1
00:00:02,880 --> 00:00:05,960
Speaker 1: When Jack hard Tongue joined Chipotle twenty years ago, it

2
00:00:06,080 --> 00:00:09,479
Speaker 1: was far from the powerhouse it is today. Chipotle was

3
00:00:09,520 --> 00:00:11,399
Speaker 1: a special brand. It was an unknown brand. It was

4
00:00:11,520 --> 00:00:16,000
Speaker 1: very small, founded in by chef turned entrepreneur Steve Els.

5
00:00:16,239 --> 00:00:18,360
Speaker 1: The company stood on the brink of the growth spurth

6
00:00:18,440 --> 00:00:22,159
Speaker 1: that would create a category fast casual dining. It was

7
00:00:22,200 --> 00:00:25,599
Speaker 1: really simple idea of Steve at It was, look, why

8
00:00:25,760 --> 00:00:29,760
Speaker 1: is fast food crap? Why can't great food be done fast?

9
00:00:30,240 --> 00:00:32,440
Speaker 1: I was there when there was a couple of dozen restaurants,

10
00:00:32,479 --> 00:00:35,680
Speaker 1: and I would visit restaurants like this where Steve would

11
00:00:35,720 --> 00:00:37,559
Speaker 1: go behind the line and he'd see somebody cutting an

12
00:00:37,600 --> 00:00:39,479
Speaker 1: onion and saying, well, hold on, let me let me

13
00:00:39,479 --> 00:00:42,000
Speaker 1: show you how to do it. Two decades later, Jack

14
00:00:42,040 --> 00:00:44,680
Speaker 1: hard Tongue is still the chief financial officer of Chipotle.

15
00:00:45,240 --> 00:00:47,320
Speaker 1: He's had a hand in just about every area of

16
00:00:47,320 --> 00:00:49,960
Speaker 1: the operation. I feel like I've always been able to

17
00:00:50,000 --> 00:00:53,080
Speaker 1: dabble in things outside of just financials. And while his

18
00:00:53,200 --> 00:00:55,800
Speaker 1: central task is to create greater value for a chain

19
00:00:55,840 --> 00:00:59,120
Speaker 1: that now has about three thousand restaurants, he insists on

20
00:00:59,240 --> 00:01:02,280
Speaker 1: staying true to the values that have defined Chipotle from

21
00:01:02,360 --> 00:01:05,880
Speaker 1: day one. I think I'm really open minded, but um,

22
00:01:06,160 --> 00:01:08,679
Speaker 1: I really do want to protect the heritage of Chippotle

23
00:01:09,000 --> 00:01:11,679
Speaker 1: and make sure that we don't lose the essence. It's

24
00:01:11,680 --> 00:01:15,440
Speaker 1: a powerful blend a consistent mission that sustains the brand

25
00:01:15,480 --> 00:01:19,560
Speaker 1: with a commitment to innovation that drives the business. Chipotle's

26
00:01:19,600 --> 00:01:23,560
Speaker 1: future depends on investments that address both priorities. Jack har

27
00:01:23,640 --> 00:01:28,560
Speaker 1: Tongue embraces that challenge. He's always had a passion for

28
00:01:29,000 --> 00:01:31,840
Speaker 1: what we do next at our company because he's always

29
00:01:31,920 --> 00:01:34,640
Speaker 1: been really a champion of growth. I've got to make

30
00:01:34,680 --> 00:01:37,560
Speaker 1: sure that the financials, the balance sheet, the way we

31
00:01:37,640 --> 00:01:40,840
Speaker 1: source food, the way that we provide food, the way

32
00:01:40,840 --> 00:01:43,400
Speaker 1: that our business works needs to be strong so that

33
00:01:43,440 --> 00:01:46,479
Speaker 1: we reach our full potential. I love working with people

34
00:01:46,520 --> 00:01:48,800
Speaker 1: that can figure out how to thread the needle between

35
00:01:49,280 --> 00:01:53,000
Speaker 1: the numbers and the purpose. Frankly, not everybody can do it,

36
00:01:53,360 --> 00:01:56,200
Speaker 1: but luckily Jack does it really well, and you know,

37
00:01:56,400 --> 00:02:13,239
Speaker 1: we're pretty fortunate to have him at our company. Chipotle's

38
00:02:13,280 --> 00:02:15,520
Speaker 1: growth in the last five years has been nothing short

39
00:02:15,560 --> 00:02:20,360
Speaker 1: of spectacular. Revenues have jumped nearly sev the company's market

40
00:02:20,400 --> 00:02:24,480
Speaker 1: capitalization has more than quadrupled. All this despite a global

41
00:02:24,520 --> 00:02:28,639
Speaker 1: pandemic that's disrupted the restaurant industry, and all this following

42
00:02:28,639 --> 00:02:31,480
Speaker 1: a food safety crisis that caused sales at the company

43
00:02:31,520 --> 00:02:36,000
Speaker 1: to created and forced to shake up in the c suite. Individually,

44
00:02:36,760 --> 00:02:43,200
Speaker 1: the team was phenomenal. Individually, people were very talented, but

45
00:02:43,280 --> 00:02:46,080
Speaker 1: it's almost like they didn't have the right people in

46
00:02:46,120 --> 00:02:50,560
Speaker 1: the right places UM to handle how big the brand

47
00:02:50,600 --> 00:02:54,799
Speaker 1: and the platform became. The enhanced food safety procedures, enhanced

48
00:02:54,800 --> 00:02:58,520
Speaker 1: standards and training they really enhanced. Hence, the management team

49
00:02:58,520 --> 00:03:02,160
Speaker 1: took marketing dollars, you know, transition them to more effective

50
00:03:02,200 --> 00:03:05,760
Speaker 1: marketing brand building efforts with a big focus on reminded

51
00:03:05,760 --> 00:03:09,679
Speaker 1: consumers of why they love Chipotle. The breakdown was the

52
00:03:09,760 --> 00:03:13,440
Speaker 1: human capital. The breakdown was in culture, and that's what

53
00:03:13,520 --> 00:03:17,400
Speaker 1: they've repaired and that's why they're coming back stronger. What

54
00:03:17,560 --> 00:03:21,359
Speaker 1: have you learned in your CFO position going through those crises?

55
00:03:21,400 --> 00:03:23,240
Speaker 1: What was what was the Which one was the most challenging?

