Behind the Counter: Inside Chipotle

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July 9 (Bloomberg) -- Inside Chipotle. It's a company that broke all the fast food rules, turning a small eatery into an $16-billion, 1500-store chain. Bloomberg television takes you behind the counter to see how this company keep customers lining up. (Source: Bloomberg)

With the writing.

He is, quality,, tripoli has reinvented the fast food business.

We reinvented the fast food culture.

They have smoked their competitors.

The competitors are following suit.

Competition helps us, it does not hurt us.

We are really passionate about feeding our customers great food.

Food evangelist?

Maybe.

On a mission?

Definitely.

After graduating for the culinary institute america, steve ells had a dream.

I wanted to open my own restaurant.

It was a modest investment.

$80,000 or so.

My dad lent it to me.

He opened his first chipotle in denver, serving up tacos amber a dose.

The idea was to use materials that were inexpensive.

Barstools, things like that.

I had this built in environment that i think really said a lot about the brand, and the food we were serving.

Things went so well that his dream of opening a fine dining establishment was pushed aside.

This is much better than i had expected.

I should probably have one more of these.

Then i will get onto my real restaurant.

The second restaurant did much better than the first.

Within five years, he had opened 15 chipotles.

The biggest fast food chain invested $360 million in chipotle.

Mcdonald's held a majority stake.

It was a great way to really jumpstart chipotle.

Without mcdonald's, they would not have become a big company.

They immediately got the benefit of the huge company system , real estate expertise.

A bunch of stuff.

What we found was we had different cultures.

Those different cultures, and the donald's decision to focus on a core business, led to a parting of the ways.

Mcdonald's spun off chipotle, making $670 million in the deal.

The day chipotle went public, the stock went wild.

Doubling in one day.

The second best restaurant ipo of all time.

Today, the company is worth $12 million.

The stock is more than tripled in the past five years.

We broke all the fast food rules.

We ordered fresh ingredients.

We prepared everything in the restaurant according to classic techniques.

We serve all the food in an interactive format, so the customers get to pick and choose what they want.

It is a former customers are lining up, eager for food that has not been sitting under heat lamps, but is made in front of them.

They created the category.

They are trail blazers.

Fast, casual eateries don't offer full table service, but promise a higher quality of food and atmosphere.

Fast casual is the fastest- growing category in the fast food business.

Compared to sales growth of fast food chains, including taco band l -- taco bell and mcdonald's. they have been to brand themselves as a company that you can identify with basing your values.

This is steve.

He is a classically chained chef.

You didn't start out that way.

I was starting out by buying fresh food.

You learn the maybe fresh is not enough anymore.

He knew to understand -- you need to understand the ways farmers raise food.

Steve had an idea.

He visited the farms where pigs were raised.

My introduction to the way most of the pigs were raised, 19% of them -- 99% of them, when i solve that, it was really shocking to me.

It is the model that i think is based on a lot of exploitation.

They are crammed into confinement.

You work in -- you were upset by it.

Most people who see that would be upset.

Chipotle decided they would no longer use cows and pigs use on industrial farms.

Today, all of the pork is raised at the diamond ranch pork company, a farmer's cooperative.

Chipotle buys more naturally raised meat than any restaurant in the world.

The chain uses lettuce, peppers, and oregano from local farms around the country.

This food with integrity comes from steve ells.

He has taken a hands on approach to every part of the business.

It is cook for 5.5 minutes -- 5.5 hours.

It is a philosophy reach by the management team.

Anytime we get customer feedback that they have an experience that was less than wonderful, would pick up the phone and call them.

We write them back.

A handful of employees are longtime friends of steve ells.

There are a lot of people who make up the senior management team.

Two i have gone to school with.

Then there is another high school pal, who runs chipotle's social media.

Did you guys have any idea that this is what you would be doing together?

Steve was not even a chef at that point.

This is all very strange.

Garlic, onions.

Delicious.

Not strange to steve ells, who was fascinated by food at an early age.

Welcome to the french chef.

You watch julia child when you were younger.

It is true brit i love those shows.

This goes into a 350 degree oven.

I was in grade school.

I would watch those shows and go into the kitchen, and try to make stuff.

Chipotle's been making supper the last 20 years.

The company continues to gain traction thanks to a key advantage.

The founders.

All good on screen doors have great passion.

It.

this guy lives in.

-- all good entrepreneurs have great passion.

This guy lives it.

Going face to face with employees.

? hello.

Company stock about the importance of having a people culture.

This company means it.

Hello, nice to see you.

It is 9:00 on a monday morning.

The ceos are making a surprise visit to this chipotle.

Their mission, to introduce every employee who works here.

Laster, -- answers for what they call the best restaurant to her -- do you know what a restauranteur is?

Someone with nice manners.

What was your name again?

They talk to the team.

Their goal, put employees at ease while checking in on what is going on at the restaurant.

How was the menu when you arrived?

Mcdonald's. i had to run the team.

Who hired you?

Denise.

It is a sound very convincing.

Is in these and empowering -- is the niece and empowering leader?

Yes.

Why did you choose chipotle?

I love cooking.

I knew that chipotle had all time -- had all types of potential.

I knew i needed to have something, some sort of a program that would enable us to attract better people.

