The History of Chipotle Mexican Grill

Exterior of a Chipotle restaurant on a busy city street.

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Chipotle Mexican Grill was founded by Steve Ells in 1993 and is based in Denver, Colorado. The name Chipotle derives from the Nahuatl/Mexican name for a smoked, dried jalapeño chili pepper.

Humble Beginnings

Founder Steve Ells attended the Culinary Institute of America in Hyde Park, New York. Afterward, he became a line cook for Jeremiah Tower at Stars in San Francisco, California. In 1993, Ells took what he learned in San Francisco and opened the first Chipotle restaurant in Denver, Colorado, near the University of Denver campus with an $85,000 loan from his father. 

Ells and his father calculated that the store would need to sell 107 burritos per day in order to be profitable; however, after one month, the original restaurant was selling over 1,000 burritos a day. Ells had originally planned to use funds from the first Chipotle to open a fine-dining restaurant but instead focused on Chipotle Mexican Grill when the restaurant showed the potential for further success.

By 2017, Chipotle was operating more than 2,400 restaurants. Chipotle does not franchise its business, considering retaining ownership of all its locations central to its ability to set the tone for employee culture, as well as to maintain its commitment to sustainable ingredients.

McDonald's Investment

In 1998, McDonald's made an initial minority investment in the company. By 2001, the company had grown to become Chipotle's largest investor. McDonald's investment allowed the firm to quickly expand from 16 restaurants in 1998 to over 500 stores by 2005.

In October 2006, McDonald's fully divested from Chipotle. This was part of a larger initiative for McDonald's to divest all of its non-core business restaurants, including Chipotle, Donatos Pizza, and ​Boston Market, so that it could squarely focus on the main McDonald's chain.

Following McDonald's divestment, Chipotle bought back the few franchises it had sold and became 100% company-owned. Chipotle went public in 2007.

E-Coli Outbreaks

In late 2015, there was a series of E-coli outbreaks at various Chipotle Mexican Grill restaurants, including 11 Chipotle restaurants in Washington and Oregon.

The Centers for Disease Control and Prevention (CDC) reduced the number of cases connected to Chipotle from 50 to 37 cases on November 18, 2015 (with 24 in Washington and 13 in Oregon). This reduction of nearly 25% was based upon more sensitive testing that revealed the cases were not related to Chipotle.

The CDC has informed Chipotle that it identified six additional cases in which initial testing matches the E. coli strain involved in the Washington and Oregon incident. In response to this incident, Chipotle said it took steps to make sure its restaurants were safe, although the group experienced a tremendous drop in stock price.

The company said it conducted deep cleaning at the restaurants that were connected to the E-coli outbreak, replacing ingredients in those restaurants, changing food preparation procedures, providing all necessary supply chain data to investigators, and surveying employees to be sure none have had any symptoms of illness.

Chipotle also said the company is expanding testing of key ingredients, examining all of its food-safety procedures to find other opportunities for improvement, and is working with two renowned food safety scientists to assess all of its food safety programs, from the farms that provide its food to its restaurants.

According to the CDC, about 48 million cases of food-related illness happen in the U.S. annually, including 265,000 cases of E. coli.

Executive Changes

In November 2017, founder and CEO Steve Ells announced he would be stepping down from his position. In March of 2018, Ells was replaced by Taco Bell CEO Brian Niccol, although Ells will continue to hold his position as chairman. Chipotle's (NYSE: CMG) stock price went up over 12% upon the announcement of the change in leadership. Although in November 2018, CMG is trading 35% off highs experienced in 2015.