56
00:03:23,680 --> 00:03:25,920
Speaker 1: The food safety issue was the most challenging because we

57
00:03:25,919 --> 00:03:29,000
Speaker 1: were alone in that one UM that was unique to Chipotle. UM.

58
00:03:29,040 --> 00:03:32,240
Speaker 1: The pandemic is certainly a challenge, but everyone's in it together.

59
00:03:32,520 --> 00:03:34,520
Speaker 1: The things that really got us through it is we

60
00:03:34,560 --> 00:03:37,920
Speaker 1: stay true to our purpose. So during each of these challenges,

61
00:03:38,160 --> 00:03:40,280
Speaker 1: we made sure we invested into things that made Chipotle

62
00:03:40,360 --> 00:03:43,320
Speaker 1: specially invest in higher quality food, invest in our people,

63
00:03:43,520 --> 00:03:45,640
Speaker 1: and then invest in our growth and invest in things

64
00:03:45,640 --> 00:03:47,760
Speaker 1: like technology. We have a saying around there. I think

65
00:03:47,760 --> 00:03:49,680
Speaker 1: it actually comes from west Point. You know, we will

66
00:03:49,800 --> 00:03:53,600
Speaker 1: choose the harder right over the easy role. How do

67
00:03:53,680 --> 00:03:56,960
Speaker 1: you and Jack work on things like that, those black

68
00:03:57,040 --> 00:04:01,160
Speaker 1: Swan events, those things that can be you know, fundamentally

69
00:04:01,320 --> 00:04:05,400
Speaker 1: changing for you as a company. When we are successful

70
00:04:05,880 --> 00:04:09,560
Speaker 1: in focusing on the really important things that can strategically

71
00:04:09,600 --> 00:04:13,480
Speaker 1: drive growth for us, they seem to be having resiliency

72
00:04:13,720 --> 00:04:16,680
Speaker 1: in these unexpected events. And the other thing I think

73
00:04:16,720 --> 00:04:19,080
Speaker 1: is to make sure you have a strong balance sheet

74
00:04:19,240 --> 00:04:21,800
Speaker 1: to make sure you can weather the storm. And we've

75
00:04:21,800 --> 00:04:24,080
Speaker 1: had a strong balance sheet. We've never had debt. We've

76
00:04:24,120 --> 00:04:26,640
Speaker 1: always had more cast and the balance sheet than we

77
00:04:26,680 --> 00:04:29,320
Speaker 1: need for our normal ongoing business. And that has come

78
00:04:29,320 --> 00:04:32,480
Speaker 1: in you know great, you know really happy. Chipotle carries

79
00:04:32,520 --> 00:04:35,599
Speaker 1: no long term debt and it's free cash flow almost

80
00:04:35,640 --> 00:04:39,840
Speaker 1: tripled in When you think about the future, how do

81
00:04:39,880 --> 00:04:42,280
Speaker 1: you take advantage of this and and what is the

82
00:04:42,320 --> 00:04:45,919
Speaker 1: flexibility that that enables What it really affords us is

83
00:04:46,120 --> 00:04:47,640
Speaker 1: we're going to be able to invest in our future

84
00:04:47,839 --> 00:04:51,839
Speaker 1: no matter what. Like we accelerated are open, we accelerated

85
00:04:51,960 --> 00:04:55,200
Speaker 1: our pursuit of new restaurant sites during the pandemic when

86
00:04:55,200 --> 00:04:58,120
Speaker 1: some of the restaurant companies were laying off their development team.

87
00:04:58,279 --> 00:05:01,920
Speaker 1: CHIPOTLEI not only expanded its footprint over the last two years,

88
00:05:02,200 --> 00:05:05,760
Speaker 1: it reshaped its restaurants, ventured to drive through dining that

89
00:05:05,839 --> 00:05:09,560
Speaker 1: began several years ago, became a thriving profit center when

90
00:05:09,600 --> 00:05:13,200
Speaker 1: the pandemic struck. The thing that's changed the most is

91
00:05:13,240 --> 00:05:15,160
Speaker 1: just most of our restaurants and I'll have a Chipot Lane.

92
00:05:15,520 --> 00:05:18,360
Speaker 1: So three years ago we had maybe five or six

93
00:05:18,440 --> 00:05:21,320
Speaker 1: Chipotle length and now we have over three fifty and

94
00:05:21,480 --> 00:05:23,839
Speaker 1: eighty percent of our new openings have each polne. The

95
00:05:23,960 --> 00:05:27,400
Speaker 1: sales and our Chipotlelane restaurants are higher, and our margins

96
00:05:27,400 --> 00:05:30,560
Speaker 1: are higher too, because the digital orders are our highest

97
00:05:30,560 --> 00:05:33,840
Speaker 1: margin transaction. And when you can serve the customer through

98
00:05:33,920 --> 00:05:36,080
Speaker 1: the pot lane without the delivery fees that we pay

99
00:05:36,080 --> 00:05:38,440
Speaker 1: in the customers paper, it's it's it's a great margin

100
00:05:38,480 --> 00:05:42,159
Speaker 1: opportunity for us. The convenience of Chipot lanes contributed to

101
00:05:42,240 --> 00:05:46,840
Speaker 1: soaring digital sales in there was little erosion in one

102
00:05:47,240 --> 00:05:50,560
Speaker 1: even as in restaurants sales returned to eight of twenty

103
00:05:50,680 --> 00:05:55,640
Speaker 1: nine levels. Meanwhile, membership and loyalty programs has boomed, giving

104
00:05:55,680 --> 00:06:00,200
Speaker 1: Chipotle valuable insight into its customers omni channel preferences. Is

105
00:06:00,560 --> 00:06:03,680
Speaker 1: what we've seen is that our digital customers they come

106
00:06:03,720 --> 00:06:05,600
Speaker 1: to most often, and they spend the most each time

107
00:06:05,680 --> 00:06:09,400
Speaker 1: they come. Customer loyalty could face a test if inflation

108
00:06:09,440 --> 00:06:15,400
Speaker 1: continues to push higher. Chipotle hiked menu prices roughly. Jack

109
00:06:15,440 --> 00:06:18,599
Speaker 1: Harton says, it's not just wages and food costs that

110
00:06:18,640 --> 00:06:22,560
Speaker 1: are putting on the pressure. It's hitting everything. Sitting materials

111
00:06:22,560 --> 00:06:24,520
Speaker 1: to for a restaurants or new restaurants are costing more

112
00:06:24,560 --> 00:06:28,159
Speaker 1: as well. You guys have had incredible pricing power. Is

113
00:06:28,200 --> 00:06:31,000
Speaker 1: there kind of a tipping point where it's like enough?

