Last week, The Motley Fool hosted Chipotle
Moran has been co-CEO of the fast-food burrito chain since January 2009, during which time the stock has run up more than 300%. Chipotle makes food based on its "food with integrity" philosophy, which emphasizes locally sourced, sustainable ingredients. With more than 1,000 restaurants selling burritos in the U.S. and Canada, Chipotle is branching out with a new Asian concept -- but don't expect a drive-thru anytime soon.
Steve: What do you expect/hope to come of your new Asian cuisine concept? Is this going to be based on "food with integrity" as well?
Monty Moran: The magic of Chipotle is not tied to burritos and tacos. The magic has to do with great food from sustainable sources, great people who offer a genuine and excellent dining experience, and a great restaurant design that provides a comfortable backdrop for that experience. We believe the model can apply to other cuisines. The Asian concept, which will certainly be based on food with integrity, is our way of testing our belief in that idea. Right now, we plan to open one of these restaurants next year, and we'll see how it goes.
Jack: How do you make your real estate decisions in terms of specific locations? Do you use local brokers or just go by demographics? I have seen good food ideas in lots of bad places because of issues as simple as poor ingress or egress even though demographics for the area are strong. Have you ever had to close a location because of performance that may have been related to the local real estate decision?
Moran: Real estate selection is vitally important. We look for locations based on all of the variables you mentioned, Jack: demographics, traffic counts, daytime (workers) population, residential or nighttime populations, and so on. But we also look for locations where we believe we can properly express the Chipotle design and trade dress as we think design is a critical component of our brand. It's been a long time since we have closed a location, but we have closed four (in California) in about 2003, and those were based on poor real estate selection on the front end. However, if I had it to do again, we would not have closed any of those four, because the whole market of California had sales increases nearing 50% of same-store sales the following year, and California has been on a tear ever since!
Moderator: How is breakfast going at the Dulles (Virginia) Airport location? Are there plans to begin serving breakfast at other locations?
Moran: We serve breakfast at the Dulles Airport location because the landlord required it to get that space, so we thought it was a good opportunity to test a breakfast menu. So far, we're pleased with how it's going. We're keeping it very simple, adding eggs, potatoes, chorizo, and customers seem to like it. We don't have any plans to expand breakfast at this time, but we do believe it might provide an opportunity for us down the road. What we're most pleased with is that we've been able to keep the breakfast offering so simple that it didn't require significant changes to labor or operations, and didn't complicate things for our customers.
Analyst: Does McDonald's
Moran: No. None whatsoever.
In 2006, McDonald's sold its interest in Chipotle. But it's important to understand that McDonald's involvement in Chipotle was limited to that of an investor. Throughout our relationship with them, Chipotle continued to run independently and autonomously based on our vision and values. Nonetheless, we got some good people from the McDonald's organization.
Matt S.: Monty, when you're not eating at Chipotle, or there's no Chipotle nearby, what other "fast casual" restaurants would you seek out?
Moran: I'm seldom someplace where there isn't a Chipotle, so this isn't something I run into often.
When I'm in that situation, I generally look for restaurants that select great ingredients and prepare them with respect. In terms of chains, the Houston's chain is my favorite. They select high-quality ingredients, prepare them carefully and consistently, and have terrific customer service. Unfortunately, it's a small chain and they're harder to find and more expensive than fast-casual restaurants. Often I'll go by Whole Foods and get something from the prepared foods section. No one else in our category is doing anything particularly special in terms of ingredient selection and all of that, and that makes me drive the extra mile to get to Chipotle more often than not!
Chris Patovisti: Any idea on estimated percentage of customers who are ordering via the mobile application? Are you seeing any trends, opportunities or envision other developments in this area?
Moran: I don't know the percentage exactly. The app is certainly popular among many of our customers (it's been downloaded about 1 million times), but it only accounts for a small percentage of orders (low single digits).
As the economy improves, we are seeing more online, fax, and mobile orders as people get back to work and maybe more inclined to order for a group at work.
Chipotle Mexican Grill is a Motley Fool Rule Breakers selection. Chipotle Mexican Grill is a Motley Fool Hidden Gems pick. The Fool owns shares of Chipotle Mexican Grill. The Motley Fool has a disclosure policy.