Brian Niccol CEO Of Chipotle Talks Outlook In The Restaurant Space

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CNBC Transcript: CNBC’s Kate Rogers Interviews Chipotle Mexican Grill CEO Brian Niccol From The CNBC Evolve Conference In Los Angeles Today

WHEN: Today, Tuesday, November 19th

Following is the unofficial transcript of an on-stage CNBC interview with Chipotle Mexican Grill CEO Brian Niccol live from the CNBC Evolve conference in Los Angeles on Tuesday, November 19th.

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Chipotle CEO Brian Niccol on the company's digital growth

Mandatory credit: The CNBC Evolve conference.

TYLER MATHISEN:  Please welcome to the stage, Brian Niccol, the CEO of Chipotle Mexican Grill, and our restaurant and food correspondent, Kate Rogers. Welcome, Brian.  Good to have you.

BRIAN NICCOL:  Thank you.

TYLER MATHISEN:  Kate, good to see you.

KATE ROGERS:  Thank you.  Brian, thank you so much for joining us.

BRIAN NICCOL:  Yeah, great to be here.

KATE ROGERS:  Great to have you here.  So when we first sat down when you got this job, you told me priority number one was to remind people why they love Chipotle, in this new role.  So I'd love for you to kind of explain to the audience, where do you even start?

BRIAN NICCOL:  Sure.  So, obviously Chipotle was founded on a really simple idea, which was give people access to real culinary experiences, real fresh ingredients in a really fast way and in an affordable way; and they had 20-plus years of tremendous success with those simple beliefs and a purpose of getting people access to food with integrity.

Unfortunately, they had some challenges, and the organization became really defensive and I think forgot to keep talking about what made the food unique, what made the brand unique, and what really made the culture and the company unique.  So that's what I meant by saying we've got to get back to talking about why people love it.

One of the biggest challenges sometimes in organizations is internally the organization gets really defensive and stops staying on the offensive and really continuing to move the purpose forward.  We've got a really simple purpose:  Cultivating a better world and bringing people more access to food with integrity.  So, that gets people excited when they realize that's what we're all about.

KATE ROGERS:  You also took over for a founder CEO in Steve Ells.  That can sometimes be a challenging thing to do --


KATE ROGERS:  -- as the new person coming in.  What tips do you have for someone who is in a similar situation?  How did you go about navigating that?

BRIAN NICCOL:  Sure.  Well, so Steve came up with this idea.  He was a classically trained chef.  And, actually, the first Chipotle he opened, the reason why he opened it was to raise enough money to open a fine dining restaurant.  Then what he discovered was a lot of people like burritos.  And so --

KATE ROGERS:  More than fine dining.

BRIAN NICCOL:  Yeah, exactly.  And he realized he could probably have a few more Chipotles than fine dining restaurants.  So, one of the things that's great is Steve has got the history.  You know, he worked in the very first restaurant and the first couple restaurants where he was braising the meats.  He went out and bought the plywood to make the counters.  So it's great to have somebody with that much passion and commitment to, really, the brand and the company to be at your access.  So it's been good.  He didn't want to be the CEO anymore, so it worked out well.  But, you know, it's great to still have him on the board and have him be as an access point or resource when you need him.

KATE ROGERS:  A big focus under your tenure here has been accessibility and making sure that people can access Chipotle and making sure the restaurant kind of meets them where they want to be.  A lot of that has been digital growth.  We will talk about that.  But what has been the plan for expanding accessibility?  And how did you come in and kind of decide where the restaurant needed to be and what avenues you would be bringing people this accessibility?

BRIAN NICCOL:  Yeah, so one of the things you quickly realize with Chipotle is one of the biggest complaints we have from our customers is there isn't a Chipotle near them.  They wanted to have more access in general.  So the good news is, we continue to build a lot of restaurants.  This year we'll build probably 140-plus restaurants; next year we'll build more than that.  One of the things we also realized is in our restaurants, I get this question a lot:  What do you think of dark kitchens?

