Chipotle’s CFO credits the company’s success to investing $2.5 billion in employees, who earn an average of $17 an hour, while also reducing logistics costs.

Chipotle's CFO credits the company's success to investing $2.5 billion in employees, who earn an average of $17 an hour, while also reducing logistics costs.

Chipotle: A Tale of Fresh Ingredients and Steady Growth

Chipotle Mexican Grill, Inc. celebrated a significant milestone this month as it reached its 30th anniversary. The fast-casual restaurant, founded by Steve Ells, first opened its doors on July 13, 1993, on Evans Avenue in Denver, Colo. Chipotle’s Chief Financial Officer, Jack Hartung, joined the company in 2002 and vividly remembers his first impression of the brand.

“I’d be lying if I said I knew that we’d be exactly where we are today,” Hartung reflects. “But I was bullish when I joined Chipotle. It kind of blew my mind that you’ve got a young chef, who started this fast-casual restaurant company based on what fine dining restaurants do.” Chipotle’s emphasis on extensive prep work using fresh ingredients set them apart. For example, they prepare their ingredients hours before the restaurant opens to ensure quality.

Hartung shares his experience of tasting a Chipotle burrito for the first time, where he discovered the beauty of well-made rice. “I used to think rice was kind of bland and didn’t have much flavor,” he admits. “But not if you make it right. If you cook it where it’s not too starchy, not too sticky, you season it correctly with the right amount of citrus and cilantro, it’s delicious.”

Now, Hartung, along with Chipotle CEO Brian Niccol, leads the direction of 3,000 Chipotle restaurants, with ambitious plans to add 7,000 more units across North America. Their entrepreneurial spirit doesn’t shy away from navigating uncertain economic circumstances.

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The Economics of Fresh Food

After Chipotle’s Q2 2023 earnings call, I had the opportunity to sit down with Jack Hartung to discuss the company’s financial outlook. He reveals that Chipotle’s sales are expected to reach approximately $10 billion this year. While other companies might look for ways to save money by cutting corners on food quality, Hartung emphasizes that Chipotle takes a different approach.

“We tend to invest in higher quality food that’s better tasting, better for the animals, the environment, and better for the health of our consumers,” says Hartung. He clarifies that they don’t compromise on the quality of their ingredients, but they do explore cost-cutting options in logistics, such as efficient supplier diversification and streamlining distribution.

However, one factor that remains uncertain is the impact of the current heatwave in the United States. Hartung acknowledges the challenges it presents, especially regarding ingredient availability and cost. Chipotle is committed to closely monitoring their supply chain and making appropriate adjustments when necessary.

Hartung’s commitment to supporting the company’s growth extends to investing in their workforce. He explains that Chipotle will be allocating $2.5 billion to support their employees at the restaurant level through salaries, bonuses, and benefits. Over the past few years, the company has made significant progress in improving wages, with their average hourly rate now at $17, compared to $10 or $11 five years ago.

A Flavorful Quarter

Turning our attention to Chipotle’s Q2 earnings, the company reported a 13.6% increase in revenue, reaching $2.5 billion, slightly below analysts’ expectations. The rise in total revenue was primarily driven by a 7.4% boost in comparable restaurant sales and the addition of 47 new restaurants.

In-restaurant sales saw a significant uptick of 15.8% compared to the same period last year. Additionally, Chipotle’s net income rose to $341.8 million from $259.9 million. While shares experienced a slight decline of 9.8% following the earnings report, they had previously risen by approximately 50% year-to-date.

Hartung highlights that Chipotle has not implemented any price increases this year, with the last national increase occurring in early August 2022, followed by a targeted increase in select locations. However, he acknowledges the potential impact of inflation on pricing.

The Future of Technology and Talent

Shifting gears, let’s explore the technology landscape. McKinsey’s Technology Trends Outlook 2023 report delves into the development, potential applications, and industry effects of advanced technologies. The study suggests that tech talent is a crucial source of competitiveness, and the lack of skilled professionals remains a top constraint for growth.

According to McKinsey’s analysis of 3.5 million job postings, fields related to tech trends experienced robust growth of 15% between 2021 and 2022, despite an overall decrease in global job postings by 13%. For instance, the combined categories of Applied A.I. and next-generation software development witnessed a million job postings between 2018 and 2022, with next-generation software development displaying the most significant increase.

The report also highlights the accelerated innovation in generative A.I., which has introduced new capabilities and immense potential impact across various industries.

With the demand for tech talent continuously on the rise, companies need to adopt strategic approaches to manage their tech workforce effectively.

Weekend Reads and Notable Leaders

Before we conclude, here are a few ANBLE weekend reads worth exploring:

• “Cancel the recession, Fed staff says. Whether the central bank’s governors agree is another matter” by Will Daniel
• “Inside Illumina’s $8 billion deal that spurred a proxy fight with Carl Icahn and the ouster of 2 prominent Black Silicon Valley executives” by Lila MacLellan
• “Billions in 9/11 aid has gone unclaimed. Now a new law will compel banks like JPMorgan and Goldman Sachs to alert survivors who worked near Ground Zero” by Shawn Tully
• “How late in the day can you drink coffee? What time you can have your last cup and still fall asleep at night” by L’Oreal Thompson Payton

Furthermore, some notable leadership movements this week include:

• Ruth Porat, SVP and CFO at Google and Alphabet, being promoted to the newly created role of president and chief investment officer, effective Sept. 1
• Eimear P. Bonner, VP and CTO at Chevron Corporation, being appointed as the next CFO, effective March 1, 2024
• Jason Marino’s promotion to EVP and CFO at Marriott Vacations Worldwide Corporation, effective Sept. 30, succeeding Anthony “Tony” Terry, who previously announced his intent to retire
• Diana Saadeh-Jajeh resigning from her role as CFO at GameStop Corp., with Daniel Moore being appointed as interim principal financial officer
• James Kehoe, EVP and CFO at Walgreens Boots Alliance, departing in mid-August to pursue a technology sector opportunity, with Manmohan Mahajan serving as interim global CFO during the search for Kehoe’s replacement
• Alexandra Brooks being promoted to EVP and CFO at Hertz Global Holdings, Inc., immediately assuming the role after serving as interim CFO
• Diego Reynoso being named CFO and treasurer at The Boston Beer Company, Inc., effective Sept. 5, bringing a wealth of experience from his previous roles at Tyson Foods and Constellation Brands

In Conclusion

Chipotle’s journey from a single restaurant to a thriving fast-casual empire showcases the result of a passion for fresh ingredients, strategic investment in quality, and commitment to their people. With the guidance of leaders like Jack Hartung and Brian Niccol, the company continues to navigate challenges and pursue innovative solutions.

Furthermore, as McKinsey’s Technology Trends Outlook reveals, the importance of tech talent management cannot be overlooked as organizations strive for competitiveness and growth in the ever-evolving technology landscape. Aligning talent strategies with emerging trends is crucial to stay ahead in the industry.

Both Chipotle’s success story and the discussion on tech talent demonstrate the dynamic nature of the business world, where forward-thinking companies strive to create culinary experiences and leverage technological advancements to shape the future.

Have a delightful weekend.

Sheryl Estrada [email protected]

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