On with Kara Swisher - Can Chipotle Founder Steve Ells Strike "Fast-Casual" Gold Again?

Episode Date: May 6, 2024

Thirty-one years after founding Chipotle, Steve Ells is back with what he hopes will be another fast-casual dining revolution: the highly-automated, plant-based food chain, Kernel. Ells says that streamlining and automation will allow him to pay workers well above minimum wage and give them more benefits – all while reducing labor costs. But don’t call it a robot restaurant! Kara and Ells discuss the mechanics and philosophy underpinning Kernel’s concept and the downstream effects of integrating tech into our food. Questions? Comments? Email us at [e-mail] or find Kara on Threads/Instagram @karaswisher Learn more about your ad choices. Visit podcastchoices.com/adchoices

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you can get closer to everything you love about city life in the all-new, reimagined Nissan Kicks. Learn more at www.nissanusa.com slash 2025 dash kicks. Available feature. Bose is a registered trademark of the Bose Corporation. Do you feel like your leads never lead anywhere? And you're making content that no one sees? And it takes forever to build a campaign?

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Today, I'm talking to Steve Ells. The Chipotle founder isn't a household name, but he probably should be. A classically trained chef, Ells opened the first Chipotle in Denver in 1993 and helped popularize the fast-casual dining craze. Go to almost any American city at lunchtime and you'll find office workers picking their preferred proteins and toppings as they snake through the assembly line at any number of fast-casual restaurants. Ells deserves a lot of the credit for executing this concept to perfection before it was ultimately copied across America. My sons, Louie and Alex, devour Chipotle burritos every chance they get, and so do millions of other people around the world. As of this recording,

Chipotle's shares are worth over $3,200 each for a market value of $87 billion. But Ells is no longer a part of the company he founded. In 2017, after multiple foodborne illness outbreaks at Chipotle restaurants, he resigned as CEO, and in 2020, he stepped down as executive chairman. Now he's backed with a new vegan concept called Kernel. It has no seating, only a counter for diners to stand at after ordering via an app and retrieving their food from a locked cubby. Instead of employing a small army of workers to chop, saute, wrap, and serve meals, Colonel uses a robot arm to heat and prepare them. The robot needs only three human co-workers,

and they make at least $25 an hour plus benefits. Els says he's trying to spark a, quote, reinvention of how a fast food or fast casual restaurant can run. I'll talk to him to find out if Kernel represents the future of takeout lunch in America and maybe even a microcosm of how tech will change the way we eat. Our expert question this episode comes from novelist Jonathan Safran Foer, who not only published a short story on Chipotle comps, he came up with the whole idea and pitched it to Al's. All that and more after a

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Learn more about how to protect yourself at vox.com slash zelle. And when using digital payment platforms, remember to only send money to people you know and trust. Support for this show is brought to people you know and trust. We'll see you next time. Available feature, Bose is a registered trademark of the Bose Corporation. The Capital Ideas Podcast now features a series hosted by Capital Group CEO, Mike Gitlin. Through the words and experiences of investment professionals, you'll discover what differentiates their investment approach, what learnings have shifted their career trajectories, and how do they find their next great idea? Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Hi, Steve. Thanks for being here. Kara, it's great to be here. Thanks.

I just want to say, that is a beautiful home behind you, I think. And I have to say, I feel like I've paid for half of it, given my sons eat so much Chipotle throughout their teenage years. Thank you, and thank your son. In any case, you're no longer with the restaurant, but we're going to talk about what you're doing now. Obviously, you founded Chipotle, but earlier this year, you launched a vegan robot restaurant named Kernel, which certainly got my attention in Manhattan.

