The Lawrence N. Field Center for Entrepreneurship hosted Steve Ells, former CEO and founder of Chipotle Mexican Grill, Inc., in the latest installment of the Russell Banks Leadership Lecture Series. Ells, who is now the CEO and founder of Kernel Foods Inc., participated in a fireside chat with Zicklin School of Business Dean Bruce Weber. Weber began the fireside chat by asking Ells to describe his career journey.
Ells said that scaling the business brought new challenges in a job that was constantly changing, adding that he was “always learning” and adapting to new experiences.
“When I opened the first restaurant, it was sort of like an independent mom-and-pop business, and I did everything,” Ells said when discussing the process of opening Chipotle. “As I started to add more restaurants, I had to learn how to find people who could help me lead others, empower them and teach them about the culture and skills needed to then have them run their own restaurants.”
Ells added that as the company grew, the focus shifted to raising funds and how to evolve into a global brand.
Weber noted that Chipotle and Kernel are healthy food options and asked how Ells brings these options to consumers. Ells responded that he does not think about serving healthy food but “serving delicious food” because everyone’s definition of a healthy diet differs. However, he believes in eating ingredients that “your great-grandmother would recognize” and avoiding highly processed foods.
This prompted Weber to ask what the challenges are in bringing raw ingredients, conversely to standard fast-food places that ship in frozen pre-made food. Ells said that the challenge is the high turnover rate, making it difficult to teach people how to cook and care for food because “they’re gone before they do the reps.”
Additionally, Ells stated that Kernel has an entirely new operating platform that utilizes robots and automation, which results in a staff of 10 people, compared to the average of 40 per restaurant.
Ells added that two reasons explain the high turnover rate in the restaurant industry: people do not like the work and pay. He explained that Kernel solves these issues by hiring fewer people, so current employees are paid more and have full benefits while the automation changes the workload. Ultimately, he said that “you have to invest in the people.”
Moreover, Weber asked if Kernel may go to the public markets in the future. Ells said that “it’s way too early to tell” and explained that Kernel’s main goal is to make better food using its hub and spoke model. A hub and spoke model is a distribution network with a central point, the hub, as the main point of control, processing, and coordination. It then sends its products to smaller locations called spokes for distribution and processing.
Before transitioning to an open Q&A, Weber acknowledged the importance of culture in the restaurant industry and asked Ells to describe the culture he built at Chipotle and is now building at Kernel. Ells said that at Chipotle, “we were very much a fast-food restaurant that had a culture of fine dining and farm-to-table ethos.” At Kernel, there is a culture of “we’re all in this together” because employees share in the upside of the venture.
“I sort of designed the Chipotle operating platform based on my observations of restaurants,” Ells said. “It was pretty easy, pretty low-tech. This [Kernel’s operating platform] is something much more complicated, and so to create an environment where all these different people can work together for one common goal is fun, and that’s what the culture is all about.”
At the end of the event, an attendee asked Ells how automation and online-only ordering affect hospitality in sit-down restaurants. Ells answered that he’s attempting to improve the working experience in fast-food restaurants and that there will always be a place for traditional sit-down restaurants because the technology to implement automation is expensive.
“It’s not that I’m trying to replace workers in the restaurant world necessarily,” Ells said in his closing remarks. “I’m just talking about fast-food and fast-casual. I think there’s going to always be a place for really great independent restaurants. I think it would be very difficult to employ a lot of this expensive technology in an independent restaurant, at least now.”