One of the things I point out to everybody is that I have 2500 dark kitchens, because, actually we have a second line in the back of the restaurant that was actually created 20 years ago for fax orders and catering.  And, you know, the good news is, we took out the last fax machine about a month ago because we now have a business that's very much off-premise and coming through digital.  But that whole thing comes into our second food line.  So we literally staff that with our employees to make burritos and bowls on demand when these orders come in.  And then we use technology to queue all those orders.

So when you go onto your app right now, we will slot a time for you.  If you say I want to pick up my food at 12, we then queue it into the system so that our team members don't make the food until 11:55.  You walk in, your food's right there, you walk out, and off you go.  And then most recently we've just now added -- because apparently that wasn't fast enough, we added the ability for people to not have to get out of their cars.  So we now have a pick-up window where you can literally just pull up.

Again, you've got your dedicated time.  You show up at 12:00, say your name through the window, we hand your food out the window, and you go.  I just saw statistics on this.  It takes us all of 12 seconds to get you your food when you pull up in your car, because you've already paid in advance, you've already made the whole order.  So we've given people exactly what they want; more access and faster access.  That's worked really well for us.

KATE ROGERS:  So a big part of that has been digital growth.  You saw it in the video.  88 percent this past quarter, the two quarters before that I think it was at or close to 100 percent.

BRIAN NICCOL:  100 percent, yeah.

KATE ROGERS:  I mean, talk us through the digital strategy.  When you came in, we mentioned accessibility.  But how do you even begin to really build out a program that's not only successful, but really resonates with consumers and hits all the notes that they are looking for?

BRIAN NICCOL:  Yeah, look, one of the first things we did was invested into the restaurant to build the capability.  We were already taking digital orders, but it was on a ticket system.  So what was happening is our team members would have to remember to make the food, and they would move this ticket all through the restaurant; whether it was off of our second line or the front line.  The problem is, when it goes to the front line, it gets in the way of our customers that come into the restaurant, right?  We've all experienced that, where you walk into a place, you're waiting for your food and a bunch of food keeps coming out, and you're like, wait a second.  I'm here, I thought my food would come out at some point.


CHIPOTLE CEO BRIAN NICCOL:  So we had to invest in the restaurant to give the system the ability for our team members to not have to make that choice.  I literally caught it.  There was this moment of awkwardness, where you would order in advance, you walk into the restaurant, you would come up to the cashier, the woman at cash didn't want to make eye contact with you because she wanted to serve the person coming down this way.  The person coming into the restaurant didn't want to cut in front of the line because they felt like there's all these people in line, how do I just cut in front of them?  So we eliminated all that by putting in pick-up shelves, and then --

KATE ROGERS:  The Chipotlanes, as well.

BRIAN NICCOL:  And then we added Chipotlanes most recently, so now you don't have to come into the restaurant.  We really did try to invest in a digital system.  We also created a rewards program, which we now have currency to incentivize people to access Chipotle in different ways.  It's worked really well.  Not surprising, young people really love it.

KATE ROGERS:  Love not talking to anyone, not having to interact with anyone?

BRIAN NICCOL:  Yeah, yeah I know.  I have --

KATE ROGERS:  I may fall into that category.

BRIAN NICCOL:  I have a teenager, and I constantly tell her to get her head out of the phone.  But you've got to meet them sometimes on their needs and wants as well.

KATE ROGERS:  A lot of high expectations around the company.  You heard Jim Cramer say the stock could go to 1,000.  I now you probably don't pay too much attention to the stock, right?

BRIAN NICCOL:  Well, that's nice to hear.

KATE ROGERS:  I would love to know kind of what you think about -- in terms of pressures and challenges and continuing to build on that digital momentum.  There are very high hopes for the company.  You're making and exceeding them.


KATE ROGERS:  What's next?  How do you think about that?

BRIAN NICCOL:  Well, you know, look, one of the things that I should have mentioned right from the beginning is I think one of the things that's really driven these results is we've been able to attract and recruit, I think, some of the best leaders, whether it's operations, technology, marketing, you know, HR, public relations.  And the reason why I start there is great people attract more great people.  And the way I think we ensure that we continue to have success is we have a great culture with great people.


