Chipotle CEO talks state of the consumer, social media, labor shortage, and stores unionizing

Chipotle Mexican Grill CEO Brian Niccol joins Yahoo Finance's Brian Sozzi and Brooke DiPalma at Yahoo Finance's 2022 All Markets Summit.

Video Transcript

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BRIAN SOZZI: Brian Niccol is the Chairman and CEO of Chipotle. He runs 2,700 restaurants in North America and Europe. Niccol has instilled a culture at Chipotle of serving food that is both fresh and raised responsibly. Under his leadership, Chipotle has posted record sales and profits despite increased food and labor costs. Niccol plans to keep the growth story going by opening more restaurants and using new technology to drive sales, oh, yeah, and to keep that guacamole flowing.

I'm here with Chipotle CEO, Brian Niccol, and Yahoo Finance's Brooke DiPalma. Brian, good to see you here. thanks for joining us. Look, we've been talking all day long about how the economy isn't doing great, you have stocks in the tank, yet you have guys like me spending up to buy double meat bowls from a Chipotle. How do you explain all this?

BRIAN NICCOL: Well, you know, look, I think what we've really focused on is making sure that in challenging times and in good times, we ensure we've got great culinary, we've got our teams trained and ready to give people exactly what they want at the speed at which they want it. And hopefully, that's why guys like you keep coming back for the double meat, so I'm glad to hear that.

BRIAN SOZZI: Brian, is it just that your consumer is better off financially, you just focus on a higher-income consumer? And right now, by and large, they're OK, they have the money to go out there and shop, and shop at Chipotle.

BRIAN NICCOL: Yeah. Look, our brand is positioned in a really great spot. Obviously, as you mentioned, we have some higher household income on average in our customers. We also skew younger but we serve pretty much all income groups. And I don't love to see some of the lower income groups being impacted the way they have but we're fortunate that we're positioned the way we are with our commitment to food with integrity.

And frankly, I think the job that the brand has done to position itself in this space of being an elevated food experience, so we get people trading down. And I think we also get people trading up and just in a really unique position. So we're pretty fortunate, no doubt about it.

BROOKE DIPALMA: Speaking of that younger consumer, in Piper Sandler's fall 2022 teen survey, Chipotle was voted number three. It's also the most preferred Hispanic cuisine level for across upper-income and average-income teens there. You're also making headway on BeReal, on TikTok you have 2 million followers. How exactly are you viewing these social media apps as an asset to Chipotle, and really engaging with that gen-Z community?

BRIAN NICCOL: Yeah. Look, you know, we talk about this all the time here, we want to be a brand that's visible, we want to be a brand that's leading culture, and then also in culture. And social media, applications like BeReal are a part of that. That's something that has just really taken off lately.

My understanding is we've maxed out all our followers. We have to continue to figure out how we evolve that platform. But it's really important for us to show up in the places where people want to experience our brand, and then do it in a way where it makes sense for us to show up. And you know, we're very fortunate to have I think one of the best groups of leaders running our social media efforts, our digital efforts, and just really researching where young people are headed. So that hopefully sometimes we're ahead of them, and then other times they lead us to where we need to be.

BROOKE DIPALMA: Another place that people can experience your Chipotle experience is on Roblox. That's another interesting foray for fast food. We see the others get into the game as well. So my question here is, what exactly is the opportunity that you're seeing in the overall metaverse there?

BRIAN NICCOL: You know, it's hard to like put it into dollars and actual sales. It's much more to do with brand relevance and I think being visible. And then playing a role in peoples' every day. People make their meal decisions or their food decisions every day, multiple times a day. And I think it's important for them to understand what our brand stands for, which is this idea of food with integrity, great culinary.

You know, we're going to do the right things for our people, our food, and then our customers. And if they're able to pick that up through programs like Roblox to you know, BeReal, that's hugely important to us. And then look, we're going to always experiment, and that's partly what we're doing with Roblox. This is more about experimenting so that we can understand where potentially future sales may come from. And at a minimum right now it's definitely the right place to be to communicate with young people.

BRIAN SOZZI: Brian, before you came on, I talked to Target CEO Brian Cornell. He told me he is confident they will be able to find 100,000 workers for this holiday season. I was just blown away given the labor shortage. Talk to us about your hiring plans right now, are you able to find the workers you need to support not only the restaurants you do have open but also the hundreds of locations you plan to open this year?

BRIAN NICCOL: Yeah. Look, that's a great question, Brian. And I fully believe our opportunity to join our company and grow with our company, and what we stand for will attract the right employees. We will open well over 200 restaurants this year. And obviously, we've got to staff that with new people. And then we also get to promote people into these roles.

And I think as people understand 90% of our promotions come from within. We have industry-leading benefits, both wages and those benefits that surround you, whether it's health care, mental health, you know, debt-free degrees. We find that we're able to attract a huge amount of people. And then the key piece for us is developing them, training them so that then they become future leaders as we grow this company.

But look, I'm 100% confident we will get these restaurants staffed. I'm also 100% confident that our leaders in our restaurants will take the time to develop our crew so that they ultimately become general managers, our general managers become field leaders, and you know, you can see how this cascades into just bigger and bigger jobs. So people are able to grow their career with Chipotle, as well as move forward our purpose of cultivating a better world. So we'll get it done.

BROOKE DIPALMA: And Brian, on the employee front, it seems like this is the year of unionization for restaurants, not only at Chipotle but of course, others in the fast food industry. This past late August one location in Michigan did choose to unionize. I'm just curious if you'd provide an update on the stance of Chipotle on unionization.

