So, to make sense of all of this, of these challenges and opportunities, we are excited to be joined today by none other than the CEO of Chipotle, Brian Niccol.
Welcome to Post Live, Brian.
MR. NICCOL: Yeah, thanks for having me.
MS. LONG: So, let's start with the delta variant. It's on everybody's minds right now. I'm curious to hear, have you all seen any slowdown in foot traffic in your restaurants?
MR. NICCOL: We have not seen an impact yet on the consumer showing up to restaurants. It's definitely, I think weighing on people's mind, though. We are seeing in data, you know, probably about two or three weeks ago COVID seemed to be something that people felt was definitely getting behind them. Now, it is definitely in--back in front of them, and hopefully more people take action on the vaccine front.
MS. LONG: Yeah. And what about any change in hiring or in workers maybe being a little bit more reluctant to apply to your job openings?
MR. NICCOL: You know, actually what we've seen is, at least in our company, and I think I'm seeing this broadly across the industry, is obviously, as people have contact with COVID, you're seeing more employees being excluded from work.
Fortunately, with all the incentives we've put out, as well as the wages and benefits and career opportunity, we've kept a really good stream of candidates both applying as well as then keeping our great employees with us. So, we're not seeing a major impact on applicant flow or retention of employees. The impact we're seeing right now is exclusions just from people either having contact with COVID or they themselves having COVID.
MS. LONG: Got it. And what about masks? Your company policy is to--for the employees to wear masks at all times, and it's recommended for customers to wear masks. Why not make customers have to wear masks, as well?
MR. NICCOL: Yeah, so, obviously, we want to make sure we've got the safety of our employees at the front, which is ensuring that they are wearing masks and were practicing all the best practices we can to keep people safe from COVID.
On the customer front, we are recommending they wear masks. You know, we're not looking for our employees to police people's behaviors on this front. You know, the sign is posted right in the front of the door. So, when you walk through it's pretty clear our preference is you wear a mask.
Also, fortunately for Chipotle, a lot of our transactions happen, you know, pretty quick. So, it is an order ahead through the mobile app, where you just come in, grab your food, and go. Or if you do go down the line, there is pretty good social distance between the employee and the customer that's ordering their food. And then, most of the folks still are taking their food out of the restaurant. So, we feel like there's a lot of things in place with all the practices we've been executing. Obviously, we still are recommending people wear masks, but we're not asking our employees to police it.
MS. LONG: And what about obviously different policies, as you know, are in place in different parts of the country. I'm sitting here in Washington, D.C. where we are now required to wear masks indoors again, including at restaurants.
How has that been for you to have to adjust to all these different policies as this delta variant rises again?
MR. NICCOL: Yeah, look, it's tough, especially when you've got restaurants in just about every state and every county, and those rules continue to move around. But we've got a great team. We have a taskforce that has been in place for the last 18 months, meets just about every day, twice a day, ensuring that we're following all the local rules.
So, you know, it's kind of a moving target, but luckily, we have an organization of people that are flexible enough to stay in front of it, and then we've got great communication channels with our team members at every restaurant so that we ensure people are following whatever the latest direction is.
MS. LONG: But would your preference be to have masks back in the way that Washington, D.C. is requiring it across the country? MR. NICCOL: You know, my preference would be everybody gets vaccinated and we move on. You know, that would be the ideal scenario, here. And I know people have to get to a certain level of comfort in order to step forward, I guess, and get the vaccine, but I think it continues to prove that the vaccine is effective. You know, it's definitely got less risk than getting COVID, based on everything I'm reading and the people I get to talk to. I'm not an expert in it, but I try to be very well informed.
So, hopefully, where we get to is a really good place in the vaccination rates and we can get back to socializing the way we used to social.
MS. LONG: Yeah, speaking of vaccines, you all generated a lot of buzz in July when I think it was an incentive for customers to get vaccinated with your burrito; you know, buy one, get one free if you're vaccinated.
MR. NICCOL: Yeah.
MS. LONG: Certainly, that was popular.
