not easy things to have to face. All said and done, after doing it for, at that time it would have been 25 years.
having someone else come in to take the CEO position is a sense of relief, really. I'm not going to say it was easy because it wasn't. And when I handed it over to Brian, I felt comfort in his ability to rebuild the team, to build excitement about
the safety protocols, the new procedures, and also his way of speaking to the public and gaining confidence through great communications. So he did a fantastic job, but sitting on the board as executive chairman, it's not what I do. I mean, it was a fine job, but it's not what energizes me. And so I took the opportunity to retire and think about what was next.
You stepped down officially. I was announced right as the pandemic was unfolding in March of 2020 as executive chairman. And when you stepped down, did you have a sense of what you wanted to do next? Did you kind of have an idea in your mind of what where you would go?
I didn't. I remember a few times, these big transitions in my life. After college deciding to go to cooking school, I said, Dad, I want to go to cooking school. I said, well, are you going to be a chef? I said, no, I'm really interested in cooking. I think I'd have a lot of fun. I think I'd learn a lot.
Maybe that's risky. Maybe decide what you want to do first. I remember working at STARS and telling my dad, hey, I'm going to leave. I'm going to go start this burrito place. I'm going to move back to Colorado and do it. He's like, oh.
Tell me what does the plan look like. I said, I don't really know yet. I just have this hunch. And so I'm not afraid to try new things without having a full plan in place. The change just felt like it was going to be right. I knew that I needed to do something different. I just didn't know what.
So what did you, I mean, during the pandemic, did you kind of hunker down and just start to think? So it was in the winter. So I was in Colorado and I was skiing a lot, but also reading and spending time with friends and family and
One of the things that I read was Bill Gates, how to avoid a climate disaster, and what struck me was this scientific consensus that if we don't address the amount of greenhouse gases we're emitting and bring them down to zero by 2050 that we go over the tipping point.
Those are exactly the numbers. I think conceptually it's right that we have a long way to go to reduce our greenhouse gases so that we're not affecting negatively our planet. And I thought, well, what could I do about it? And I come to understand that 25% or 30% or so of the greenhouse gases that we emit come from what we eat. And the vast majority of that comes from animal sources.
So I thought, well, what if I started a plant-based restaurant? Might that help? And, of course, if I start a plant-based restaurant, that's really not going to move the needle. But I thought, well, what if it's a chain the size of Chipotle? Might that help? And I'm still probably not. These are big problems that we have.
And so I thought, well, what if everybody copied this restaurant like they copied the Chipotle model? Might that do something? And I thought, well, quite possibly. And so why not give it a shot? When you were sort of experimenting with this, I'm assuming that when you left Chipotle, you couldn't open another chain of Mexican restaurants. But it was OK for you to get back into the food business.
Oh yeah, no, I was speaking with Chipotle. Of course, I have a non-compete in place. But I asked them, I said, well, what do you think if I started a plant-based restaurant, have nothing to do with Chipotle or the fast casual format, certainly something completely different. And they said it would be fine to open a handful of restaurants.
And so you thought, OK, a plant-based restaurant. There have been some attempts to do this. I think even in Washington, DC, Jose Andres has a plant-based, fast, casual place. When you start to think about it, what were you thinking like this will be like plant-based, fast food kind of restaurant?
So I don't really like categories. I never really liked the categories that people threw at Chipotle. But I wanted to create a menu that people felt good about eating every day. So the name of this restaurant is Colonel and we have two sandwiches. One sort of like an engineered patty that's meant to taste like chicken. It's like it's a fried chicken sandwich that's
not chicken, but tastes every bit as much of like a fried chicken sandwich. And then that we have the kernel burger, which is grains and legumes. But we also have two big salads. We have a kale Caesar that's, of course, plant-based. And we have a salad of chickeries with white bean and chickpea schmear and lentils and a mustard vinaigrette. We have some sides that are not typical for fast food. Of course, we have crispy potatoes.
But we also have roasted carrots and the carrots have a green hummus and spicy toasted almonds. We have roasted beets with quinoa and a salsa verde and a seed crunch. So we take a bunch of different seeds and make like a savory granola. And lastly for the vegetables, we have a crispy cucumbers with chili jam and roasted cashews.