114
00:06:31,560 --> 00:06:34,520
Speaker 1: We haven't seen it? U. Why is that, Jack? Well,

115
00:06:34,520 --> 00:06:38,120
Speaker 1: part of it is um we've over the years been

116
00:06:38,160 --> 00:06:42,400
Speaker 1: slow to raise prices. We've always tried not to go

117
00:06:42,480 --> 00:06:44,680
Speaker 1: to the menu board to raise prices. Whenever we've had

118
00:06:44,680 --> 00:06:47,200
Speaker 1: a challenge from a cost standpoint, we'll do other things

119
00:06:47,200 --> 00:06:50,920
Speaker 1: to try to find efficiencies. Somewhere along the line. We

120
00:06:51,000 --> 00:06:53,719
Speaker 1: raise prices in the second quarter of last year. We

121
00:06:53,839 --> 00:06:57,040
Speaker 1: did that just to cover the cost of raising wages.

122
00:06:57,120 --> 00:06:59,640
Speaker 1: We raise wages up the fifteen dollars. It was an

123
00:06:59,680 --> 00:07:03,320
Speaker 1: average increase, and we raise prices just to cover the

124
00:07:03,400 --> 00:07:05,440
Speaker 1: dollar costs of app So we didn't increase our margins.

125
00:07:05,480 --> 00:07:08,520
Speaker 1: Our margins actually went down, but our profitability stayed the same.

126
00:07:08,880 --> 00:07:11,800
Speaker 1: Our customers actually said, we really applaud what you're doing.

127
00:07:12,080 --> 00:07:13,920
Speaker 1: We're fine with a four percent price increase, not a

128
00:07:13,960 --> 00:07:16,520
Speaker 1: chi cambrito that's thirty cents, but the fact that you

129
00:07:16,720 --> 00:07:19,840
Speaker 1: increase wages to that extent. We like to eat a morgo.

130
00:07:20,720 --> 00:07:23,840
Speaker 1: CEO Brian Nicol has warned that Chipotle may raise prices

131
00:07:23,840 --> 00:07:26,840
Speaker 1: again if cost pressures intensify. With the cost of eating

132
00:07:26,840 --> 00:07:30,320
Speaker 1: out already at historic levels, consumers may just have to

133
00:07:30,320 --> 00:07:33,720
Speaker 1: get used to paying more. The industry is used to

134
00:07:33,800 --> 00:07:39,520
Speaker 1: tepid inflation, call it two you know um level inflation.

135
00:07:40,120 --> 00:07:42,680
Speaker 1: They take you know, a little bit of priced offset

136
00:07:43,040 --> 00:07:46,560
Speaker 1: it flows through and margins are just naturally restored. The

137
00:07:46,560 --> 00:07:49,640
Speaker 1: fact of the matter is labor was the pressure point.

138
00:07:50,320 --> 00:07:52,840
Speaker 1: So the industry today is definitely sitting on a high

139
00:07:52,840 --> 00:07:56,280
Speaker 1: single digit price versus what is typically a low single

140
00:07:56,280 --> 00:08:00,280
Speaker 1: digit price inflation or level of menu price increase in

141
00:08:00,360 --> 00:08:02,720
Speaker 1: relative terms. Everyone has to do this. In fact, I

142
00:08:02,760 --> 00:08:04,560
Speaker 1: would say, Carol, we we could be more patient than

143
00:08:04,600 --> 00:08:06,920
Speaker 1: others because we own all of our restaurants. When you're

144
00:08:06,920 --> 00:08:09,840
Speaker 1: a franchise organization, when you have franchise z s that

145
00:08:09,880 --> 00:08:13,040
Speaker 1: have borrowed to invest in their business, they can't necessarily

146
00:08:13,080 --> 00:08:15,680
Speaker 1: afford to let inflation eat away at their at their

147
00:08:15,680 --> 00:08:18,720
Speaker 1: ability to pay the debt for very long. It is

148
00:08:18,800 --> 00:08:21,640
Speaker 1: full speed ahead when it comes to store growth. Chipotle

149
00:08:21,840 --> 00:08:24,240
Speaker 1: just up to its goal to seven thousand from six

150
00:08:24,280 --> 00:08:27,240
Speaker 1: thousand restaurants in the US, thanks in large part to

151
00:08:27,320 --> 00:08:31,160
Speaker 1: strong performance at seeing in smaller towns based on we're

152
00:08:31,160 --> 00:08:33,760
Speaker 1: are already in more than a hundred of them. Based

153
00:08:33,760 --> 00:08:35,440
Speaker 1: on the ones that we're in, based on the results

154
00:08:35,440 --> 00:08:38,200
Speaker 1: so far, which are extraordinary, we think there is as

155
00:08:38,280 --> 00:08:40,520
Speaker 1: many as almost a thousand more restaurants. And so even

156
00:08:40,559 --> 00:08:42,640
Speaker 1: though you talk about a small town with you know,

157
00:08:42,800 --> 00:08:46,080
Speaker 1: maybe twenty thirty thousand people, the sales volumes are almost

158
00:08:46,080 --> 00:08:48,040
Speaker 1: the same as if you you know, we're in a

159
00:08:48,080 --> 00:08:51,840
Speaker 1: city like Chicago or a Chicago suburb, but the investment

160
00:08:51,840 --> 00:08:53,920
Speaker 1: costs are lower. The rents are certainly lower and the

161
00:08:53,920 --> 00:08:56,200
Speaker 1: operating costs are lower, so you end up getting higher

162
00:08:56,240 --> 00:08:59,319
Speaker 1: margins and higher returns. She probably reaps the full benefit

163
00:08:59,360 --> 00:09:01,679
Speaker 1: of these return earned since it owns and operates all

164
00:09:01,679 --> 00:09:05,000
Speaker 1: its stores, and advantage that's not lost on Wall Street.