BRIAN NICCOL:  I think one of the things that's terrific about Chipotle is our purpose is very transparent.  It's at the core of who we are.  And as a result, a lot of people want to company work at Chipotle.  And, actually, when I interview a lot of people, by the time I'm interviewing, they've already -- they're experts at whatever specific area they are.  I'm just more interviewing from the standpoint of would I want to talk to this person in the hallway.

If I'm walking down the hallway and I saw this person, do I jump into a conference room to avoid them, or do I say:  Let's chat, and let's hear your ideas for the company. The thing that I love is the company that you keep I think is also an indication of what type of culture you're building.  You know, a lot of other places that people are interested in share our purpose.  You hear them talking a lot about like a Whole Foods or a Trader Joe's --


BRIAN NICCOL:  -- where there's this purpose around the idea of giving people access to whole, nutritious food at affordable prices.  So I think at the end of the day, keeping great talent with great culture is our best course of action to ensure our continued success.

KATE ROGERS:  And the motto is, for anyone who is not familiar, "Food with integrity."  Can you talk us through what that looks like and why you think it resonates not only with customers, but the team that you're building?

BRIAN NICCOL:  Yeah, look, I think this is how people want to eat food.  And the more I have gotten into understanding the supply chain of food in America, I do think we're going to need to change our food culture.  It's just -- it's a reality.  When you -- I've had the opportunity now to go to hog farms and cattle ranches and local farms to big farms, and I think there's just a better way to move farming forward; and frankly, our local farmers are at a crossroads.

You know? We, you know, I think have an obligation to continue to support them.  We have a strong partnership with Niman Ranch, we have a strong partnership with local farmers of America, and the reason why is because I think that ultimately is going to produce I think better environments, meaning the communities that they operate in; the sustainability, the impact on the planet.

But it also results in I think more delicious food, more nutritious food, and that's why people are excited about the idea of food with integrity.  When you actually go out there and see the difference between a hog farm where these animals are pasture raised and living in little A-frames, you feel like you're doing the right thing for the animal, you feel like you're doing the right thing for the farm; and ultimately, you're doing the right thing for I think for our food system.

You know, when you talk to people, they would love to have more access to that type of cuisine; and frankly, if you talk to farmers, they would prefer to farm that way. I think it's something that we'll continue to push.  And the nice thing is this whole fast casual category continues to grow.  And I think it will continue to push the supply chain and food culture in this direction.

KATE ROGERS:  Let's talk a bit about delivery.  You talked about the pickup part of the business, which is growing significantly.  Delivery, I think it's been mentioned a few times, is the fastest growing part of your business.  We've heard from other CEOs in the industry who think what is happening right now is not sustainable, too much competition among all these different players, more regulation coming in.  What do you see as the future of delivery and how does that play into the growth that Chipotle will continue to experience?

BRIAN NICCOL:  Look, delivery is a piece of our off-promise business.  It's not the biggest piece, it is the fastest growing piece.  Look, you know, I think consumers will continue to want delivery, you know?  There's lots of businesses that have proven people would like more things delivered to them than not.

KATE ROGERS:  I know, I pay the 4, 5, 6 dollar fees --

BRIAN NICCOL:  That's right.

KATE ROGERS:  -- depending on what you're getting, right?

BRIAN NICCOL:  Like in our family, we have Amazon --


BRIAN NICCOL:  -- van at the front door five times a day; so, you know, delivery is not going away.  If anything, the category will continue to figure out the profitability.  And the players like Uber Eats and DoorDash and such, I think they will continue to figure out how they get to a place where they can make those transactions profitable.

For us, it's very attractive because we already have a second production line where we make the food, and we do it in a much more efficient way than our front line.  So our most profitable transaction is a digital transaction.  So when you're working from a really healthy economic model and then you add in something like additional access, like delivery, it works economically for us.  The thing I've heard from some of the delivery providers is we're one of the number one requested brands to be delivered, so I think we're helping them grow their business as well.  So it works, but I think it's definitely a fluid system that's going to continue to evolve over time.