I'm curious, are you all planning to require you’re your employees to be vaccinated? We have taken that step at The Washington Post. You know, given what you've just said about the importance of vaccines, will you take that step for your employees?
MR. NICCOL: You know, what we are waiting on is for the final approval of the vaccine. And then, where I think we're leaning towards is, in order to be able to come back to the office, be able to come together in big gatherings which, you know, in not-too-distant future, we bring together 4,000 employees for an event. In order to attend that event, we're going to have everybody vaccinated to ensure it's safe.
So, once the vaccine gets to approval, I think it just gives a lot more, I think, latitude in ensuring every employee is vaccinated before they can come to the office, before they can come to large gatherings. And our company obviously wants everybody to be safe and be doing the best thing possible for their health and wellbeing.
MS. LONG: So, it sounds like you anticipate it will happen at some point, but no immediate plans.
MR. NICCOL: I think that's exactly right.
MS. LONG: Can I ask about New York City. You know, they've taken this step now of saying they want people to be vaccinated, and that in order to even go to a restaurant or an inside a store, by the middle of September, you would need to have at least one dose of the vaccine.
You know, is it feasible? You talked about how you don't want your employees to have to police masks. Is this feasible, to have your staff or somebody at your restaurants and stores doing this?
MR. NICCOL: You know, that's a great question. Obviously, this just came out pretty recent, and we're working through how we actually comply with this. You know, obviously, we will do everything we can to comply. You know, we're trying to figure out if there is a technology solution for this. What is going to be the path to ensure that customers that are coming into your restaurants are vaccinated?
You know, we have solutions that we can put in place to ensure that all our employees that are working have at least one dose, or have taken the other mitigating factors into place so that they are safe to work. I'm assuming, as this law gets figured out, you're going to have to figure what you're going to do with people that just medically can't take a vaccine or have a reason why they can't take a vaccine. We can't just exclude them from working.
So, there's still more to be figured out on this, but it's not going to be a very simple execution, and I think we're going to have to figure it out. It's going to be tricky, though.
MS. LONG: And does it feel like you're able to negotiate and talk through these issues with the City of New York? Are they being understanding in what you're saying and solutions that you and others are proposing?
MR. NICCOL: You know, I've not had a chance to talk to anybody that's involved with this. Obviously, we have our folks that are reaching out to hopefully provide feedback. And I'm hopeful that they'll take our feedback so that we can get an outcome that is executable and repeatable. It does us no good to put something in place that can't be executed.
MS. LONG: Yeah. And it sounds like it would just be too onerous to have to have somebody standing at the door, sort of checking people's cards or photos of their cards.
I was just at Shakespeare in the Park in New York, and that's what they did. They had an employee that was working there.
MR. NICCOL: Yeah, yeah. Yeah, I mean, that could be the simple solution, is we're just going to have to put somebody at the door.
You know, the thing that's interesting is not all restaurants have that person, you know, a hostess or someone that greets people at the door. So, we'll have to figure out who that position would go to. And if that is the path forward, what is going to be the piece that people need to show so that we know it's valid.
Yeah, so, there's still a lot of things to figure out. Obviously, it's something that is going to require some thinking if we want it to be truly executable.
MS. LONG: Yeah. I'd like to shift gears and ask you about supply chains and inflation. We just saw the latest inflation data this morning. You know, certainly prices are high, especially food prices, food at restaurants up close to 5 percent over last year. You all have raised prices, I believe, about 4 percent this summer.
You know, are you still struggling with getting any of the supplies that you need right now? I was just at a Chipotle a couple of weeks ago and they didn't--they ran out of guacamole. It may have been a temporary thing, but there was certainly some rioting in the line.
You know, are you seeing any supply chain issues right now?
MR. NICCOL: You know, look, the supply chain is still tight. What we're dealing with more than anything else, frankly, is that a lot of our suppliers, they're still struggling with staffing to basically pull together the goods that they then need to provide us. So, whether that's chicken or packaging avocados, we're seeing, fortunately for us, no shortages, but we do continue to hear there's a lot of pressure and people are doing everything they can to ensure companies like ours don't run out of products.