When some people think about these plant-based menus, they think about these highly processed items that are meant to taste like meat. Yes, we have one chicken sandwich that's meant to taste like chicken, but most of the menu is whole grains, legumes, vegetables. This is why my big question is about
Obviously, you were inspired to do this because you want to do something that has a net positive benefit or impact on the planet. But why do you think that this kind of food will work? I'm a huge fan of this food. I love vegan food and I mostly eat a vegan diet. But I wonder, I mean, you know, I here in California, the line to In-N-Out Burger from 11 a.m. to 2 a.m. is
always long. There's always people there. Five guys, burger joints, taco plates, chipotle. Probably the vast majority of people eat chipotle are still ordering the meat proteins.
Why do you think that a vegan concept like this is going to appeal in scale? I don't adhere to a plant-based diet. I still eat meat. I still eat fish. But I've noticed over the years, I eat less and less meat. And when I find really great plant-based options, I find myself drawn to them.
And I notice a lot of people are acting in a similar way. And I think people choose more plant-based options for a number of reasons. Some people understand that there's an environmental implication. Some people care about animal welfare issues. Other people think that
Plant-based menus offer a better health. And for me, it's probably all of those things personally. And I think I'm not alone. I think people will eat more plant-based diets and make that part of their life if there are better options. And if we offer something that's really compelling, that's really delicious, that's something that you want to eat often, I think this could be a wildly successful business.
We're gonna take a quick break, but when we come back, how Steve Els is using robots to rethink the entire restaurant experience. That's just a moment, stay with us. You're listening to How I Built This Lab.
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Welcome back to How I Built This Lab. I'm Guy Ros, and I'm talking with Steve Ells, the founder of Chipotle, and now a new restaurant concept called Colonel. Okay, so you come up with this plant-based menu, and that's one way that Colonel's gonna be different from like a typical fast food or casual restaurant. But I understand that you're also planning to operate these locations, these Colonel locations in a different way. Can you tell me a little bit about that? Like, how is Colonel gonna be
run differently than a typical restaurant. So the main difference is that it's based on a hub and spoke model. So one of the most difficult parts of making a great meal is the prep. And what we've decided to do at Colonel is centralize the prep.
So we do all of our preparation, all of the food prep in a central kitchen. And that will service a couple of handfuls of restaurants within a five to ten minute bicycle ride. And we'll put this prepped food into totes and load the totes onto a wagon and pull them by bicycle to the restaurants every hour.
So when the restaurant receives their tote, they load the prep food into the system. When you guy want to order food at Colonel, you take out your device and you go through our app or our web app and see the offerings and decide what you want.
Do the little double click and pay and agree upon a time to pick it up or have it delivered. And the system takes it from there. The system knows what time it needs to start cooking the food, what time it needs to start toasting the buns, and then hands that to the second person who puts that all together for you.
and then hands that off to a person who bundles and puts the items in a bag and places them in a cubby. And so where a typical fast casual restaurant might have a dozen folks at peak period, Colonel would have three. When you come into the restaurant, you unlock your cubby with your SMS and off you go.
So this concept, I guess, is to completely reinvent our relationship with restaurants. Essentially, that it is going to be delivered exactly on time, and it's going to be hot because we're picking it up. It's ready exactly when we pick it up, and much of it will be automated. Each of these kernel locations will only need three humans to operate them.
Exactly. So we've taken a lot of what I'll call the waste out of the experience. And so if you think about all of the energy that's expended in a typical restaurant, and you just sort of study all the extra steps and the power and the space, it's extraordinary. So for instance, customers will not walk into the restaurant
look at a menu board, talk to somebody behind a counter, place their order, hand them a credit card or cash and have a POS transaction because there is no menu board. There is no counter. There is no person behind the counter. There is no POS.
All of that takes place on your device before you even go into the restaurant. And you go into the restaurant only when your order is ready. And you'll know precisely when your order is ready. Your app will tell you. We also operate out of a much smaller footprint. We can operate out of 800 square feet, where a typical fast casual might be 2,500 square feet. And our build out cost is a lot less.
A typical fast casual restaurant will have a grease hood, fire suppression systems, gas lines, grease traps, all of these sort of infrastructure pieces. We don't need any of that.
So my question I'm still wondering about is why do you need the hub and spoke model like why can't you just make all of the food like you know like McDonald's does for example in one central location and send everything frozen to each location and just keep it in a freezer.
What is special about the Chipotle model or the fast casual model is that a lot of the food prep is done at the individual restaurants. Yeah. And so before that, in typical fast food restaurants, the food would come in highly processed or frozen. The new fast casual model has allowed fresh ingredients to come into restaurants and are prepared on site.