KATE ROGERS:  So the environment, obviously, in the fast food space is extremely competitive.  You guys are set to likely be the best performing stock again this year in the sector. How much do you watch what other people are doing?  There's been a slew of new talent in terms of the c-suite with all of these restaurants.  I know since I came onto the beat, it's been about two years, and it feels like just about every company has a new CEO, they all have their own plans.  How much do you listen to the noise, how much do you tune it out?

BRIAN NICCOL:  I think where a lot of the changes have happened, actually, aren't in our category and our way of doing food.  Obviously, I read the news, I'm interested in our industry from top to bottom.  But we're much more focused on how do we continue to grow our food culture around this idea of food with integrity.  I believe if we do that correctly, the fast casual category is still really small, and it's going to continue to grow.  I usually get the question:  Well, aren't you worried about all the competition in fast casual?  I'm like:  Actually, I think it's just the opposite.  I think it's a validation of how people want to eat.

Because, if you look at all the young, start-up restaurant companies, they're in the space of fast casual, which I think is an indication of all the innovation and the youthful approach to restaurants is going to continue to grow our category. And we happen to have a lot more scale than everybody else, with 2500 restaurants.  So, you know, when you compare some of these other concepts, like a Sweet Greens or whatever, they've got 100 restaurants, you know, they can't match our value proposition, to tell you the truth.

And I think what's really interesting about fast casual is, we have quality food, we have speed, we have great value, and we have tremendous customization.  When I went to business school, they kind of told you to pick one of those and you've got potentially a viable proposition.  The fact that we've got all four, I think is just an indication of why this category is going to continue to grow aggressively, and I think Chipotle will be one of the leaders in that growth story.

KATE ROGERS:  You came from Taco Bell, where you had, obviously, a history of innovating breakfast, I know is something that you were a big part of, some of the limited-time offers that were very splashy.  Chipotle is clearly a very different business.  How much of the Taco Bell lessons and mindsets did you bring with you to the new role?

BRIAN NICCOL:  What I would say is, you know, the thing in that job was also a little bit of a turnaround at the time.  It's the classic case of you have to understand what is unique about your business.  I had the opportunity to work at Proctor and Gamble before I worked at Young Brands.  One of the things I learned early in my career at Proctor and Gamble, because I worked on Scope mouthwash to Pringles potato chips:  Sour cream and onion does not leave you with good breath.

KATE ROGERS:  You need one after the other.

BRIAN NICCOL:  Yeah, I needed Scope to compensate for my Pringles potato chips. What you quickly learn is the way that you make money and the way that you have this business connect with your customer, which is very different.  Scope was all about, you know, this simple benefit of killing bad breath germs.  Pringles was much more about lifestyle and bringing to life the idea of fun, "Once you pop, you can't stop." So as I've had experiences working on these different brands or companies, I think one of the things I've done a pretty good job at is recognizing what's different about it, what's core to that business, and then taking that core business and elevating it and making it relevant.  That's what we're doing at Chipotle.

KATE ROGERS:  So you've been in this role for just under two years, in March it will be two years.  I'll put you on the spot here.


KATE ROGERS:  What has been your biggest lesson that you've learned as CEO at Chipotle?

BRIAN NICCOL:  We have 80,000 employees because we own all 2500 restaurants, and you cannot underestimate how important it is for people -- from the person that is serving you, asking you the question, "Burrito or bowl," all the way up to our executive leadership team, that everybody's aligned and understands what we're trying to achieve.


BRIAN NICCOL:  You know, that -- and it really came to, I guess, reality for me.  We do this all managers conference where we bring in all our managers.  So we had about 3500 people together, and you're talking to these people one on one, and then you get up on stage and you look out and see 3500 managers, and you're like, all right, we've got to make sure we're all rowing together.

KATE ROGERS:  Yeah.  On the same page, right?

BRIAN NICCOL:  On the same page.  And, you know, when you do get it, though, man, you get really powerful results.  And, you know, I think that's a big reason why we've had so much of the success we've had to date, is because I think we've got 80,000 people really optimistic about our future, but firmly entrenched in believing in this idea of cultivating a better world.