And you've got big plans for it. You put $10 million of your own money into Kernel, and you reportedly raised $36 million in a Series A round. According to the deck, Kernel, quote, fundamentally rethinks labor, technology, real estate, and menu. So let's hear it. Give me the elevator pitch you used. Well, first let me dispel this idea that it's a robot restaurant. Okay. You know, when I first started thinking about this restaurant, I wanted to create something

that allowed us to make better food. I wanted a platform that could make the work better for the folks actually working in the restaurant. Not only change the work, but create an economic model that allows us to pay them more. Because I think there's two problems with the labor in current restaurants. Number one, the work. People don't want to do the work anymore. And second, the inability to pay them more and give them benefits and things like this. And then thirdly, I wanted to eliminate waste and be more environmentally responsible. So to do that, we created an entirely new platform. And basically, the way it works is this. It's a hub-and-spoke model. And in the hub, which is the central production kitchen, we are constantly receiving beautiful ingredients. And since it's plant-based, it's mainly produce. And this central kitchen is optimized for continuous, high-quality, delicious prepped food.

And then every hour, we pack the prepped food into totes, and we deliver them to the restaurant. And the totes are put onto a wagon and pulled by a bicycle. And our first restaurant is about six minutes away from the Central Kitchen. One of the advantages of this model is that you can really focus on super high-quality prep in a way that certainly fast food can't do. Meaning that individual restaurants could, you'd have to do these individually at restaurants, this prep. That's right. Then the restaurants themselves will receive the totes and put the prepped food into the system.

And then it's the system that initiates the cooking. It happens to be done by a robot arm right now, although probably in a couple of more iterations, there'll be a different way to automate this. But it was very easy to program a robot arm to simply take the patty for the kernel burger and place it into the oven. And then when it's done, take it out of the oven. But 30 seconds before it comes out of the oven, the bun toaster automatically toasts the buns. And so then it presents the toasted buns and the cooked patty to the person who assembles. So we have a system that has a lot of automation, some robotics, and there's this sympathetic relationship between the automation and the people who are working alongside this automation. And so what we've done here is we've designed a system whereby we have

a beautifully equipped central kitchen that's doing beautiful prep. With people doing the prep. With people. And it's sort of doing it the old-fashioned way. Cutting, chopping. And yes, we can talk about in the future, there could be more automation and things like this. But for now, it's old-fashioned.

Right. But those are people prepping vegetables or making burgers, right? That's right. And we have great chefs and their team of cooks, a small group, a handful of people making beautiful food that can be leveraged across many individual kernel restaurants. And then when the prep food is delivered, it's sort of initiated by this system, and there's very little touching, human touching. So let me ask you, the hub and spoke model isn't a new one.

Plenty of restaurants have commissaries that they prep food, especially caterers, I'm thinking. Caterers. Caterers, but Chipotle was an early adopter of the commissary. And, you know, when I opened Chipotle in 93, I was doing everything in the restaurant. And then we took the opportunity to outsource some things to some commissaries, things that had a longer shelf life. We would make some of the marinades, cook some of the beans, braise some of the meat. And quite frankly, we could do a better job using the commissaries for those sorts of things. So was your experience at Chipotle part of the motivation for creating a largely automated restaurant. You told the Wall Street Journal the new system design helps better ensure food safety.

Obviously, food safety was your biggest crisis at Chipotle. Talk a little bit about the question of food safety. Sure. So, you know, the food safety crisis at Chipotle, our foodborne illness issue, was probably the hardest thing I've ever had to deal with. We had many, many years of just sort of crazy success and customer acceptance and growth and all that. And then this hit us, and it was really devastating. It was really devastating. Since then, we put in so many protocols and procedures to drastically reduce that risk. And it became an extraordinarily safe place to eat.

And so it was a terrible lesson. I would not want anyone to have to go through that. But I did learn a ton. and the organization learned so much and is much stronger for it now. So Kernel, though, of course, takes into account all those learnings. And so from the very beginning, we have extensive HACCP plans to make sure that we're following all these rigorous safety protocols. But Kernel also has an advantage in that it's plant-based. So while there certainly can be pathogens in plants, in lettuce, in fruits and vegetables, in all fruits and vegetables, you definitely reduce the risk when you eliminate meats from the calculus. So you said you plan on eventually licensing the automated system, which you refer