165
00:09:05,640 --> 00:09:09,920
Speaker 1: It's extremely unusual, and not only restaurants, but from a

166
00:09:09,960 --> 00:09:14,040
Speaker 1: restaurant stock perspective, to have a large cap stock that's

167
00:09:14,200 --> 00:09:17,600
Speaker 1: growing its unit level economic model, meaning the revenues are

168
00:09:17,600 --> 00:09:20,640
Speaker 1: getting better and the margins are getting better as growth

169
00:09:20,679 --> 00:09:25,199
Speaker 1: is accelerating. It's just it's like almost unheard of. So

170
00:09:25,240 --> 00:09:28,040
Speaker 1: there's little reason for Chipotle to begin franchising in the

171
00:09:28,120 --> 00:09:32,240
Speaker 1: United States, but for the chains forty five international restaurants,

172
00:09:32,400 --> 00:09:36,920
Speaker 1: Bloomberg Intelligence notes that partnering with local operators overseas might

173
00:09:36,960 --> 00:09:41,560
Speaker 1: boost margins and accelerate expansion. We're open to the idea

174
00:09:41,640 --> 00:09:44,120
Speaker 1: of some kind of franchise model. UM. You know, there

175
00:09:44,160 --> 00:09:45,800
Speaker 1: are areas of the world where it's going to be

176
00:09:45,840 --> 00:09:48,120
Speaker 1: harder for us to to own UM and to run

177
00:09:48,160 --> 00:09:51,520
Speaker 1: the businesses ourselves. When the process of bringing our digital

178
00:09:51,520 --> 00:09:54,319
Speaker 1: system to Europe that's going really, really well. We've also

179
00:09:54,320 --> 00:09:57,599
Speaker 1: opened up some alternative sites. It gives us great optimism

180
00:09:57,679 --> 00:09:59,840
Speaker 1: that international is going to be a growth vehicle for

181
00:10:00,080 --> 00:10:05,280
Speaker 1: and you know, hopefully not for this computer. Like Chipotle's menu,

182
00:10:05,440 --> 00:10:09,520
Speaker 1: Jack Hartungue's professional resume isn't patted out with exotic ingredients.

183
00:10:09,920 --> 00:10:12,800
Speaker 1: After earning a bachelor's degree in NBA at Illinois State,

184
00:10:13,120 --> 00:10:15,360
Speaker 1: he went straight to an accounting job at Cooper's and

185
00:10:15,440 --> 00:10:20,440
Speaker 1: library his next stop eighteen years at McDonald's. They called

186
00:10:20,480 --> 00:10:22,880
Speaker 1: me up and McDonald's was just a few miles down

187
00:10:22,920 --> 00:10:24,880
Speaker 1: the road, and they said, this place is great. And

188
00:10:24,920 --> 00:10:26,760
Speaker 1: what they what they told me was great about it

189
00:10:26,840 --> 00:10:29,640
Speaker 1: was you started in one area, but then when a

190
00:10:29,720 --> 00:10:31,319
Speaker 1: job opens up, they would post it and you can

191
00:10:31,360 --> 00:10:33,640
Speaker 1: interview for it. So I felt, well, that sounds great.

192
00:10:33,679 --> 00:10:35,360
Speaker 1: So I can learn a job and then if I'm

193
00:10:35,360 --> 00:10:38,320
Speaker 1: looking for another opportunity, I can interview for it, and

194
00:10:38,360 --> 00:10:40,280
Speaker 1: if I've done a good job, I'll get those opportunities,

195
00:10:40,320 --> 00:10:42,080
Speaker 1: which is what happened. I am curious when you went

196
00:10:42,080 --> 00:10:45,480
Speaker 1: from McDonald's to Chimpole. Were folks like Jack. Here, you've

197
00:10:45,520 --> 00:10:47,679
Speaker 1: got the established company, You're going to a startup. I mean,

198
00:10:47,679 --> 00:10:50,600
Speaker 1: did people think you were crazy? Yeah? I mean a

199
00:10:50,600 --> 00:10:52,600
Speaker 1: lot of people thought I was crazy. Um. In fact,

200
00:10:52,720 --> 00:10:55,280
Speaker 1: one memorable person was the CEO of McDonald's at the time,

201
00:10:55,360 --> 00:10:57,480
Speaker 1: because I had a great career at McDonald's and the

202
00:10:57,480 --> 00:11:00,400
Speaker 1: future looked really, really really good at a tootle. It

203
00:11:00,400 --> 00:11:02,480
Speaker 1: was in its infancy and it and it had this

204
00:11:02,640 --> 00:11:06,439
Speaker 1: vision for food, um that was like no other that

205
00:11:06,520 --> 00:11:10,240
Speaker 1: I've seen. How much of it was but Dowald, Oh, Chipotle,

206
00:11:10,360 --> 00:11:12,560
Speaker 1: how much of it was? Alright, Jack, keep an eyeing

207
00:11:12,600 --> 00:11:15,560
Speaker 1: these guys, you know, That's how it started. Okay, And

208
00:11:15,559 --> 00:11:18,760
Speaker 1: it wasn't keep an eye on it, but it was more. Um,

209
00:11:18,800 --> 00:11:22,520
Speaker 1: their food culture was very advanced, their business culture was not,

210
00:11:22,760 --> 00:11:25,120
Speaker 1: and so it was more of bringing some of your

211
00:11:25,120 --> 00:11:28,320
Speaker 1: experience to Chipotle just so you can get them on

212
00:11:28,400 --> 00:11:30,600
Speaker 1: a you know, on a on a stronger track. Once

213
00:11:30,640 --> 00:11:33,040
Speaker 1: I got into Schopotle, the environment and I realized, oh

214
00:11:33,080 --> 00:11:35,480
Speaker 1: my god, I want to be part of this. There

215
00:11:35,520 --> 00:11:37,240
Speaker 1: was a passion about what we were doing. So it

216
00:11:37,320 --> 00:11:39,720
Speaker 1: wasn't a finance job anymore. It was a job that

217
00:11:39,800 --> 00:11:42,360
Speaker 1: was really changing food culture in this country. Um, And

218
00:11:42,360 --> 00:11:43,720
Speaker 1: it was it was a mission and it was a

219
00:11:43,720 --> 00:11:46,600
Speaker 1: mission that I that I totally bought into. The Chipotle's

220
00:11:46,679 --> 00:11:49,880
Speaker 1: culture and mission have long differentiated it as a place

221
00:11:49,920 --> 00:11:53,320
Speaker 1: to eat. With restaurants competing fiercely for employees in the

222
00:11:53,320 --> 00:11:56,040
Speaker 1: wake of the pandemic, companies are going to have to

223
00:11:56,040 --> 00:11:59,000
Speaker 1: show that they are great places to work as well.