Well, we're doing the same thing except in a central kitchen that's only a few minutes away from the restaurants. And what's exciting about this model is that you can really focus on the central kitchen doing prep all day long.
If you look at the most vast casual restaurants, prep will be done before lunch, and then you stop and you switch over to lunch rush, and then after lunch you go back to prep, and then you go back to cooking again for the dinner rush. With the kernel model, prep is done all day long, so you're constantly producing freshly prepared vegetables, patties, buns, everything that the restaurant needs, and you're delivering them
frequently we'll open with a cadence of about a delivery every hour.
All right. So you mentioned that it's going to take just three people working in each of these restaurants at a time and a lot of automation. So let me, let me see if I understand this, because I think that what's talking about is robotics, right? And I've read a little bit about it. And I guess there's going to be like a robotic arm and an electric oven that's automated that actually does a lot of the cooking. So what was, was that equipment that you were like, did you just find it off the shelf or, or was that equipment that you had to
that had to be custom-made. What I knew I wanted to do was have a team that was smaller than the typical restaurant team. How do you reduce the number of people from, let's say, a dozen down to three? There's a lot of automation. There is robotics. You order from a digital environment instead of a person-to-person environment.
The equipment varies. So the robot arm, we didn't develop that. We bought an off-the-shelf KUKA robot. It's a robot that's typically used on assembly lines. They work 24-7 for years. They're very reliable. Of course, we custom program that.
We use an impingement oven that we took and modified. We have special pans that we custom made that go into the oven, and a special way that the robot arm engages with those pans. But a lot of the equipment is off the shelf. It's just used
In a novel way so if you look at the equipment you might recognize some things, but some things for sure are custom. Tell me about, because this model, if this works and I don't see why it wouldn't, I think you're going to open up the first location in the fall of 2023 and I read that plans are to have like,
15 locations within the next two years. Imagine that the ambitions are big here. Well, yes. We will go fast. The operating platform has been working now for well over a year. We're now in the process of building the final version of it. I expect that we will open up and it will be highly reliable.
I think that we will learn, though, as we observe it in the first few months, and almost for sure we will tweak it before the second restaurant opens. I see over the next couple of years, as we build out 15 restaurants, we will continue to refine the system. I think we will be able to operate out of a smaller footprint.
and increase the number of items that we can make in a given time, but for sure the first restaurant, the platform works, it works well, and it's just very exciting to watch.
I mean, the idea of opening a restaurant with no grease hoods or grease traps, no ventilation, no deep fryers, that's very appealing because that is a huge challenge for many people who want open restaurants.
the barriers to entry are high when you can't bring all those things in. They're expensive. I'm curious. Do you see this model? Do you see it being replicated by other like the Chipotle model was replicated? Do you see that as part of your business, like maybe even licensing the technology?
Well, I think that's exactly it, Guy. When people come in to look at the system, I think they will notice that there are fewer people working in the restaurant. They'll notice the efficiencies. They'll notice the reduced square footage. They'll notice that it probably is a much lower investment than a typical restaurant. And so people will be interested in copying or borrowing that model.
I think an opportunity, though, it would be to license this platform or parts of the platform to others for cheaper than they could build it themselves. It's interesting. I wonder in terms of the cost, the startup cost, I'm curious about it. Like the other day, I always had a William Sonoma.
And I was eyeing this beautiful espresso machine and it was like $4,000. I'm not gonna buy it. But I was like, how many cups of coffee do I have to buy for this to pay off? And actually you can do the math and you can figure it out and say, you know, in a couple of years, not going to Starbucks, this thing's gonna pay itself off. So just applying that principle to this restaurant. Or, I mean, if you had a restaurant with a grease, you know, trap and the hood and all that stuff and you had like five or six employees,
You could get that up and running but to have this restaurant with the special oven and the technology and only three employees is are the startup costs just the initial costs higher to get it off the ground or or not well, you know, I have spent a good amount of money and I just completed my series a round and raised 36 million and so so you know that'll take us through the next couple of years and and that will be a lot to open up and
15 restaurants. The investment cost in these individual restaurants, though, is much less than a typical fast casual restaurant. Wow. So there is a lot that has gone into developing the technology, but the actual amount that you spend to open one of these units is substantially less than a typical fast casual restaurant.
