“How I Built It” with Chipotle’s Steve Ells

Steve Ells opened the first Chipotle Mexican Grill in Denver in 1993, in a converted ice-cream parlour next to the University of Denver, on the back of an eighty-five-thousand-dollar loan from his father. The original concept had been to use Chipotle as a cash generator that would fund his real ambition — a fine-dining restaurant in the same neighbourhood. The cash generator outperformed the ambition. Across the next twenty-five years Ells built Chipotle into a publicly listed company with more than two thousand restaurants, on the basis of a small set of operating decisions taken in the first decade that the practice has often pointed clients toward as a case in capital-conservative growth.

Ells, interviewed by Guy Raz for NPR’s How I Built This in 2017, described the original site selection and production-format decisions in the following terms:

> Well, it was very, very efficient. First of all, the investment cost was very low. And, you know, typical fast food, at the time, had to have room for a drive-through. They were usually freestanding. And so all of that required a sizable investment. With Chipotle, we were going into strip malls — often in the inexpensive centre units, not the more desirable end caps. This was early on. So the investment was very, very modest. And our production system, or our service format, really was an assembly line.

Three Lean-relevant decisions are visible in that single passage.

The site-selection discipline was a deliberate refusal of the conventional quick-service strategy of freestanding, drive-through-equipped buildings on prominent corner sites. Ells took the inexpensive centre units of strip malls — what real-estate agents tried not to lease, what other quick-service brands would not consider — and ran them on rents and build-out costs that produced a unit economics three or four times better than the competition. Creativity before capital, the practice’s own framing, would describe what Ells did very directly.

The production format — the Chipotle line, which the customer walks down while assembling their order — is one of the few American quick-service formats designed for flow rather than batching. The customer is the takt-time signal; the line operates at the rate the customer arrives, and the order is built once, in the customer’s presence, with no kitchen-to-counter handoff. The format predates Chipotle by some years (the cafeteria line is older than fast food itself), but Chipotle was unusually disciplined about preserving it as the brand grew.

The discipline broke, briefly, in the food-safety crises of 2015 and 2016, and Ells stepped down as chief executive in 2018. The operating template he built remains one of the cleaner examples of capital-conservative growth in the recent restaurant industry.

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