224
00:11:59,840 --> 00:12:02,600
Speaker 1: It's not just about that person coming back to work

225
00:12:02,600 --> 00:12:05,440
Speaker 1: in the restaurant. They're going to come back, but they're

226
00:12:05,480 --> 00:12:07,719
Speaker 1: not going to come back and work the way they

227
00:12:07,760 --> 00:12:11,600
Speaker 1: did before. I think that the companies that win are

228
00:12:11,640 --> 00:12:14,920
Speaker 1: those that are investing in their employees, their teams, that

229
00:12:14,960 --> 00:12:18,280
Speaker 1: are developing a strong culture that people want to be

230
00:12:18,320 --> 00:12:21,760
Speaker 1: a part of. The real win on a micro level

231
00:12:22,320 --> 00:12:24,560
Speaker 1: is if restaurants can figure out how to make that

232
00:12:24,640 --> 00:12:29,720
Speaker 1: employee work better and more efficiently, but in a way

233
00:12:29,720 --> 00:12:33,520
Speaker 1: that makes them more satisfied. At this new location just

234
00:12:33,600 --> 00:12:36,680
Speaker 1: outside Chicago, Jack hartone, tell me what it will take

235
00:12:36,760 --> 00:12:40,760
Speaker 1: to build a workforce to meet Chipotley's goals. You've got

236
00:12:40,800 --> 00:12:43,040
Speaker 1: to start with attractive wages, but then you've got to

237
00:12:43,040 --> 00:12:45,800
Speaker 1: go away beyond that. You've got to offer developmental opportunities,

238
00:12:46,080 --> 00:12:49,440
Speaker 1: promotional opportunities. We have a hundred thousand employees. As we

239
00:12:49,480 --> 00:12:52,920
Speaker 1: grow from three thousand restaurants to seven thousand restaurants, we're

240
00:12:52,920 --> 00:12:55,600
Speaker 1: gonna need two hundred or two or fifty thousand employees.

241
00:12:55,840 --> 00:12:58,880
Speaker 1: So our feature depends on hiring great crew today that

242
00:12:58,920 --> 00:13:02,679
Speaker 1: will be great managers and that your turn, double the locations,

243
00:13:02,920 --> 00:13:06,280
Speaker 1: double the staff. And along with investing in people, Chipotle

244
00:13:06,440 --> 00:13:10,720
Speaker 1: plans to invest in technology to support them. There is

245
00:13:11,040 --> 00:13:15,120
Speaker 1: so much still that can be done with artificial intelligence robotics.

246
00:13:15,800 --> 00:13:18,120
Speaker 1: When you think about our system, there are a lot

247
00:13:18,160 --> 00:13:21,880
Speaker 1: of processes that frankly people don't love doing. Cutting and

248
00:13:21,960 --> 00:13:26,760
Speaker 1: couring avocados in the restaurant. Not a fun job, very repetitive,

249
00:13:27,200 --> 00:13:28,560
Speaker 1: you know. I think there's a way where we could

250
00:13:28,640 --> 00:13:31,000
Speaker 1: use robotics to help us do that. And then as

251
00:13:31,000 --> 00:13:33,360
Speaker 1: you think about artificial intelligence, we could be better at

252
00:13:33,360 --> 00:13:35,280
Speaker 1: figure out how many avocados that we have to cut

253
00:13:35,280 --> 00:13:37,360
Speaker 1: in court today so that we never run out of

254
00:13:37,400 --> 00:13:41,400
Speaker 1: backamore lee throughout the day. As digital orders have surged,

255
00:13:41,600 --> 00:13:45,200
Speaker 1: Chipotle has adapted its processes. The most dramatic change has

256
00:13:45,200 --> 00:13:48,160
Speaker 1: been the addition of a second make line. This is

257
00:13:48,240 --> 00:13:50,480
Speaker 1: very familiar to customers, our frontline, and this is what

258
00:13:50,760 --> 00:13:52,920
Speaker 1: for the first you know, call it eighteen years at

259
00:13:53,000 --> 00:13:55,800
Speaker 1: coleg this was you come into pole along the line,

260
00:13:56,080 --> 00:13:58,240
Speaker 1: you interact with the crew, and you customize your mail.

261
00:13:58,559 --> 00:14:01,720
Speaker 1: We've got this separate makeline and it's digitized, and so

262
00:14:02,040 --> 00:14:04,600
Speaker 1: the orders come in and they're they're really kind of

263
00:14:04,640 --> 00:14:06,880
Speaker 1: stage so that if you say at noon, I want

264
00:14:06,880 --> 00:14:09,079
Speaker 1: to come in at one o'clock, we hold that order

265
00:14:09,440 --> 00:14:11,240
Speaker 1: and we will send it to the crew like it

266
00:14:11,280 --> 00:14:13,480
Speaker 1: maybe ten to one, so it's already right when you

267
00:14:13,480 --> 00:14:16,360
Speaker 1: pull up your car. How do you manage these kind

268
00:14:16,400 --> 00:14:18,840
Speaker 1: of two different staffing needs right and making sure you

269
00:14:18,840 --> 00:14:21,320
Speaker 1: have the right amount of people at the at the

270
00:14:21,400 --> 00:14:24,880
Speaker 1: right right time. We spend a lot of time projecting

271
00:14:24,920 --> 00:14:27,040
Speaker 1: sales of a lot of it is you know, it's

272
00:14:27,080 --> 00:14:29,640
Speaker 1: part art, part science. We're trying to bring more science

273
00:14:29,640 --> 00:14:31,760
Speaker 1: and more AI into it because if you get the

274
00:14:31,800 --> 00:14:34,640
Speaker 1: right sales projection, then you know exactly what you're saying,

275
00:14:34,880 --> 00:14:36,760
Speaker 1: what you're staffing needs to be. So if you get

276
00:14:36,760 --> 00:14:39,520
Speaker 1: the sales right, you can get the entire restaurant staffed

277
00:14:39,560 --> 00:14:42,800
Speaker 1: perfectly with just a couple of people. Our our average

278
00:14:42,920 --> 00:14:47,080
Speaker 1: restaurant now does about um over a million dollars per

279
00:14:47,200 --> 00:14:51,440
Speaker 1: restaurant in digital sales. Data science meets culinary art. In

280
00:14:51,480 --> 00:14:55,840
Speaker 1: Chipotle's commitment to menu innovation but releasing several new items

281
00:14:55,840 --> 00:14:59,520
Speaker 1: each year, management hopes to boost same store sales. It

282
00:14:59,640 --> 00:15:03,520
Speaker 1: seems to be working, but it's more complicated than it looks.