So you could apply the same model to any kind of food, essentially. Well, I wouldn't say any kind of food. I couldn't see our system making spaghetti bolognese today. Right. Like grab-and-go food, I mean, for example.
Well, there are some things that I think it could do very well. There are others that it probably can't do yet. But for sure, there's no question that robotics will have a lot more dexterity and they will be a lot easier to program. And through AI, they will learn and get better.
And so what we've done is we've developed a platform and a format that will allow us to avail ourselves of the new technology and sort of plug it in to what we've already created. And I think a legacy restaurant might have a harder time doing that or might not gain as much advantage of the new technology coming out. And so I think it's exciting for people to come in and be involved in something that has this kind of technology.
We're going to take another quick break, but just ahead, more from Steve Ells on the future of food service. Stay with us. You're listening to How I Built This Lab.
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Welcome back to how I built this lab. My guest is Steve Ells, the founder of Chipotle, and now a new, highly automated vegan restaurant called Colonel.
So one of the things, there've been a few articles about what you're doing, but not much information yet because it's still, I guess, in sort of stealth mode. But one of the things that I've read that I think is very interesting is you suggested that the current system, the current model of the fast food or fast casualty in the restaurant industry is broken. And if you think that this is the case, I think you're right. You can see this with
Restaurants are struggling to find employees. Employees are struggling. Many people don't want to work in the space. The pay is low or can be low. And some restaurants have to, like in San Francisco, pay a lot because the cost of living is so high. Is this, in a sense, also an attempt to kind of address that sort of broken labor system within restaurants?
wanted to be able to have an experience for the team that is better than the typical fast food experience. One of the problems is that we see extraordinarily high turnover in the industry. I think it's something like 165% is typical.
The folks are never there long enough to get really good at their jobs. I think the manager who has probably a team of 40 people, if they have lunch and dinner shifts of a dozen, this is hard for someone to manage a team of 40 people.
I'm excited about having these very, very small teams. So if we need three people at a shift, maybe we have a team of eight, maybe nine, and you can really pay attention and mentor and train. And it's also different work. I mean, yes, they're cooking. Yes, it's a restaurant.
But there's a lot of technology and understanding that technology and caring for that technology, maintaining the technology. It's sort of an elevated position. It's going to take a lot of training and will command higher wages. And since we only have three people, we'll be able to afford those higher wages.
Plus, I think our purpose is bigger than our product, being able to address global warming, being able to address some of the inequality with pay for folks in the world of fast food and restaurants in general, to be able to pay them much higher wages and give them full benefits, give them vacation time, give them predictable schedules, give them stock option programs so that they can
participate in the upside of the venture. This is all very, very exciting, and it's much more doable when you have smaller teams that you can really mentor and pay a lot of attention to. I'm curious, Steve, I'm sure you've seen this at San Francisco Airport. I'm sure a lot of people who've been to the airport have seen it, but there's a fully automated barista there, and I think there's another one in the city.
In fact, I saw a fully automated cotton candy machine recently, which was absolutely amazing because it shapes the cotton candy in different shapes. It's incredible. It seems like just a few more steps, this can be entirely automated, that you wouldn't need any humans involved. Well, I think that it's certainly possible in the future, but I think we're many, many, many, many years away from that.
How technology evolves with robotics and eventually how much dexterity these robots can have, I'm not sure. But I think there will always be a place for our teams to operate the kernel model for the foreseeable future. And I'm talking about the next decade at least.
I just want to make sure that we're creating a system that has the potential to create a really great work environment and reward our folks appropriately. I think that's tough with some of the current fast food models out there. I think you see depressed wages because margins are so tight.
And I think these operators would love to pay their folks more, but the model just can't afford to do it.
Over the last 20 years, we've become more and more used to fewer and fewer human-to-human interactions, right? Like we order stuff through Amazon, or we get our food delivered through DoorDash, and, you know, it just kind of happens. And for many people, that's better. It's a better option. But there are still lots of people who do like that face-to-face interaction. You go into a Chick-fil-A, and they're famously extremely friendly, same with In-N-Out. It's part of their training.
You will not encounter human at Colonel, right? You will go in and there will be no sort of human face. And so is there, how do you create a sense of warmth, a feeling of hospitality, welcome, without the human? What are you doing to kind of, I don't know?
bring that sensibility in. A lot of people ask me this question and ask me if it's ultimately a good thing. We'll have to see how it unfolds. I know for sure that continuing to operate these systems that's heavy, heavy, heavy on numbers of employees who turn over very frequently
Is not sustainable it says to me that people don't want those particular jobs under those conditions with with that pay and so it takes reinventing the system to do that. I think.
craving human interaction is not going to go away. I think we might get it in different places, but I see a necessity to create an economic model for serving this food. And that solves some problems.