But we're definitely not past this discussion where--you know, it's a weekly conversation to figure out, okay, how do we keep our supply chain going. We don't want to run out of any products. I'm sorry to hear we were out of guacamole. That sounds like that was more of a store issue than a supply chain issue, though, would be my guess. So, you know, trade is still tricky and getting workers is still tricky. And while that continues to go, it's going to continue to be a tight supply chain.
MS. LONG: Yeah. Can I ask directly, are you anticipating any more price increases this year for your company?
MR. NICCOL: You know, we don't have any anything planned, but obviously we are keeping a close eye on what is happening with all of our costs. And then, subsequently, we'll take action if we need to.
You know, fortunately for Chipotle, we have a really good value proposition, so we do have pricing power. So, if we needed to pull that lever, we feel like we could. I'd prefer not to. You know, I'd love to find other places to offset the cost so that we don't have to impact ultimately the purchase price of our burritos and bowls. But you know, sometimes there comes a point where you have no other lever to pull than the pricing lever, and nothing's planned right now, but we'll see how the rest of the year unfolds.
MS. LONG: Yeah.
MR. NICCOL: One thing I know for sure is everything is continuing to be unpredictable, so [audio distortion]--
MS. LONG: Yeah, that sounds about right.
MR. NICCOL: Yeah.
MS. LONG: I was struck by a comment that you made recently that you and your executives--that you saw very little price resistance--very little resistance to the price increase. Basically, people didn't shout at you or didn't sort of react super negatively.
Was that surprising? Were you anticipating a little bit more pushback?
MR. NICCOL: Look, nobody likes pricing to go up, but fortunately, as I mentioned, we have a great value proposition. When you look at the customization, the quantity of food that you're able to get, and then the quality of our food, people realize it's a heck of a value, when you're buying a chicken burrito for less $8.00.
And so, yeah, we had to take the prices up. But for the most part, our chicken burrito, with the exception of maybe Washington, D.C. or New York City, some of the higher-cost markets, still is below $8.00. So, it's still a tremendous value. That's why we didn't see really any major resistance, and you know, we do everything we can to keep it a great value, while not giving up on having food with integrity and pushing our food ethos forward. So, people appreciate it and I think they really like the fact that the food is delicious and they can feel good about the food that they're eating.
MS. LONG: I'd like to ask you about wages. Your company made a lot of waves earlier this summer when you increased the average pay to $15.00. So, up about $2.00 in many parts of the country.
What happened after you raised those prices--excuse me, the wages?
MR. NICCOL: The wages? Yeah, so, you know, look, one of the things that was clear to us is the business was just responding as COVID requirements were being lifted, okay? And our current employees were getting overwhelmed by the amount of demand they were dealing with, and we were having a hard time attracting new employees to start working. And what we didn't want to have happen is we burn out our existing employees.
So, you know, we've got great benefits, right? We've got debt-free degrees. We've got mental health benefits. You know, we've got a great purpose for our employees. But one thing that came back was, hey, look, we need to increase wages if we want to get people to come back to the restaurant industry, for a myriad of reasons.
And when that became clear, we decided to move the wages up to be, on average, $15.00. And fortunately, the combination of that starting wage was very compelling, the great benefits, and then the opportunity wherein, like, two or three years, you can find yourself running a Chipotle restaurant, making over $100,000. That resulted in a lot of people applying and a lot of people getting hired and also, really importantly, it took a lot of the pressure off our existing employees. So, it made their job much more tolerable.
MS. LONG: As you noted, the average is 15. Some employees are less than that. I believe 11, maybe, is your bottom point. Why not take everybody to at least 15?
MR. NICCOL: You know, I think what will happen is, over time, wages will continue to rise, but what we always look at is the marketplace, what's competitive to get the starting employee that we need.
And that varies by market. You know, in markets like New York City and D.C., we're paying well above $15.00 as a starting wage. So, we always want to be competitive. What we find in the market is we're usually the leader and we like that position, and we'll continue to be a leader in wages, as well as total opportunity. And that's what really matters to the employee. What we hear over and over again is they want a great opportunity to start and where that opportunity can lead them to. And so, that's really the path we've been on.