283
00:15:03,560 --> 00:15:05,640
Speaker 1: The most important thing is to make sure that the

284
00:15:05,680 --> 00:15:09,520
Speaker 1: economics work, meaning when you bring something new UM, does

285
00:15:09,560 --> 00:15:12,440
Speaker 1: it bring in additional customers? Does that bring existing customers

286
00:15:12,600 --> 00:15:14,920
Speaker 1: more often? There's always going to be trade off from

287
00:15:15,040 --> 00:15:17,400
Speaker 1: you know, one menu item to another UM, and there

288
00:15:17,400 --> 00:15:20,760
Speaker 1: could be economic either advantages or disadvantages. So we just

289
00:15:20,800 --> 00:15:23,720
Speaker 1: want to understand that. You know, when a customer comes in,

290
00:15:23,920 --> 00:15:26,520
Speaker 1: if they're trading from a high mar den itum to

291
00:15:26,560 --> 00:15:28,680
Speaker 1: lomar den it um, that's gonna be a loser for us.

292
00:15:28,800 --> 00:15:32,600
Speaker 1: And any new offering must meet Chipotle's rigorous sourcing standards.

293
00:15:33,560 --> 00:15:35,640
Speaker 1: It will take us a year and a half up

294
00:15:35,880 --> 00:15:38,600
Speaker 1: from the time that we are are experimenting in the

295
00:15:38,600 --> 00:15:41,400
Speaker 1: test kitchen. Two. We'll put it into a few restaurants

296
00:15:41,400 --> 00:15:43,680
Speaker 1: to see how does it work operationally and do customers

297
00:15:43,720 --> 00:15:45,080
Speaker 1: like it? But it'll take us a year and a

298
00:15:45,080 --> 00:15:48,320
Speaker 1: half because we've then got to build up the supply chain.

299
00:15:48,840 --> 00:15:51,040
Speaker 1: It's a challenge, but we take our time and we're

300
00:15:51,080 --> 00:15:53,320
Speaker 1: not going to roll it out before it's ready. Jack

301
00:15:53,360 --> 00:15:56,640
Speaker 1: Harton clearly places a high value on the customer experience,

302
00:15:56,960 --> 00:16:00,240
Speaker 1: and the experience of those who work at Chipotle restaurant.

303
00:16:00,520 --> 00:16:03,080
Speaker 1: He's a people person and a family man with five

304
00:16:03,200 --> 00:16:07,520
Speaker 1: children and ten grandchildren. Even his favorite hobby brings family

305
00:16:07,560 --> 00:16:11,800
Speaker 1: into play. It's a passion for collecting and restoring classic cars.

306
00:16:12,280 --> 00:16:14,640
Speaker 1: I drive here very conservatively, so I'm not like ripping

307
00:16:14,640 --> 00:16:17,520
Speaker 1: down the highway or anything. But these are cars that

308
00:16:17,600 --> 00:16:20,480
Speaker 1: I really cared about and really admired and aspired to

309
00:16:20,520 --> 00:16:22,760
Speaker 1: when I was young, and so I still love these cars.

310
00:16:23,080 --> 00:16:24,760
Speaker 1: There's a bonding that goes on as well. One of

311
00:16:24,760 --> 00:16:26,600
Speaker 1: my sons is a mechanic, so he was a mechanic

312
00:16:26,640 --> 00:16:29,920
Speaker 1: for tesla Um and he loves cars, and so we

313
00:16:30,320 --> 00:16:32,520
Speaker 1: spend time to car shows together. We'll go to auctions

314
00:16:32,520 --> 00:16:34,440
Speaker 1: and look for cars um, and so we have a

315
00:16:34,440 --> 00:16:36,600
Speaker 1: great time. And he knows how to fix the cars,

316
00:16:36,760 --> 00:16:38,440
Speaker 1: and I know how to drive the cars, and so

317
00:16:38,480 --> 00:16:40,440
Speaker 1: that's kind of the partnership that we have. We have

318
00:16:40,440 --> 00:16:44,920
Speaker 1: a great time together. Essential pillar of Chipotle's business has

319
00:16:44,960 --> 00:16:47,200
Speaker 1: always been a commitment to fresh food and support of

320
00:16:47,280 --> 00:16:52,240
Speaker 1: sustainable agriculture. From responsibly raised meat to local and organic produce,

321
00:16:52,520 --> 00:16:55,960
Speaker 1: the company has crafted a supply chain carefully over decades.

322
00:16:56,720 --> 00:17:02,440
Speaker 1: Every company is facing supply change, leunges. Chippotle has a

323
00:17:02,560 --> 00:17:08,560
Speaker 1: great infrastructure. They have a sophisticated team. They have relationships

324
00:17:08,640 --> 00:17:12,520
Speaker 1: with their suppliers, a lot of whom are local, and

325
00:17:12,680 --> 00:17:14,919
Speaker 1: a lot who have gotten to know Jack hard Tongue.

326
00:17:15,280 --> 00:17:18,199
Speaker 1: He's done much more to build those relationships than just

327
00:17:18,520 --> 00:17:21,960
Speaker 1: sign checks. Within my first year, I was spending time

328
00:17:21,960 --> 00:17:25,159
Speaker 1: on hog farms, cilantro farms. Believe it or not, I was.