There's always going to be a place, I think, for the kind of human interaction that you describe, it will probably just be different. When will you know? You're talking about 15 restaurants over the next two years. Obviously, your metrics are going to be your sales, but what other metrics are you going to be looking for to see whether this is working?
Well, we will know a lot about our customers and their habits and their frequency and hopefully how they felt about their experience because of our connectivity to them through the app. Success to me means that they love the food, that they tell all their friends about it, that they come often.
If that happens, we know we're in a very good position. Success also means that enough people are coming and we have the volumes to achieve the sales levels that we're predicting. I think if we have those two things, we're off to the races. Right now, you're starting in New York, which is where you live. Do you have a plan of where you want to expand next or will you wait and see what happens in New York first?
I really like to focus on the problem at hand and that is over the next two years really refine the system. I think if we have the sales volume and the customer affinity to prove that the brand is a success, then we go to new markets. And yes, there are markets that have the right kinds of densities and they're close enough to us and there'll be a natural expansion program. Steve, how have you changed as a leader?
from the time you ran Chipotle to this. I mean, what are you doing differently, maybe better, that you didn't do there or that you learned from there that you're applying to here?
So Chipotle was 30 years old this summer. And so if I think about my leadership style 30 years ago and what it is today, I mean, it's much, much different. You know, thankfully I've learned from
My mistakes learn from other people who are terrific leaders. And I think the way I'm opening kernels today is much different than I opened Chipotle 30 years ago.
There are some similarities, though. I have a very strong vision for sort of the foundational principles, and those will be really great ingredients, solid cooking techniques, and building teams that believe in our purpose and love to provide great hospitality. And while hospitality may not be face to face,
With the customers, it's providing a really good experience through the app. It's providing reliability on service times. It's making sure that everything that we serve is delicious. And so, foundationally, I think I'll operate in a very similar way.
But the team that I'm putting in place today is really a team that's so expert and ready to take this to the next level. And I didn't initially build Chipotle with that kind of team.
Steve, your legacy as a pioneer in this space is solidified. I mean, so many people have replicated the model of Chipotle, and it's a great restaurant. I probably, my family probably eats there a few times a month. It's my kid's favorite place to eat. But I wonder, I mean, you left Chipotle, great reputation, wealthy, you did very well.
Why are you doing this? I'm curious what motivates you now. You don't need the money. You don't need the reputational push. You don't need the legacy side. What is it that gets you going about doing this? Why?
Well, it's not an easy question to answer. I've been around restaurants my entire life, and I see why there is high turnover. I see why certain restaurants serve certain kinds of food. I think Colonel could be a platform that perhaps solves some fundamental problems.
And it's really hard. But this problem is fun to solve. And the team that I've put together, they're so smart. And it's been really great to see how they have been addressing some of these challenges that we have. I have fun doing this.
But I also have always loved serving people, like literally serving food. I mean, I used to love to throw dinner parties in high school, in college. And of course, then when I graduate to college, I go into the restaurant business to serve food. So this idea of serving is sort of part of who I am. I think Colonel is just an extension of that, but just in a different way.
I also like to challenge the system. I don't think there's been a lot of innovation in restaurants over the generations. We pretty much have the same kind of equipment, the same kinds of kitchens, the same kinds of cooking techniques. So I think by reinventing it, I don't know, it's exciting. And I think a lot of good could come out of it.
That's Steve Ells, founder of Chipotle, and now, Colonel. By the way, I wasn't kidding when I said that Chipotle is my kid's favorite place to eat. We were actually in Paris earlier this year on vacation, where the greatest food cities on the planet. Can you know where they ate? That's right. They got burritos at Chipotle in Paris.
Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast apps that you never miss a new episode of the show. And as always, it's totally free. This episode was produced by Chris Messini with editing by John Isabella. Our music was composed by Romtine Arab-Louis. Our audio engineer was Neil Rauch, our production team and how I built this includes Alex Chung, Casey Herman, Carla Estavez, JC Howard, Carrie Thompson,
I'm Guy Raz, and you've been listening to How I Built This.
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