to as an operating system. Do you want Kernel, and Kernel, of course, is a tech word for people who don't know. It's also Kernel of Corn or anything like that. Do you want Kernel to become a test kitchen for tech so that licensing eventually becomes a bigger business than the restaurant itself? I would imagine investors would rather fork over money for a tech company instead of a restaurant brand, correct, or not? Well, sure. I mean, the multiples on tech companies are much higher than traditional retail companies. No question about that. no question about that. But you can build a very good business and provide really good returns if you have a strong unit economic model at a restaurant that has great customer demand and

has the ability to scale and improve margins over time. It's what led to such huge success at Chipotle. And they continue to drive that kind of success. You know, in 1993, when Chipotle opened, so many people came in who were curious about why there were lines out the door and there were rave reviews. And so lots of other people in the industry started to look at the model and copy it. Sure did. to look at the model and copy it. Sure did. And today you see the Chipotle of salads and Mediterranean food. I mean, you name it.

It's all the new fast casual restaurants. And I think that the eating public has won because it's a great model that allows for better food than typical fast food. And it was very easy for people to copy. So tech is a differentiator, presumably, because... Well, it is, for sure. But what we have is something much more complicated. We've been working for the past two and a half years or so on this operating platform, and we have protected

this. There's a lot of technology that goes into it. And we own a lot of that. And so, I think if people glance in at it, it's not obvious how it works. But I think there's this opportunity to license the platform in whole or in part to people who think that they could put their particular cuisine or their particular offerings into the system. So you're hoping the kernel operating system is worse more than the restaurants eventually, presumably. Well, I think there's an opportunity to license it. I do. We're really focused right now, though, on perfecting the system. And the system's working well, but we can already see how it will evolve over time

and be more efficient and take up less space and produce more food more accurately and use less labor. And those are all exciting projects, and that will take some time. So let me ask about differentiation, because there's lots of plant-based restaurants in New York, and some of your competitors are already incorporating robots. White Castle, Jack in the Box, and Chipotle have robots. Sweet Green is rolling out fully automated locations. What are you doing fundamentally different, or is it just sort of another rung of the evolutionary ladder?

I recall a restaurant in San Francisco that did this. It was a very Chipotle-like thing but had no people in it and and just a flat screen and they'd open up and your food would be there. I don't know what was behind the wall, but it certainly- I think that was, they were serving quinoa bowls. Quinoa bowls. Yeah, that's correct. Remember that? And it was a- Down at Embarcadero. You walked into the restaurant and it was a wall of cubbies. That's correct. And you did not know what was behind the cubbies.

No idea. Right? Goblins was my guess. I actually spent some time with those folks, and they had some ambitious plans, and it didn't turn out. Maybe they were a little bit ahead of their time. Why didn't it turn out from your perspective? Well, so the technology that dispensed the food into the bowls was never deployed at the restaurants. It was only in a lab setting.

But to jumpstart the concept, they had a more traditional kitchen behind the cubbies. That's what I thought. Yeah, and I'm not sure of the details, whether it was a funding issue or maybe the machine was too complicated or too expensive, I'm not sure, but it never made it to that next step. Right, but it was the concept of it. I liked it a lot. So one of the things-

But I think this is- I enjoyed it. Yeah, yeah, yeah, listen. I mean, it was a healthy, quick, tasty bowl, right? Right, that we didn't have to stand, that you just ordered and waited. That's right. You probably stand in line the same thing,

but it felt like it was moving faster. There was Spice Kitchen in Cambridge. There was Creator Burger in the Bay Area. And Coffee X is still going. Lots of people are trying to apply automation and robotics to food. So I don't think there's any question, there's no question that over time, there will be less people working in restaurants and more automation.

The question is, you know, what is going to be the method that wins? And I think at Kernel, we're on to something that makes better food. Like we have the ability to produce food that's more complicated, food that has depth and character and nuance and layers and layers and layers of flavor and and we do that we can do that because of our ability to focus on receiving great ingredients scrutinizing those ingredients prepping those ingredients very carefully and very precisely and then then cooking and finishing those prepped ingredients in the restaurant in a very precise, automated, efficient way. And it's that, I mean, that's the kernel system right there. That's the whole story.

