In this article HOUSTON, TEXAS - JUNE 09: Employees speak inappears in a Chipotle Mexican Grill on June 09, 2021 in Houston, Texas. Menu prices at the Chipotle Mexican Grill have increased about 4% to cover the costs of raising its minimum wage to $ 15 an hour for employees. The restaurant industry has increased wages in the hope of attracting workers in times of labor shortages. (Photo by Brandon Bell / Images) Brandon Bell | Images News | Images
Unlike many of his peers in the restaurant space who have a franchise model, Chipotle " Mexican Grill owns all of its 3,000 restaurants, on its way to a goal of 6,000 restaurants. This means it also owns the relationship with nearly 100,000 employees, many of whom are on the front lines and in lower paying, high turnover restaurant positions.t the pandemic, food business turnover was typically over 100% per year.
For Chipotle's senior management, the focus on investing in workers is nothing new, but in an era of national labor shortages and wage inflation in lower-paying industries, it has a message for competitors: if you consider the workforce of labor as a cost, you'd think wrong.
This week's latest JOLTS report from the Department of Labor showed a record high level of workers leaving concentrated restaurant and retail jobs, and a record high open positions.
T he employment situation is so tense that CEOs in these industries are launching desperate appeals after many in the business world have complained about the loss. 'exextension of unemployment benefits as a government aid effort that was the main reason people stayed out of the workforce, Barry Sternlicht of hotel operator Starwood Capital told CNBC on Wednesday that the government now had to pay "people to come back to work . "The whole service economy is in crisis, " he said. "The country cannot really function without the return of its military.
Marissa Andrada, head of persity, inclusion and human resources at Chipotle, says he was able to attract and retain talent by investing in workers before the pandemic rather than as a sudden response to this one.
"We feel like the investments we have made in people over the past two years have established the opening of therest of the world ", Andrada told @Work " Summit from CNBC on Wednesday.
Starting in 2019, Chipotle invested in the benefits of education for workers, and it has since extended these to debt-free education. for all employees rather than just tuition reimbursement, the latter being a model of benefits that education experts said was not " well designed for low-wage workers and has received limited use. This year, companies like Amazon, Target a nd Walmart is all taking steps to offer debt-free college degrees as well (Walmart has had a program in place for years, though it was charging employees $ 1 per week.)
Rachel Carlson, co -Founder and CEO of Guild Education - which offers a platform forur companies including Chipotle to make education available to workers and is a CNBC Disruptor 50 company twice, including No. "49 on t The list 2021 "Disruptor 50 - said in a separate session at CNBC @Work Summit that there were still large gaps in bridging between employers and employees on understanding a company's role in education.
She said research from the Guild shows that workers today are still afraid to say to an employer they don 't plan to stay with the company for 40 years, let alone 20 years, with a lingering idea of their "grandfather ' s career at General Electric ". But employers are much more likely to view shorter terms as a wine.
"I am in conversation with CFOs ... and management teams, saying they are thrilled when this role is supported by a leader, an employee, for three years, five years. We need to have the conversation about what is 'tour of duty today, ' "Carlson said.
Additionally, she stated that Guild knows that even though of more and more large companies are offering educational benefits, "We know a very significant number of employees feel uncomfortable telling employers that they don't high school or college diploma. ... They inflate the data or avoid answering it. "
'Every penny we spend on the line of work '
Andrada said the company has also looked into a health care concierge service for employees and their families, and she pointed out that this was an investment fbefore the pandemic.
"We are grateful that we have been able to attract and retain talent," she said, although she added that the company does not 'is not immune to working conditions and, "there are pockets across the United States. where there are challenges.
Jack Hartung, Director Chipotle financier, who spoke to Andrada at the CNBC event, said that since the company runs all of its restaurants, it needs to view investing in people in a different way than as a cost of typical profit and loss. "If you look at it that way, the main goal is to minimize costs.