When steve approached me to join, he was intrigued by the kind of culture we had at my law firm.

A lot of people into what they were doing.

I think steve saw that, and challenge me as to whether i could bring that culture to chipotle.

The hero in their system is the store manager that manages to promote the most people who are qualified.

It is essential to the growth model.

, the chain is more than 1400 restaurants in the u.s., as the number of locations almost doubles.

They plan to have more restaurants by the end of this year.

Internationally, chipotle began expanding five years ago.

They have five restaurants in canada, with more under construction.

The company's -- some investors say chipotle shares have gotten ahead of themselves.

This is a mature company trading at 40 times earnings , 40 times sales.

It is trading at 50% over its peers.

When you looking at the s&p 500 and the multiple, this is the thing trading like an internet stock.

There is no reason it should be.

Likes other critics have included david ein worn -- david einhorn.

There are folks that are shorting chipotle.

Do you worry about increasing labor cost question are not really.

We have notice advantage.

Do i worry about it?

No.

i think that the best way to make sure that our labor costs are healthy is to make sure that our teams are the best they can be.

You can get on and google minimum wage hikes.

It is coming.

It is coming for everyone.

When it hits mcdonald's, they are trading at 15 times earnings.

When it hits chip only, their margins are going to be hit.

It is a totally different conversation.

You are shorting the stock, but not the company.

Correct.

Going back 20 years, if i had thought about making money, instead of creating a great restaurant, i would've thought about cheaper ingredients.

I need to buy things that are highly process and easy for an inexperienced, low performing team to consistently produce.

Chipotle has run into problems in its effort to build top teams.

In 2010, and audit found undocumented role workers -- workers.

And led to massive firings.

Our turnover has normalized.

For a while, it was increased as a result of the concerns that arose from the investigation with regard to immigration.

It is leveled off now.

I love this company.

I worked retail for five companies.

I never work for someone who pushes people like you guys push it.

The team is coming together.

It sets yourself up for success.

Coming up, chipotle's success may lie in its untraditional methods.

? just another rock festival?

Not exactly.

It is the annual -- festival, part of the chipotle unconventional approach to marketing, including demos, drinking, and education.

In between their free burritos promote -- are both that promote sustainable farming.

Chipotle's philosophy, food with integrity.

In the form of an all-day party.

Mark created the festival.

We do not do the same marketing everyone else does.

We have all these other ways to tell our story.

Another way they are telling their story, is this mini drama series.

We are filming a web series about a likable but misguided group of people whose job it is to spend the most egregious aspects of industrialized agriculture in a positive way so it looks good for consumers.

I want to know more about you.

They plan to air it online , and it will be shown on -- and it may be shown on cable or tv.

Consumers are ready found it entertaining, it's one and only international tv ad.

? an animated film about a farmer contrasting the drawbacks of industrial farming.

It went viral, getting more than 4 million hits, then went to movie theaters before hitting the airwaves.

He was brilliant in the way he wanted to communicate the importance of food with integrity.

A way that is not preachy, anyway people can understand -- in a way that people could understand the emotional components to why it is so important to buy sustainably raised food.

These days, they are selling more than food.

Scroll the website, you will see organic foodies -- hoodies.

Are you trying to be a lifestyle brand?

Our customers made as a lifestyle brand.

People make their own chipotle t-shirts.

They are very loyal.

For us, it was just a matter of helping that out.

You spent a third of your cells on ingredients, compared to everyone else.

Can you keep it going?

The most important marketing we do today will always be what you experience when you come into the restaurants.

You love what you eat.

When the lines are not 20 minutes long, then we will optimize it in.

It has no plans to roll out a big tv campaign.

In contrast to his competitors, their main menu has hardly changed since the first store opened 20 years ago.

Our focus , our simple menu, and the fact that we do not constantly add new menu items.

Therefore, we do not have to spend lots of advertising dollars around those menu items.

We do not have to teach our crews had to prepare new menu items, which will be dumbing everything down.

Chipotle has a couple of things.

Bowles, salads, burritos.

It is the combination that people can make.

There are so many flavors that i do not think we need a new item.

We signed a lease and open the restaurant in the dulles airport.

Part of the leased ablation is that we be open during breakfast.

We have since opened another airport location at baltimore airport.

We have a new for caught up -- and that is part of the breakfast burrito.

It is delicious.

We will see how it goes.

Right now, we're just going to continue to throw this out there.

It is a possibility.

One among the menu, -- they started selling the vegan filling.

There are a lot of vegan, vegetarian's in general who are asking for the sort of thing.

Will he notices that people who are buying vegan now, half are vegetarian, and half are people who normally eat meat.

How can you take this model?

First up, shop house.

Based on the flavors and ingredients of southeast asia, you have exciting high curry.

Meatballs.

Traditional thai preparation.

Could you see it for italian food?

Indian food?

Any kind of cuisine will fit the model.

That is why i think it is the new fast food model.

Five years from now, do you want to be the person leveraging this model that you have created?

What is exciting is that it is not going to be about creating anything.

It is about being an extraordinary team.

You wanted to open up a chipotle, and then open up a fine dining.

You still dream about that?

I do.

Every week we open up a new fine dining restaurant near you.

I think this is it.

? .

This text has been automatically generated. It may not be 100% accurate.

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