Okay. You've said Bill Gates spoke how to avoid climate disaster. I interviewed him about it. It was a big inspiration. Talk a little bit about reducing climate change via food. Don't go on and on for decades, but give me a— Well, I can't go on and on for decades because I'm not an expert by any means. But I was inspired by reading Bill Gates' book. And from what I understood, the imperative is that we reduce our greenhouse gases dramatically by 2050 or so, or else we go over this tipping point. And whether or not it's exactly 2050, give or take a few decades, I think the consensus is that we need to reduce our greenhouse gases.

And we're doing something already about the grid. We're doing something already about transportation. I don't see as much effort about reducing greenhouse gases from what we eat. So in that regard, how do you get people to give up meat in general for lunch particularly? You don't have to be a vegan to eat a veggie lunch, but for context, only about 4% of Americans say they're vegetarian and 1% say they're vegan. And American meat consumption remains very high, even though we've seen a lot of buzzy new options like Beyond Meat and Impossible Burger. How do you change that insatiable appetite

for meat? So I'm not a vegan myself. I'm not a vegetarian. But I do notice myself eating less meat. And that has been happening for many years. And again, I'm not asking for people to be vegan, and I'm not shaming people for eating meat. That's not what this is about. Kernel is about offering really delicious, satisfying, interesting plant-based dishes. We have sandwiches, salads, vegetable sides, crispy potatoes. sandwiches, salads, vegetable sides, crispy potatoes. We have a couple of cookies, a chocolate chip cookie and an oatmeal raisin cookie, all plant-based, 100% plant-based, no animal inputs at all. And people who are coming in are raving about the food. They're especially enamored with the vegetable sides. And now we're noticing people getting multiple vegetable sides and making a meal of that. And so I'm spending most of my days at Kernel standing out in the front of the

restaurant and talking with customers. The vast majority of our customers are meat eaters. They're not vegans or vegetarians. And Carol, like you and me, they are noticing themselves eating less meat. So let's talk about things that have happened in the restaurant so far. You've been up and running for almost three months, still in trial and error mode, as you noted. Any unexpected issues with the robot arm or if it malfunctions? Does everything grind to a halt until the robot repairman shows up? Or could employees theoretically cover the lunch

rush on their own? What's the backup plan? Well, something like that. So the robot arm, again, puts things into the oven and takes things out of the oven. That's pretty much it. But really, the main benefit we get from that is that it controls the timing. So you, the customer orders their food on the app, and then when the appropriate time comes, the system initiates the order. One of the hardest things to do in a restaurant when it's really busy is to keep ahead of all the orders to make sure that you're delivering the food precisely on time for the customers. And we have a system that does that in a very precise way. So that's what the robot arm does. But to answer your question about its reliability, I think the robot arm itself is probably the last thing to break. It's a KUKA robot. It's a robot arm that's made in Germany,

and it's used on- How much does it cost? How much does each- I think it's about $25,000. But they're used in automobile manufacturing lines. So easy to fix and easy to replace. But they run so many cycles for 24-7 all year long, right? So they're really robust and durable and predictable in all this. But the system has crashed, especially in the very early days.

Different components of the system not talking to each other, sort of like weird things in the coding that cause anomalies and it crashes. So, yes, and when the system crashes, the whole thing crashes. And that's unfortunately how it was designed today. But as we evolve, you can sort of separate the components and we're in the process of doing that. But that was only for the first few weeks, really. The system has been very stable lately. And we really haven't had any problems. But you have the backup that people can make the food, presumably. Well, actually, it's actually very difficult to switch over to having people do the function of the automation. So, we just don't have food. Sorry, people.

It is. But you can think about a traditional restaurant. When the stove breaks or the oven breaks, you stop cooking. When the grill breaks, you stop cooking. When the exhaust hood stops, you close the restaurant. And it doesn't often happen. Right, and so this is cutting-edge technology, and we had to go through some cycles. Every time something causes a crash happened what is something that made you laugh i mean i will i will tell you one thing a potato um somehow came out of the tray uh the little pan uh in the oven and it and it and it somehow um jammed the the

somehow jammed the serpentine belt drive that's in the oven. This is a custom piece that we made. And that stopped. And then the robot arm doesn't know where to pick up the next pan. And there's a trickle effect and the whole thing stopped. Who dealt with the potato? A person. Correct? and the whole thing stopped.