For Chipotle, "almost all managers in the future will come from crews of 'today,' said Hartung. . "
Andrada noted that going from an hourly employee to a six-figure general manager in a restaurant can take as little as three years, although economistsLabor is quick to point out that in the future for a low-wage service company there will be far fewer general manager jobs than low-wage frontline jobs.
"We have declared as a goal that we want to come out of the pandemic stronger than we have done. This, " said Hartung. "We don't just want to survive, we want to make sure we make investments that make us stronger.
This is not to say the company has been able to avoid them. negative "work related titles to which many large companies are facing, some of which stem from legal battles that began many years ago. And according to at least one fundamental measure of the labor economist, Chipotle wasn't exactly rushing to make sure the good -be general of his employyes, including financial, was reached before his peers. While the movement for a minimum wage of $ 15 has been around for years, Chipotle did not embrace such labor spending until 2021 in a tight labor market and it is offsetting that cost in other ways. : Earlier this year, Chipotle increased menu prices by 4% to cover the increase in the minimum wage.
Chipotle, Gen Z and Millennial Consumers
But on a market basis, the business approach works. Chipotle shares have tripled since the Covid low of March 2020, and Wall Street is positive for the business for reasons that may be, if not exactly, at least tangentially correlated to management's long-term strategy.
In a bullish thesis on Chipotle in mid-September, Piper Sandler said her long-term ROI compared favorably with many peers. GoAnalysts at ldman Sachs noted in a recent bullish call on action that labor costs would continue to rise. the company's approach to investing in workers, which is estimated at just over $ 2 billion in 2022. But she added that it remains more difficult for Wall Street to model accurately. "I'm not sure, as analysts, that we have all the data to model it," she wrote.
Chipotle is consistent in her post on the fact to be a people-centric organization, and while it remains a moving target when it comes to target share price, and Wall Street sees the company as a leading ESG brand of the future that appeals to key demographics.
In a note this week, Cowen wrote that among Millennials and Gen Z consumers Chipotle stands out from chain restaurants on issues such asfood transparency, a rapidly growing digital business, reduction of waste, packaging and energy consumption, of which 22% is electricity produced from renewable sources. While Cowen analysts noted a generally high level of trust compared to their peers, among the ESG factors cited in the report were notably lacking in labor standards and the treatment of workers. "
Cowen analyst Andrew Charles said staffing is the topic of when to restore for investors, and a "mass issue " that has cooled the industry a bit. It is not immune to the pressures of the labor market, but it is also an issue that sets them apart.
"They are the best equipped in the sector to deal with it ", he said, noting that their annual sales per store are high relative to their peers ($ 2.5 million per store), which gives themno longer possibility of increasing wages and benefits, including education and health, such as mental health services provided by telemedicine that Andrada stressed.
" It's really related to the culture and I would say these guys really have it, "Charles said. "And they grow stores to a healthy clip and develop a system operated by the company and can identify talents within the system.
Although the treatment of workers is not Clearly emerged from ESG analysis as a driver like sustainability metrics Cowen was able to follow, Charles said going to $ 15 an hour was "a big gamble". companies must "define very clearly who you are and what you stand for.
For Chipotle, this means being "manly people-first ", a she said, and that "makes decisions about investing in people really easy.
EnUltimately, workers' issues and its broader culture may show up in the picture of the ESG market. "Chipotle has always been and always will be rooted in a goal and in this ESG world we live in, that suits them very well and is a big tailwind," Charles said.
There is a fundamental difference between looking at labor as the cost of operations, which an organization wants as low as possible, or as an investment that must be made every year as part of it. 'a long-term return on investment strategy, Hartung said. Whether it is an investment in education or some other benefit to employees, a company will not necessarily see that return. “Next year,” he said, but the return will be sustainable. “We have $ 300-400 million in investment per year, mostly in restaurants. Soc salaries and benefitsials amount to $ 2 billion each year. "
The business would not put money into the work unless it expected to generate a performance in the future, both in the form of leaders and financiers. "Over time we will have great people and great results," Hartung said.