MS. LONG: As you likely know well, President Biden has been vocally supportive of a $15.00 minimum wage. Would you support that nationwide or would you have concerns about that number?
MR. NICCOL: You know, look, if that's what ultimately needs to be done, fortunately for us, I think if we stage that in--the way it's been staged in a lot of other communities or counties--it's definitely something that can be executed. It's hard to just throw a switch, though, and changes wages to a new minimum wage that moves in a dramatic fashion. But you know, if that's where we need to get to in order to ensure employees have a great experience, we'll figure out how we'll get there. You know, we've always figured out how to invest in our people, and we'll continue to do that.
MS. LONG: And what about your referral bonuses. I believe it was about $200 at one point. Are those still in place and have you done any retention bonuses?
MR. NICCOL: So, our referral bonuses are still in place. And you know, actually, it's one of those things that we've always had a referral bonus program, we just didn't probably market it as aggressively as we should with our employees. So, we just ratcheted up the communication so they understood that existed.
And then, we always had for our employees a quarterly bonus. So, that's not a new program. And even during COVID, we honored paying out all those quarterly bonuses. We thought it was the right thing to do for our employees. They were performing in a big way, even though our results weren't what we initially set before we knew we were going to be dealing with COVID in 2020. And you know, obviously, we're trying to set targets in 2021, anticipating where we think COVID will be. So, we continue to take quarterly bonuses, which is a big incentive for our employees, and obviously everybody likes to get a bonus.
MS. LONG: I'd like to switch gears and ask you about innovation. It's pretty remarkable, I think, in your last results, you were talking about, about half of the orders coming through in a digital format, either through your apps or your channels or through, like, a DoorDash. You've also innovated with Chipotle Lanes, the drive-through type concept.
MR. NICCOL: Yeah.
MS. LONG: How much of this do you think sticks around, or is it likely to fade as people maybe return to walking in in person?
MR. NICCOL: You know, look, I think it's here to stay. And what we've seen is our business reopens, our dining rooms reopen. People get back to kind of their daily mobility. We're definitely seeing increases in our lunch dining room business, but the access that we've created with digital is very convenient, it serves different occasions, and what we hear from consumers is they love that access for those occasions, and the convenience, customization, and quality of food for those occasions.
So, I think it stays. You know, probably the absolute percentage will change, but the absolute dollars, I think, will hold and will just keep growing from here. Consumers continue to tell us they want additional access, whether that's more physical restaurants, or more access from our physical restaurant.
MS. LONG: Another potential change we're seeing is obviously the Senate just passed this infrastructure bill that was much-lauded in a bipartisan way. There is now debate on a second sort of infrastructure budget reconciliation package.
Part of that would require an increase in corporate taxes from maybe 21 percent to 25 or 28 percent. You know, Chipotle, you all have been very open that your tax rate went down after the 2017 tax cuts. You know, would you be okay or support going to 25 or 28, or would that be a real concern for you?
MR. NICCOL: You know, look, I mean, we are pretty much a U.S. company. So, all of our restaurants--you know, we have about 2,900 restaurants. We have about 25 restaurants in Canada and a dozen restaurants between France and the UK.
So, obviously, we've always paid taxes in the U.S.; we will continue to pay taxes in the U.S. If it does increase, it will have an impact on obviously some of our earnings, and we'll manage accordingly. You know, one of the things that we've continued to say is whatever the policy may be, we'll figure out how to continue to stay true to our purpose of cultivating a better world and bringing people food with integrity.
You know, obviously, when the tax rate got lowered, we benefitted because we're predominantly a U.S. company. If the tax rate goes up, you know, it will have a little bit of an impact on our earnings, but we're going to continue to grow just the same way we've always grown. We'll continue to stay after making great burritos for people really quickly. It doesn't change what we do, and, you know, we'll plan accordingly.
MS. LONG: So, it sounds like you don't think it would make--it would be too much of an anticompetitive measure to go a little bit higher if they decide that that's the right policy.