Who dealt with the potato? A person, correct? It was quite a scene, actually, trying to reach into the oven and pull out the potatoes. Potato got you. Anyway, some of the early coverage has focused on the lack of human interaction at Kernel, obviously,

even though shuffling in line and telling lower paid workers what toppings you want on your lunch bowl is not a particularly joyful experience for me. What are you doing to create the experience for diners? Or is it about convenience? You order on the app, you walk in, you grab your bag, you get out. So we debated this a couple of years ago

as we were thinking about the way the platform works and what the customer interaction would look like. The first interaction, though, is the app. People download the app, and they interact, and they order their food. And it's very convenient. It's easy to use, and it's only going to get better. I think there's a way to add animation and multiple layers of information if people want to really dig down

and understand what the food is about. And so that's great. And I would call that a certain kind of a hospitality, right? Letting people know about their food. People are interested in that. I think there's a very predictable nature about Carnal, more so than a typical fast casual or fast food restaurant. You know, the system will know exactly when the order is going to be ready. So,

knowing if we say your order is going to be ready at, you know, 117, you can be assured that it'll be ready at 117. And there's something comforting about that, and that's hospitable. So, talking about the sort of experiential part of it, this is a Google review. Very cool concept that delivers tasty food. Personally, I would love to see the robot up front, feel part of the process. Plan to stop again soon to try the burger and other sides. Do you plan on making the robot a novelty selling point?

As I said, Calfee X always has that robot. The coffee's not good, by the way. In San Francisco, it's somewhat amusing to watch the arm make coffee, and I certainly stare at it sometimes. My kids certainly do. Do you think that should be part of the experience? Well, so today we have one robot arm, and that robot arm puts things into the oven and takes things out of the oven. I think in a couple of iterations, that robot arm will not be putting things into the oven or taking things out i think there's going to be another methodology for doing that

one that allows us to shrink our footprint wow and reduce labor costs and have less investment right okay but that's coming but then i can think of i can think of a way That's coming. But then I can think of a way that the robot arm could find another task. And that would be to perhaps once things are put into bags, then the robot arm could index all the different orders in the bags in a holding area. the different orders in the bags in a holding area. And then when a customer walks in, that robot arm could present that order to the customer individually. And you could use some sort of geolocation kind of methodology. So it would notice when the customer is walking in the door and then present the bag. So there's not a cubby system per se, but it's more of a personalized presentation of your order, which could be perceived as very hospitable.

Right, or not. It could be scary, right? I don't know. I want to get to labor in a minute, but the prices are pretty great. The veggie burrito at Chipotle in Manhattan costs more than $11, and obviously prices for burritos for some reason are going up. A veggie burger at Shake Shack is are going up. A veggie burger at Shake Shack is over $9. Your veggie burger costs $7. Talk about the relative cost per customer for the business. Getting to lower prices is what you're going for, correct? The idea that it

shouldn't cost $11 for such a thing. Well, I mean, so, you know, one thing I've learned, Well, I mean, so, you know, one thing I've learned, you know, over the last 30 some odd years in the business that, you know, the more accessible your prices are, the wider the net. You know, you're going to attract more people and increase frequency. So keeping prices low is important. But I don't want to shy away from high-quality ingredients either. So, it's not that we're trying to find the cheapest ingredients to make the lowest prices. That's not the aim here. We want to find very, very high-quality ingredients. We have an advantage in that it's plant-based, and so we're not buying animal proteins, which tend to be more expensive, And so we're not buying animal proteins, which tend to be more expensive, although lots of the cost of animal production in the United States is externalized, which is a whole different topic.

But all things being equal, it should be cheaper to have a plant-based menu. And we want to be accessible to people to eat an everyday kind of experience. Yeah, and real estate prices are lower because it's a smaller footprint, presumably, because you don't have seats. It's a much smaller footprint. Well, we don't have seats, but we also don't have a back of the house. We don't have a prep area. We don't have all the typical infrastructure that you see in a typical fast food or fast casual restaurant.