329
00:17:25,960 --> 00:17:28,840
Speaker 1: I drove a combine, you know that's like the size

330
00:17:28,840 --> 00:17:32,360
Speaker 1: of this restaurant, um to harvest rice, organic rice, and

331
00:17:32,600 --> 00:17:34,760
Speaker 1: these are things that they had. They had a lasting

332
00:17:34,920 --> 00:17:37,320
Speaker 1: impression on me because when I would go back to

333
00:17:37,400 --> 00:17:39,359
Speaker 1: my office and I would be working on spreadsheets and

334
00:17:39,359 --> 00:17:42,320
Speaker 1: financial analysis, I saw how the hogs were raised, and

335
00:17:42,359 --> 00:17:45,880
Speaker 1: I saw how they were raised conventionally versus with our farmers,

336
00:17:46,000 --> 00:17:47,600
Speaker 1: and I'm like, I've got to make sure that our

337
00:17:47,640 --> 00:17:50,879
Speaker 1: financials and all everything we spend money on needs to

338
00:17:50,880 --> 00:17:53,680
Speaker 1: be thoughtful so that we can invest in the better

339
00:17:53,680 --> 00:17:56,439
Speaker 1: way raising food. It's more expensive to buy this food.

340
00:17:56,960 --> 00:17:59,240
Speaker 1: I was trying to make sure that the economic model

341
00:17:59,400 --> 00:18:02,320
Speaker 1: supported in testing in this food and not through higher

342
00:18:02,320 --> 00:18:07,480
Speaker 1: menu prices. Jack is bought into our purpose and cultivating

343
00:18:07,480 --> 00:18:10,760
Speaker 1: a better world. One of those key planks is sustainability

344
00:18:10,800 --> 00:18:12,439
Speaker 1: and doing the right thing for the planet. And as

345
00:18:12,440 --> 00:18:14,879
Speaker 1: a result, he's all on board with investing in it

346
00:18:15,000 --> 00:18:18,440
Speaker 1: and understanding the implications on the business and then obviously

347
00:18:18,480 --> 00:18:21,119
Speaker 1: our purpose. We know it matters. We know it matters

348
00:18:21,200 --> 00:18:22,960
Speaker 1: not just to our customers, to our crew as well.

349
00:18:23,320 --> 00:18:25,440
Speaker 1: We do the right things. We do what's right for people.

350
00:18:25,440 --> 00:18:27,119
Speaker 1: We do it's right for the farmers, we do it's

351
00:18:27,160 --> 00:18:29,920
Speaker 1: right for the environment. For the last twenty years at Chipotle,

352
00:18:30,359 --> 00:18:33,600
Speaker 1: Jack hard Tongue has made strategic decisions based on what matters,

353
00:18:34,000 --> 00:18:37,160
Speaker 1: even in times of turmoil in crisis. Looking back, more

354
00:18:37,200 --> 00:18:40,119
Speaker 1: often than not, it's paid off. So I wanted to

355
00:18:40,160 --> 00:18:43,320
Speaker 1: know what he sees when he looks ahead, what's the

356
00:18:43,359 --> 00:18:45,760
Speaker 1: opportunity for Chipotle and the next ten years. It excites

357
00:18:45,800 --> 00:18:49,240
Speaker 1: you the most, well, I think the most exciting thing

358
00:18:49,359 --> 00:18:52,360
Speaker 1: is that we're not even halfway to our potential um

359
00:18:52,400 --> 00:18:54,520
Speaker 1: in the US. So you know, when I joined the

360
00:18:54,520 --> 00:18:56,760
Speaker 1: company with a few hundred restaurants and we're talking about

361
00:18:56,760 --> 00:18:59,240
Speaker 1: a thousand, maybe two thousand. Here we are three thousand,

362
00:18:59,280 --> 00:19:02,120
Speaker 1: talking about seven, and I believe as we approach seven

363
00:19:02,200 --> 00:19:04,080
Speaker 1: that number is going to be higher, a lot higher.

364
00:19:04,200 --> 00:19:06,440
Speaker 1: Well I don't know how much higher, but for sure

365
00:19:06,480 --> 00:19:09,000
Speaker 1: it's going to go up. And international we're just scratching

366
00:19:09,040 --> 00:19:12,080
Speaker 1: the surface. And we've been very responsible in international where

367
00:19:12,080 --> 00:19:15,240
Speaker 1: we've taken the same food ethos we've owned the restaurants

368
00:19:15,240 --> 00:19:17,560
Speaker 1: so far, and so it's been a very slow let's

369
00:19:17,560 --> 00:19:19,720
Speaker 1: make sure we get this right. You know, sometimes you

370
00:19:19,760 --> 00:19:21,600
Speaker 1: have to go slow before you go fast, and that's

371
00:19:21,640 --> 00:19:24,120
Speaker 1: kind of been our approach. We've gone slow, and now

372
00:19:24,119 --> 00:19:26,960
Speaker 1: we're positioning ourselves too, I think in the not to

373
00:19:27,080 --> 00:19:29,480
Speaker 1: Distan future go fast into international. So those are two

374
00:19:29,480 --> 00:19:30,919
Speaker 1: things that excite me the most. All Right, what's the

375
00:19:31,000 --> 00:19:34,560
Speaker 1: challenge for the next ten years that is on your

376
00:19:34,600 --> 00:19:38,080
Speaker 1: mind the most, that maybe even keeps you up at night? People, Um,

377
00:19:38,160 --> 00:19:40,960
Speaker 1: when we run all of our restaurants like we do today, Um,

378
00:19:40,960 --> 00:19:43,680
Speaker 1: we have around a hundred thousand employees. As we grow,

379
00:19:43,680 --> 00:19:47,000
Speaker 1: we're gonna need more employees. Uh. We promoted nineteen thousand

380
00:19:47,080 --> 00:19:51,440
Speaker 1: people last year of our of our promotions were in house.

381
00:19:51,760 --> 00:19:53,560
Speaker 1: So we always have to be on our game in

382
00:19:53,640 --> 00:19:56,600
Speaker 1: terms of hiring great people that believe in Chipotle and

383
00:19:56,600 --> 00:19:59,600
Speaker 1: our purpose today, that have the desire to learn how

384
00:19:59,600 --> 00:20:01,879
Speaker 1: to cook, learn how to run a business, learn how

385
00:20:01,880 --> 00:20:03,960
Speaker 1: to lead people. If we do a great job with that,

386
00:20:04,119 --> 00:20:07,160
Speaker 1: the future only gets brighter. So we're in great shape

387
00:20:07,160 --> 00:20:09,680
Speaker 1: from with people standpoint. But that's something that I'll always

388
00:20:09,720 --> 00:20:11,879
Speaker 1: worry about. Are we are we hiring and developing the

389
00:20:11,960 --> 00:20:13,600
Speaker 1: right if you don't want to be losing people. If

390
00:20:13,640 --> 00:20:16,639
Speaker 1: we lose people, then we might have to resort to franchising.