MR. NICCOL: Yeah, I don't see it as an anticompetitive business for us. You know, again, our business is not like everybody else's. We're a company with no debt and a really strong balance sheet, and we'll continue to perform; that's what we'll do.
MS. LONG: I wanted to ask you about workers. You mentioned that many of the benefits, not just the rising pay, but the mental health, which has been huge, obviously, lately that you all offer, some 401(k), some education benefits that are certainly helping to attract younger and probably mid-career workers.
You know, but your company has also been--had a few pretty prominent lawsuits. There was the 10,000 workers who sued the company in 2016 for wage theft, when they weren't being paid fairly. And more recently, the City of New York has a lawsuit against you all over the Fair Work Week Law, where they say people--they say your company is not--you know, is not scheduling people properly and giving them enough advance notice.
What changes are you making at the company to ensure that workers are treated in the way that you want to see them be treated, that their schedules are laid out clearly, and that they are certainly getting paid for the time they put in?
MR. NICCOL: Yeah, look, absolutely. Every employee at our company that works for Chipotle, we want to ensure they get paid for the time they worked.
And we also want to ensure that the job they have is a great job, that not only gets them trained and, you know, demonstrates they have the ability to be successful in their role, but also sets them up for potentially where their ambitions take them. So, you know, that's what we're focused on. We're investing in technology; we're investing in obviously the right standards and practices in training to ensure that all the different regulatory environments we comply with and that our employees have a great work experience and they get compensated accordingly.
You know, there is no magical trick to this. We want to hire great people; we want to compensate them effectively; and we want to see them grow within our company. It's that simple.
MS. LONG: And I guess, do you think that the New York City lawsuit is not correct or do you think there's some merit to what they're saying?
MR. NICCOL: Well, look, I think first of all what we want to do in New York City is we want to hire great people. We want to have them have schedules that they can work. If they need to change the schedule, you know, we want to give them the flexibility to change the schedule. And we'll figure out how to comply with the law.
We're going to follow the law. That is--that's always our commitment. And you know, what we want to do is we want to employ people that want to work at Chipotle. If they don't like working at Chipotle, obviously, they have the ability to leave our company, but I prefer to give them a work experience, a great culture so that they can start with us, grow with us, and hopefully really be proud to be a part of our company.
MS. LONG: And lastly, I would remiss if I didn't ask you about a number of popular menu items.
I'm curious, though, to hear what's your typical order at Chipotle? Are you a bowl person, a burrito person? What's your order?
MR. NICCOL: Yeah, so, I usually go with the bowl, and I'm a big fan of our barbacoa. You know, I just think it's terrific--and our carnitas. So, I kind of bounce between a barbacoa bowl and a carnitas bowl. I just think they're just spectacular.
MS. LONG: And what about some popular menu items--I tried earlier this year your cauliflower rice, sort of a new rice substitute to be more keto friendly, I guess. Are we going to see that come back or was that popular?
MR. NICCOL: Yeah, that was really popular and you will see us bring it back. You know, we've done various innovations, right, whether on the menu--you know, carne asada, the cauliflower rice. We brought in a new blanco queso. So, it's been really fun to be able to, I think, extend the menu. Most recently we did the quesadilla for our digital business. And people find their favorites and we're always pushing ourselves. We want to be a leader in culinary, as much as making sure we're doing the right thing for culinary.
MS. LONG: And I guess any other upcoming menu items people should be looking out for this fall?
MR. NICCOL: You know, I think we've talked about--we've been testing this smoked brisket, and it's really fabulous. So, it's gone through our innovation process. It's validated so I think in the not-too-distant future we'll be bringing smoked brisket out for everybody to give it a try.
MS. LONG: Well, that does sound pretty yummy.
Brian Niccol, thank you for being with Washington Post Live, today.
MR. NICCOL: Yeah, great to be with you guys. Take care.
MS. LONG: As always, you can find more programming and our list of upcoming events at WashingtonPostLive.com. There is a great lineup for August, so whether you’re at the beach or stuck in the office or a home office, there is a lot to delight, entertain, and inform you on Washington Post Live.
Thanks for watching.
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