KATE ROGERS:  Perfect, Brian.  Thank you so much.  We're going to open it to the audience now, if anybody has any questions.  Right here.  I think we're going to bring you a mic.

AUDIENCE MEMBER:  Hi, Brian.  Thank you so much for sharing your candid experience.  My name is Melissa.  I know we focus on the Hispanic marketing side of the world, and one of the common questions that we face with our clients and in our own business is how to prioritize our roadmaps.  And as somebody who entered as a new CEO two years ago, I can imagine that was probably an overwhelming task to take on. Do you have any specific examples of how you went about prioritizing the changes that you did implement?

BRIAN NICCOL:  Yeah, that's a great question.  This kind of goes back to my point of when you have 80,000 employees, the most important thing you can do is pick a few things and focus on them.  I say to folks all the time there's two powerful words in business:  Yes and no.  And too often you don't use them.  Too often you create committees and keep evaluating and so on and so forth, and you look at this sheet of paper and it's, supposedly, like you're working on like 100 things.

The reality is, you're working on nothing. So where we were really purposeful was like -- and Chipotle had lots of ideas.  Like, when I got to the company, it wasn't like they didn't have ideas; they had lots of ideas.  The problem we were struggling with was executing an idea and then staying committed to an idea.  Look, when you get committed on an idea, you have to be open to feedback, and that feedback could be it's not working.  So I would just encourage you to pick the 3 to 5 things you're going to go work on, go work on them, and don't be afraid of the feedback.  The feedback could be you picked wrong.

Okay?  And the trick, then, is to move and then figure out what are then -- you can go ahead and replace number 5 with a new number 5, but don't create a number 6.  So that's what's really served us well at Chipotle is -- we've got right now our five key things we're focused on and, you know, some have gone really well; others, we still have opportunities to be better at.  But pick.  Use those two words:  Yes, no.

KATE ROGERS:  I think we have time for one more question.  I know there's a question out there.  There you go.

AUDIENCE MEMBER:  Hi.  My name is Jason Rapp.  I imagine, of the 80,000 employees, the average age is on the younger side.  I'm curious as to what you've learned from your employees in how they think about the world, and how that informs decisions on how you do your consumer marketing.

BRIAN NICCOL:  Yeah.  Look, that's another one that's been really powerful.  I don't know if you saw this, but as a result, we've changed some of our benefits of late.  And what some of the younger employees were telling us is they needed debt-free degrees, not just tuition reimbursement.  And so we've been working with schools to create curriculums that basically we negotiate on their behalf and then they can go ahead and get a degree, whether it's in technology or business.

The other thing we heard from them was mental health benefits, so we just rolled out mental health benefits for all 80,000 employees as well. And then the other thing was, Hey, if I'm a part of this team all the way down to the crew member, if we achieve metrics, why can't I participate in a bonus? And so I was like, that's a fair piece of feedback.  So we've actually now rolled out bonuses that go all the way down to the hourly employee.

So every quarter, they have the ability to earn, you know, a bonus; and, you know, if they're successful, they basically can earn an extra month's pay. So we got a lot of feedback on just the employee experience.  And then the other piece of feedback we got is, they really do believe in the purpose of cultivating a better world. So, you know, sustainability is usually important.  We've adopted programs, and we've invested in these programs.  We take all the gloves, as you see our team members use, and we recycle all those gloves and turn those into trash bags.  That's just an example of us trying to do the right thing, minimize our waste.

And you know what?  These folks really -- they care a lot about doing the little things that they believe is making their community better. The other thing that young people want is growth opportunities.  And you know, everybody needs a first job, but I also think if you can demonstrate to them, hey, look, if you get trained and you can contribute on this team effectively, you have the ability to move from being a crew member, to an assistant manager, to a restaurant manager, to a field leader in short order.

I was just with this young man in Atlanta.  He went from being one of our grill guys to one of our restaurant general managers in less than 24 months.  So those are the things we hear from them.  You know, I feel like it's an overused word, this idea of authenticity and transparency, but it's very important if you want to attract and retain young people in your organization.

KATE ROGERS:  Perfect.  I think we're going to leave it right there, Brian.  Thank you so much.  Really appreciate it.


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