Tax Rascal

Chipotle Restaurant: The Mysterious Disappearance of the Tip Jar

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Chipotle Restaurant: The Mysterious Disappearance of the Tip Jar

Chipotle Mexican Grill abruptly changes its tipping policy. The Tax Rascal is on the case.

Early in the spring, a strange thing happened at Chipotle Restaurant. The tip jar vanished. This brought a noticeable measure of consternation to the many devotees of the fast casual restaurant’s terrific, gloriously calorific burritos. The tip jar, you see, was a medium of communication, a locus of not so subtle allusion and inference. As in, I the generous buyer, made your tip bigger and you, the seller, added one more dab of velvety sour cream, boosted my sweet chili corn salsa content, supersized my share of verdant guacamole, swelled the portion of spicy barbacoa, in short made my burrito plumper.

Chipotle Restaurant’s removal of the tip jar was so sudden, the reactions to it from frequenters of the eco-friendly Mexican grill so sullen, that the Tax Rascal was compelled to investigate. Why the rescinding of a policy so common and so seemingly harmless, not to say beneficial to employee morale, especially by a firm that prides itself for the enlightened treatment of its workers, what it calls its “people culture”?

After all, Chipotle has been a notable and sustained success story. Founded by Steve Ells in 1993 as a one shop operation, the company has sprung from its Colorado roots to form an empire of 1100 company owned restaurants, with more coming this year, in 38 states and three countries. After a fairly brief, financially useful, association with McDonald’s, Chipotle went public in 2006. Its stock originally priced at just above $20 a share quickly rocketed, its initial public offering rising 100% to become the biggest opening-day winner in years. It now trades at close to $300 a share, a two year gain of a whopping 350%. The company’s yearly revenue nears two billion.

Even if you never scarfed a Chipotle gourmet burrito, you’re surely familiar with the industrial look of its many locations, with their corrugated metal walls, displayed ductwork and recycled newsprint bowls, far removed from the Tex-Mex kitsch of the usual Mexican food eateries. Or maybe you’ve heard of Chipotle’s food with integrity slogan, its avowed, not to say well publicized efforts to source naturally raised meat, organic veggies, and dairy not laced with hormones. Or perhaps you’ve watched Steve Ells berate a contestant on the America’s Next Great Restaurant NBC Show.

More likely, you know or are yourself one of the legions – 750,000 customers nationwide per day & growing – of burrito fanatics, many of them self-confessed addicts, who trek under skies scored by broiling sun, pregnant with rain or falling snow like bird droppings – Chipotle does not deliver – to part with some hard earned cash and gain warm sustenance from a fat bellied flour tortilla wrapped, at the moment, in gold foil.

So what’s up with Chipotle? It turns out things have gotten, ahem, a bit spicier for this darling of Wall Street in the last six months and, as we’ll see, it leads up to a quite seductive explanation for that disappearing tip jar. The first sign that things were awry came in December of 2010 with local reports of “mass firings” of Latino workers, many longtime employees, at Chipotle restaurants throughout Minnesota. As it was soon made clear, these summary dismissals, at the very start of the busy Holiday season, came in the wake of an audit by the US Immigration and Customs Enforcement agency (ICE).

The story, boosted by union protests in downtown Minneapolis, was picked up in January by the Wall Street Journal and then substantially expanded by Reuters which in February broke the news that an alarming 450 immigrant workers, roughly 40% of the workforce employed by Minnesota’s 50 Chipotle Restaurant locations, had been let go. That same month, ICE’s probe of the company’s hiring practices was expanded to DC and Virginia.

In March, Reuters reported that Chipotle restaurants in Washington DC had been hemorrhaging employees ahead of the planned inspections and that the company had gone on a hiring spree in the nation’s capital. Consequently, in April, Chipotle disclosed that the criminal division of the US attorney’s office was joining ICE on the case, instantly elevating it to the highest level of scrutiny under immigration law and suggesting that the high-profile company was being made an example of. By the start of May, the probe had metastasized: 15 states including California, Chipotle’s largest market, were now involved in the audit.

The remarkable irony in all this, which we may choose to savor as we would a spoonful of Chipotle’s divine guacamole, is that it has been the company’s very ability to keep labor costs down while augmenting profits smack in the middle of the Great Recession, not to mention stick to its costly mission statement, that has endeared it to the Wall Street boys. It may well turn out that there was nothing so uncanny about this skill if it depended in fact and quite prosaically on the massive input of unreported workers. That the majority hailed from Mexico has already led some to quip that if Chipotle did not quite manage integrity it had no problem with authenticity.

Which brings us back to our tip jar because, you see, in addition to being the place where a subtle, mutually beneficial understanding between buyer and seller is made available, not to say a repository of extra cash for undocumented workers who may be poorly remunerated, it is also a notorious site of tax evasion. Who knows just how much that cookie jar holds at the end of the day, and how much escapes the taxman? So should we be surprised that, faced with a damaging audit, Chipotle Restaurant would seek to minimize its possible offenses in the eye of the government by swooping one additional source of potential worry off its counters? Hasta luego, tip jar!

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2 Responses to “Chipotle Restaurant: The Mysterious Disappearance of the Tip Jar”

  1. Bill Says:

    Hmm. Interesting how government harassment causes the poorly paid worker to be paid even less. Leave Chipotle Restaurant alone please!

  2. mwattorneys Says:

    As far as the authenticity comment, I’m not sure how authentically “Mexican” Chipotle’s burritos are. Very tasty, but not Mexican. I like the idea of a little tip for some extra sour cream, but I never saw it work that way. Maybe if they had moved the tip jars to the beginning of the assembly line then the burrito builders would have obliged.

    At any rate, removal of the tip jar was certainly done to avoid any further scrutiny by the government as tips are considered taxable income and I just don’t see a handful of workers splitting up 20 bucks at the end of their shift and reporting it to the IRS come tax time.

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