And the investment cost appears to be about half to a third of a typical. Let's talk about the food itself. I love reading reviews to my guests, and you're no different. I did to Matthew McConaughey. According to Bon Appetit, the veggie burger is not just good for a veggie burger, it's a good burger, period. So that's good. That's a really good one. On the other hand, they said the veggie chicken sandwich lacks flavor. The potatoes aren't salty enough. The salad dressing makes the greens floppy and the cookies, they don't like the cookies. Talk about the food and how you, because you're a very talented chef. Talk about how you think about the food and how you tweak it.

So ultimately, we want people to love the food. And if people have comments that they're not loving the food, well, we are on high alert and trying to figure out why. But it's tough reading reviews because it doesn't always point to the truth. So, for instance, I think you just read that someone said the potatoes lacked salt. Yeah. Well, and I've heard the potatoes are too salty. I've heard that the salad doesn't have enough dressing. I've heard that the salad has too much dressing. I've heard that the Colonel Burger is a little boring. I've heard that the chicken sandwich is the most amazing thing. I've heard that the Colonel Burger is the most amazing thing and that the chicken sandwich is a little boring.

Right. I'm telling you, the burger is much loved. I'll tell you that. So what I find really useful is talking to customers. And, again, I spend the entire lunch period talking to customers, new customers and regular customers. And I learn a lot. Generally speaking, though, if you are using really great ingredients and have great recipes and are prepping and executing at a very, very high level, the food is going to be good. And we have really interesting

combinations of flavor and, again, depth and character. And it's not typical fast food. It's not typical fast casual food. Well, neither is Chipotle. That's why everybody became so popular. Yeah, yeah. But we're listening. One of the things that we're hearing is that people love the vegetable sides. And we can add more vegetable sides to the menu without compromising throughput or efficiencies. And so we talk about what kinds of things they'd like. We just recently added broccoli rabe, so rapini. And we blanch that and shock it and marinate it, and it's served cold. And that's with the Italian gigante beans and a little romesco sauce made with beautiful roasted red bell peppers and sprinkled on top some seasoned breadcrumbs.

And it's such a delicious thing, and people are loving it. A small percentage thinks that broccoli rabe is too bitter for them, and it is bitter. It's polarizing. But these are really exciting flavors. And again, you know, I don't want to dumb down flavors so that it's appealing to everybody. Right. So that kind of thinking leads to really boring food. We'll be back in a minute.

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with a commitment to an ethical approach that puts humanity first. To learn more, visit anthropic.com slash Claude. That's anthropic.com slash Claude. All right, let's pivot now and talk about the human impact of your labor model. We'll start with an expert question from novelist Jonathan Safran Foer. It's a two-parter, and I only endorse one part. I'll let you figure out which one.

Hey, Steve, this is Jonathan Safran Foer, novelist, nonfiction writer, dad, Brooklynite. I actually have two questions for you, the first of which is, if you ran your company as a nonprofit rather than as a for-profit, how would your practices be different? To what extent is the marketplace constraining the choices that you get to make? My second question is about these robots that are serving up the veggie burgers in Kernel. Do they have genitalia?

And if so, what are they like? Thanks so much. Okay, Jonathan. Thanks. Only Jonathan could ask that question. I allowed it. I allowed it. I love that.

it. I allowed it. I love that. So I don't know that I would run the company different if it was a non-for-profit. One of the things that's exciting is reinventing the work. And it's troubling to see that we have such high turnover rates in not only the restaurant industry as a whole, from fast food to fast casual to even fine dining, a lot of turnover, but turnover in retail in general. But the way we're thinking about it at Kernel is that it's two parts. One is the pay and benefits aren't where they need to be. And secondly, the work isn't what people want to be doing. I think the notion of the McJob, right, flipping burgers and making French fries is not appealing anymore. And certainly the pay that goes along with that

doesn't cut it. And so how can you reinvent a system that makes rewarding work? There are, thankfully, always people who are interested in cooking and working with food. And so in our central kitchen, it's a very traditional environment where it's very much like a fine dining restaurant, where we receive food from great suppliers and really critique the things that are coming in, not accepting it all, only the best, and making sure that then we're taking really good care to do exacting prep. Fast food might be one of the least respected ways to earn a living in America. You know, go to college or you'll be flipping burgers. You paid workers only slightly, at Chipotle you paid workers only slightly more than the average fast food job, but gave them more opportunities for growth.

