Today, we will be diving into Costco. Costco is a favorite business story and model for many operators and investors. It was founded in 1983 in Seattle, and it has grown into a juggernaut with over $169 billion in sales and almost 60 million members globally. To me, Costco is the best example of doing one thing for customers and getting better at it constantly for decades.   To help me break down Costco, I talked to both Zack Fuss and Chris Bloomstran. Zack is an investor at Continental Grain, a 200-year old family-owned business that is focused on investing and operating businesses throughout the food and agriculture ecosystem with assets across the US, Latin America, and Asia. Chris is President and Chief Investment Officer of Semper Augustus Investments Group and a long-time shareholder in Costco.   In this Breakdown, we'll start with Zack by diving into the Costco business model, examining the relentless focus on efficiency that separates Costco from its peers, and exploring the secrets behind its private label brand, Kirkland. I'll then talk to Chris about Costco's growing international opportunities and the lessons that operators and investors can take away from studying the business and founder Jim Sinegal. I hope you enjoy this Breakdown of Costco.   For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- Business Breakdowns is a property of Colossus, Inc. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss   Show Notes [00:03:03] - [first question] - The fundamental equation that makes Costco work [00:04:02] - Dynamics of a shared scale economy business [00:06:45] - Jim Senegal’s devotion to perfecting one model for decades [00:10:10] - Examples of how far Costco is willing to go to provide value for its members [00:12:27] - Analysis of a private label strategy, and why Kirkland is such a success [00:15:35] - Key differences that separate Costco from their competitors [00:18:19] - An open-source retailing relationship with suppliers [00:21:10] - How they maximize sales per square foot over time [00:25:45] - Thoughts on leverage in unit-concept stores and why Costco doesn’t use leverage to accelerate growth  [00:28:02] - Lessons that can be learned and applied to other businesses    [00:30:47] - How Costco approaches international expansion [00:33:54] - Why Jim Sinegal is such an exemplary CEO

Today we will be diving into Chipotle, the fast-casual food chain known for its burritos. It was started in 1993 by Steve Els, an entrepreneur who is actually a classically trained chef and dreamed of opening a fine dining restaurant.    He started Chipotle to earn cash for that dream, but the well-known chain took off and made TexMex fast-casual food an American staple. Over the past two decades, Chipotle has expanded nationwide to over 2000 owned and operated stores. Its significant growth is tied to its simple restaurant decor and efficient operations. Nevertheless, the beloved fast-casual chain was plagued with a series of foodborne illnesses from 2015 to 2018. Since then, the chain has been adapting rapidly to regain the trust of customers nationwide.    In this breakdown, we discuss Chipotle's origin stories, its hypergrowth, its focus on simplicity and innovation. We'll also go into details around how they navigated COVID and their national food safety outbreaks.    To help me break down Chipotle, I'm joined by Zack Fuss, an investor at Continental Grain and an expert on all things food and restaurant-related.   For the full show notes, transcript, and links to mentioned content, check out the episode page here.   ----- Business Breakdowns is a property of Colossus, Inc. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss   Show Notes [00:03:13] - [First question] - What is Chipotle [00:04:24] - Chipotle’s scale compared to its competitors [00:05:36] - The origin story of Steve Ells and Chipotle [00:06:47] - Carving out the fast-casual restaurant niche [00:09:02] - Unique themes that have been carried into today [00:10:22] - Unit economics in fine dining versus fast-casual dining [00:11:56] - Gross margins and their similarities across establishments [00:14:53] - An ideal payback period for a restaurant [00:16:00] - What allows for Chipotle to have such an optimized payback period [00:18:29] - Owned and operated versus franchised  [00:20:49] - Pros and cons to franchising or being an owner-operator   [00:22:11] - Key factors to consider when choosing to franchise or not [00:23:31] - Chipotle taking $350 million in growth capital from McDonald’s [00:25:58] - Differences between McDonald’s and Chipotle’s food [00:27:08] - The E Coli outbreak in late 2015  [00:28:17] - Sweetgreen, Cava, Zoes Kitchen, Noodles & Co. [00:30:09] - Pershing Square’s investment in Chipotle post-outbreak  [00:31:51] - Technology and its effects on the restaurant industry [00:33:39] - Digital orders and profit margin variance [00:35:53] - Launching a Digital-Only quesadilla menu item [00:36:33] - Internet aggregators, dark kitchens, and future food tech trends [00:39:52] - How Chipotle beat out Qdoba [00:41:32] - Blaze Pizza, Tasty Made, Panda Express  [00:43:38] - Dark kitchens and network expansion [00:45:01] - Lessons builders can take away from Chipotle’s story [00:45:01] - Lessons investors can take away from Chipotle’s story