BRIAN NICCOL: Look, I was disappointed to see that happen. You know, I really don't think we need a third party to get between our restaurant teams and our company. We do a better job of communicating directly with our employees on what it takes to be successful at our company, what it takes to have a great work environment, and what it takes to provide a great customer experience. So it was disappointing to see it. Obviously, we'll go through the process that we need to but I really don't see a need for it. And hopefully going forward you know, we'll continue to be able to communicate directly with our employees and grow our employees with that direct communication.

BRIAN SOZZI: Brian, staying on employees, if I'm correct, 15% of your locations are in California. There might be law changes that are coming up now that push up that minimum wage to $21 from $15 or so. How has it impacted Chipotle?

BRIAN NICCOL: Well, you know, look, we already pay well beyond $15 an hour in California. So the fact that there is legislation out there that has the potential that makes the hourly, I believe it's $21, $22 an hour, you know, that's going to put organizations like ours in a place where we'll probably have to raise prices. And it's unfortunate because it also impacts the economic model that could impact how many restaurants we even open in the future in a state like California. Which is a real shame because our brand is loved in California, our employees love working at Chipotle in California. And I know the customers love getting our food. So hopefully, the legislation doesn't get in the way of great economics that result in great opportunities for employees and customers. But if it does, you know, we'll deal with it accordingly but it'd be a real shame.

BROOKE DIPALMA: And in California, at eight restaurants are also testing new kitchen management system software that will help to monitor cooking times, and ultimately tell employees, or crew members rather, when exactly something is ready. I'm curious about how exactly these robots like this kitchen management system, but also a robot especially like Chippy, really comes together with your crew members, and how you ultimately see that spreading to ultimate-- other locations rather?

BRIAN NICCOL: Yeah. Look, this is something that we started down the path a couple of years ago because we asked our employees, hey, look, what are the tasks that either trip you up or you find very hard to get done? Or frankly, when people join our company they say, look, I don't really love doing that work, and they're kind of figuring out how they can just be done with doing that work.

So some of the things we got feedback on were hey, it's really tricky to know how much chicken to cook throughout the day because we get rushes, we get slow spots, then we get fast spots again. So this is really taking artificial intelligence and understanding real-time how fast are you going through the chicken, how fast are you going through the guacamole? How many you know, pieces of chicken do you need to go put on the grill now because based on what we expect happening at dinnertime, this is what you need to cook.

And so it takes a lot of the guesswork out of it for the employee, and then it does it real-time. So that they can be-- you know, our crew doesn't want to be out of anything, right? Because it's a disappointing situation for the customer. And then the crew doesn't feel like they're doing a great job. So this is really a tool that will help them be more ready for the rush and then if the rush exceeds what their expectations were, it informs them so that then they're prepared for the rest of their day so they continue to have a great day.

You know, products like our chips, our customers always want us to be in-- on the menu with our chips, and so what Chippy does is it helps us fry chips all day, right? Versus right now we fry them at some points in the day, and then we sell through, and then it's like oh, we're running out, now we got to go fry chips again. And look, that's a tough job too, to be working on the fryer. And so we got the feedback that hey, look, if you could automate this for me, that would be a huge win.

And so there's other areas that we're working on as well. You know, we want to automate our digital make line. We're partnering with a company called Hyphen, and we're really optimistic that we're going to be able to automate a lot more of that so that our team members and crew are able to just focus more on the front line with the in-store hospitality. And then hopefully, the combination of robotics, artificial intelligence can take care of those digital orders so that they're accurate, on time, and we just give people great experiences, whether it's online or in line in our restaurants.

BRIAN SOZZI: Brian, two fun ones before we let you go here, help the Yahoo Finance community know who Brian Niccol is. First, how did you go from-- I think I've got this, summer intern at P&G working on the Scope mouthwash account, to being the CEO of Chipotle?

BRIAN NICCOL: Well, you know, look, it's one of those things that you never really know where your journey is going to go. But I was very fortunate to get my first job at Procter & Gamble. I got to work with a lot of great people. They took the time to invest in me so that I became I think much better at marketing and general management skills. And I've taken that with me down the road and you know, here I am at Chipotle.

One thing I did discover while I was at P&G-- I had the opportunity to work on Pringles-- is I loved working in the space of food. And you know, it just resonated with me. And you know, so fast forward here we are today. You know, I still strongly encourage you to use Scope mouthwash but obviously, I'm a much bigger fan of guacamole and burritos these days.

BRIAN SOZZI: I don't know where to go with that but let's end on this too, I also tell the-- I also tell the Yahoo Finance community, you were the guy when you were at Taco Bell you created the Live Mas campaign. When you came up with that, did you know that that would be the home run that it's become? They still use this, Brian. I hope we get royalty checks.

BRIAN NICCOL: Well, you know, look, that was another example of having the opportunity to work on a great brand with great people. And you know, we came up with what I believe was a very timeless concept around the idea of Live Mas. And it's great to see they continue to use it, and I continue to see that they're having success. So you know, it's always fun to see places where you've been, continue to have success with programs that you had the opportunity to work on.

BRIAN SOZZI: So very true. Well, keep up the successful days over at Chipotle. Chipotle CEO, Brian Niccol, good to see you. And thanks for joining us as well, Yahoo Finance's, Brooke DiPalma.