Meanwhile, restaurant workers at Kernel make a reported $25 or more an hour and get paid time off, among other benefits. Is that the floor at Kernel? Because this is a big debate going on at Starbucks everywhere. Scott and I on our pivot say $25 should be the floor of hourly wages. Do delivery bikers and prep cooks make the same? And a lot of the people complain, and they've had to pay more recently, these fast food restaurants, because of lack of employees. Is it a sustainable business model?

Because that's the argument from business, that if we have to pay more, we're not going to be able to run our businesses. Kara, so certainly to answer your last question is that if nothing changes except the wages, then it's not a sustainable business, right? If you've got a traditional fast food restaurant or a traditional fast casual restaurant, and you go into a lot of these fast casual restaurants, and you'll see 12 people at peak period, and there are probably 50 people on the payroll at one of these restaurants. And if you have to increase everybody's salary to, say, $27 an hour and give them full benefits and two weeks paid vacation, then, of course, it's not economically sustainable. But we have three people at peak period.

And our team for a restaurant will be seven or eight people. And so, yes, it works. I mean, we've designed a new economic model so that we can pay people. And I think everybody working at Kernel today makes $27 or more. And full benefits, health benefits, including vision and dental, are offered, and paid vacation. We're also working on a stock equity program or a phantom program to allow the folks to participate in the upside of the venture. It's really difficult to do. Most people at these entry-level hourly wage jobs would rather have the cash. But I really want to try to develop a program where we can teach and mentor folks that having a piece of the venture and participating in the upside can create great savings. It's a wealth creator. And to make that available, I think, is really important. Fast food workers in California recently started a fast food union with the SEIU. Meanwhile,

Starbucks has appealed what is essentially a union busting case all the way to the Supreme Court. Talk about the idea of unions in the food businesses. To me, if they paid them more and gave them benefits, this would not be happening, but they certainly are. They're sort of taking the last bit of work out of these people. Well, so again, I think you have to start by recognizing that the way we've run restaurants has to change. The way we staff them, the way we use technology. And if we're asking people to do work that they're not interested in doing and not paying them very much for that, well, that doesn't seem like much of a future. That does not seem sustainable. And so it doesn't really matter whether the union is involved or not. It doesn't help the underlying problem. You've got to reinvent the work. You've got to reinvent the platform

that powers this whole thing. Well, one of the innovations you were just talking about is the three employees. On one hand, you're creating less jobs than you would otherwise, about 25% as many jobs as the average fast food restaurant. On the other hand, you're creating better, higher-paying jobs. Now, we don't have an employment problem in this country. I mean, we have not enough employees in this country at this point, especially in those jobs. Talk about that trade-off of not creating as much jobs, because one of the things these fast food restaurants do is just throw people at the problem, right? Low-paid people with monotonous work, essentially, and going nowhere. That has been the fast food model, right? And it was an entry-level job.

I mean, think back to the, you know, like when I was a kid in the 80s, I got a job at McDonald's, and it was not my life's ambition, but I was certainly happy to do it for a period of time. It was fun. My friends were doing it. But you don't see that kind of thing happening today. Like I don't see kids necessarily thinking about that kind of work today. So you have to adjust for the times. And so if you don't have that kind of workforce anymore, you've got to redesign the platform so it does not necessitate having, you know, a lot of people working there. And so, yes, I think the job that we're creating is more valuable. I think it will be a desirable position. You know, you're working with technology, working at a fast-growing venture, working for a place that has a purpose.

You know, we're reducing greenhouse gases. There's an animal welfare aspect to it. There's a health aspect to it. You know, it's cool. It's a better job. I think it's a better job. So do you imagine, you said, if you prove your operational model works, other food businesses will copy it, just like they copy the fast-casual concept you created at Chipotle. But they might not be as enlightened as you. The fast food industry, again, as you noted, historically paid low wages.