391
00:20:16,720 --> 00:20:19,480
Speaker 1: And it's hard to follow a purpose during tough times

392
00:20:19,480 --> 00:20:21,960
Speaker 1: like during a pandemic. It's hard to invest in things

393
00:20:22,000 --> 00:20:24,320
Speaker 1: like food and people you win margins or under pressure.

394
00:20:24,359 --> 00:20:26,920
Speaker 1: When you own your own restaurants, you can make those investors.

395
00:20:26,920 --> 00:20:30,199
Speaker 1: How do you see your role as CFO changing in

396
00:20:30,200 --> 00:20:31,960
Speaker 1: the next ten years? Safe to say it's changed a

397
00:20:31,960 --> 00:20:33,880
Speaker 1: lot in the past ten years. How about the next

398
00:20:33,920 --> 00:20:37,280
Speaker 1: ten it has? You know, I think it'll just evolve

399
00:20:37,440 --> 00:20:40,880
Speaker 1: with the challenges. I mean again, I'm I'm already fortunate

400
00:20:40,920 --> 00:20:43,400
Speaker 1: that I've been able to get involved in real estate

401
00:20:43,560 --> 00:20:45,800
Speaker 1: and supply chain. I spend time in a restaurant, spend

402
00:20:45,800 --> 00:20:49,360
Speaker 1: time and suppliers, um, you know, spend time international as well,

403
00:20:49,720 --> 00:20:52,200
Speaker 1: So I always I already get to spend a lot

404
00:20:52,200 --> 00:20:54,280
Speaker 1: of time in a lot of these areas I think

405
00:20:54,440 --> 00:20:57,520
Speaker 1: UM in terms of evolution, UM, it's probably more a

406
00:20:57,560 --> 00:21:00,200
Speaker 1: matter of the folks on my team, some of which

407
00:21:00,200 --> 00:21:01,800
Speaker 1: are new the fole in last few years, some of

408
00:21:01,800 --> 00:21:03,959
Speaker 1: which have done with us for a long time, to

409
00:21:04,240 --> 00:21:06,200
Speaker 1: help them rise up so they can take on bigger

410
00:21:06,200 --> 00:21:09,560
Speaker 1: responsibility and we become a bigger company. Everybody in the

411
00:21:09,560 --> 00:21:12,240
Speaker 1: company will need to step up and take on bigger responsibility,

412
00:21:12,440 --> 00:21:14,080
Speaker 1: so my main goal will be to make sure that

413
00:21:14,119 --> 00:21:16,600
Speaker 1: they're ready to take those on. What's the skill set

414
00:21:16,640 --> 00:21:20,840
Speaker 1: that you think every CFO should be acquiring in this environment?

415
00:21:21,480 --> 00:21:24,680
Speaker 1: I think being digital savvy UM is probably the most

416
00:21:24,680 --> 00:21:27,760
Speaker 1: important thing. Trying to stay you know, keep up or

417
00:21:27,800 --> 00:21:30,399
Speaker 1: even stay ahead of where technology is going, not just

418
00:21:30,480 --> 00:21:32,360
Speaker 1: in the next five year, has been next center fifteen years.

419
00:21:32,680 --> 00:21:35,040
Speaker 1: That's the most critical for See. What's the best advice

420
00:21:35,080 --> 00:21:36,960
Speaker 1: for the future that you'd give to somebody, a person

421
00:21:36,960 --> 00:21:40,240
Speaker 1: who just got promoted to CFO today, I would say,

422
00:21:40,359 --> 00:21:43,199
Speaker 1: be really really curious, UM, try to learn as much

423
00:21:43,240 --> 00:21:45,600
Speaker 1: as you can about every part of the business. Every

424
00:21:45,640 --> 00:21:49,800
Speaker 1: CFO knows how to read financial statements and go through

425
00:21:49,800 --> 00:21:52,280
Speaker 1: what a CFO is supposed to do. But I think

426
00:21:52,320 --> 00:21:54,040
Speaker 1: what you have to do is put those aside at

427
00:21:54,080 --> 00:21:56,640
Speaker 1: some point, go spend time in your business. In our case,

428
00:21:56,680 --> 00:22:00,520
Speaker 1: spend time in restaurants, spend time with suppliers. I think,

429
00:22:00,760 --> 00:22:03,280
Speaker 1: get to know how other people within the business, what

430
00:22:03,359 --> 00:22:06,920
Speaker 1: their challenges are, what their opportunities are, um what really

431
00:22:07,000 --> 00:22:10,080
Speaker 1: makes the customer care about your brand or your business.

432
00:22:10,359 --> 00:22:12,639
Speaker 1: And I think the more you do that, when you

433
00:22:12,680 --> 00:22:14,879
Speaker 1: go back to the spreadsheets, you're going to be thinking

434
00:22:14,920 --> 00:22:17,320
Speaker 1: about things from a different sample. Your priorities might change

435
00:22:17,320 --> 00:22:19,240
Speaker 1: a little bit right, and it might change how you

436
00:22:19,280 --> 00:22:21,639
Speaker 1: make investments to make sure that the customer experience is

437
00:22:21,680 --> 00:22:25,159
Speaker 1: better next time rather than the margin is better. I mean,

438
00:22:25,200 --> 00:22:27,080
Speaker 1: if you invest in the customer in a way where

439
00:22:27,119 --> 00:22:29,359
Speaker 1: they become loyal to your customer, the margins will come

440
00:22:30,520 --> 00:22:33,640
Speaker 1: heartfelt and hands on. Jack hard Tongue has put Chipotle

441
00:22:33,720 --> 00:22:36,600
Speaker 1: in position to go forward by always making sure the

442
00:22:36,640 --> 00:22:39,399
Speaker 1: business goes back to the start and stays true to

443
00:22:39,480 --> 00:22:43,560
Speaker 1: its roots. That's what makes him Chippotle's chief future officer.

444
00:22:44,160 --> 00:22:46,879
Speaker 1: I'm Carol Masser. This is Bloomberg