They mistreat workers. They probably won't change once a robot replaces three-quarters of their workers. They just see the robot being a better employee. Talk about the larger societal implications of tech replacing jobs, the big issue around AI and white-collar work and everywhere else. And how do you get this idea of the fast-food employee and the robot co-worker working together, both pro and con? together, both pro and con. Yeah, again, I think creating work that people enjoy doing, that they're proud of, that challenges them, that allows them to grow is the right kind of work. And if, I mean, I'm working the stations at Kernel today, I enjoy going in. But probably of all the work, I enjoy more the customer facing.

And so I think we'll probably call them ambassadors to have a couple of people out in the front of the restaurant talking with folks. And some people come in and have a seven-second experience. They unlock their cubby with their phone. They grab their bag. You say, thank you. They're like, huh? It's very much a convenience transaction. And to them, that's hospitality. It is. That's me. You just met me. To others, they want to come in. Some people are taking selfies with the robot. Some people are curious about, overall, the platform, the robot. Some people are curious about, you know, overall the platform, the automation. Others are interested in the menu, the plant-based aspect of it, you know, things like this. And it's great to engage people. And so, again, having a couple of people be able to operate a really busy restaurant in a customer-facing sort of hospitality setting where they might be looking at a dashboard to see the performance of the overall system, I think that's the future of a kind of restaurant that serves accessible food, the kind of food that people should be eating every day, not just for taste, but for nutrition and for the health of the planet, right? It's a very, you know, sort of

sustainable way of thinking about feeding people. And so that's the direction I'd like to go. And how are they getting along with the robots, your workers so far? There hasn't been any conflict. Except for the potato incident. We have not had to call in HR yet. The potato incident is troubling, as you know. All right, last question. You're a classically trained chef, as I noted.

You worked as a sous chef at Starz, the famous Jeremiah Towers restaurant in San Francisco. You originally started Chipotle thinking you could use the profits to finance your own fine dining restaurant. Any chance you will fulfill that dream? I would love to eat at Al's Fine Dining Establishment. Well, Carrie, you could come over for dinner. That's probably as close as you're going to get. Now, there are so many, you know, great, great people, chefs who are opening restaurants and doing a fantastic job. I mean, I started Chipotle 31 years ago. I think it'll be 31 years this summer.

And so I've been out of the fine dining game for a long time. And I think I'm best in the world at other things. And so I don't really have ambitions to do that. Kernel is a full-time plus job, and I have no idea how long I'll be doing it. But I can't see a time that I would open up a— What would your restaurant be called? A fine dining restaurant? Yeah.

I wouldn't open one. It's not fair. All right. Are you going to have Soylent at Colonel? Please don't. I'm kidding. I'm teasing you. I took that as a serious question. All right. Okay. Then answer it seriously. Yeah. The answer would be no. There's only one item on our menu now, which is sort of like a manufactured item. It's the patty for the chicken sandwich, which is, I think, delicious and has lots of protein. It's good, but that would be the last thing we would do, right? And everything else

is just, it really is fruits, vegetables, legumes, like stuff that you see at the farmer's market, and we cook it. And I really believe in that kind of pure, unprocessed food. I think that that makes for the best nutrition and the best flavors. Great. Steve, thank you so much. What an interesting concept. I'm excited. I haven't gone into Kernel yet, but I'm going to. Well, next time you're in New York, let me know. I'll be there very soon, so I shall. But I appreciate it. Thanks so much. Today's show was produced by Christian Castro-Russell, Kateri Yochum, Thank you. you get a kernel burger. If not, go drink your Soylent. Go wherever you listen to podcasts,

search for Kara Swisher and hit follow. Thanks for listening to On with Kara Swisher from New York Magazine, the Vox Media Podcast Network and us. You can subscribe to the magazine at nymag.com slash pod. We'll be back on Thursday with more. Thank you. tasks performed by a select few. Well, Claude by Anthropic is AI for everyone. The latest model, Claude 3.5 Sonnet, offers groundbreaking intelligence at an everyday price. Claude Sonnet can generate code, help with writing, and reason through hard problems better than

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