Group Assignment meeting Business Strategy and Policy requirement

1. Dr. Mike Onorato April 25th
2016
Business Strategy and Policy BU 3010-001
Chipotle Mexican Grill
AN ANALYSIS OF THE GROWTH AND FUTURE OF THE FAST-CASUAL DINING LEADER
By Group 5: Amanda Carullo Julio Mendoza Matthew McDougan Pateer
Batros  Vivek Jagtiari

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TABLE OF CONTENTS
Amanda Carullo
Brief Overview and Company History____________________________________________ 4
C.E.O__________________________________________________________________4
Chipotle’s “Food with Integrity” Mission:_____________________________________ 5
Current Events:
Chipotle Alerts CDC______________________________________________________5
Damage Control_________________________________________________________ 6
Business Model_______________________________________________________________ 7
7 External Factors
Demographics:__________________________________________________________ 7
Natural Environment & Social Factors:_______________________________________ 8
Economic Conditions & Global Forces:_______________________________________9
Technology:___________________________________________________________ 10
7 External Factors (Full Analysis)_______________________________________________10
Julio Mendoza
Industry Analysis ____________________________________________________________ 11
Fast food restaurants_____________________________________________________ 12
Fast-Casual ___________________________________________________________ 12
Full Services Restaurants ________________________________________________ 13
Family dining restaurants_________________________________________________ 13
Pizza Locations_________________________________________________________13
Cafes_________________________________________________________________ 14
Getting into the Restaurant Industry_________________________________________14
Driving Forces _______________________________________________________________14
Matt McDougan
Porter's Five Forces – The “Fast-Casual” industry
Rivalry amongst competing sellers__________________________________________16
Threat of new entrants __________________________________________________ 17
Threat of Substitute products______________________________________________ 17
Power of buyers________________________________________________________ 18
Power of Suppliers______________________________________________________ 19
Key Success Factors
Quality of Food________________________________________________________ 19
Quick Service__________________________________________________________ 20
Medium Price Point_____________________________________________________ 20
Inviting Atmosphere_____________________________________________________ 20
Pateer Batros
Value Chain Analysis
Primary Activities
Supply Chain Management_______________________________________________ 21
Operations_____________________________________________________________21

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Distribution____________________________________________________________ 21
Sales and marketing_____________________________________________________ 21
Service________________________________________________________________22
Support Activities
Product R&D, Technology, and Systems Development__________________________22
Human Resources Management____________________________________________ 22
General Administration__________________________________________________ 23
Financial Analysis_______________________________________________________23
Vivek Jagtiari
Generic Strategy
Differentiation__________________________________________________________25
Low Cost______________________________________________________________26
Niche_________________________________________________________________26
Core Competencies______________________________________________________26
Competitive Advantage__________________________________________________ 27
SWOT Analysis
Strengths______________________________________________________________ 27
Weaknesses____________________________________________________________29
Opportunities___________________________________________________________30
Threats________________________________________________________________31

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Brief Overview and Company History:
Chipotle Mexican Grill was founded in 1993 by Steve Ells, a chef, who opened his first
restaurant in Denver, Colorado. Due to the company’s immediate success, the second restaurant
opened two years later, thus the beginning of the value chain commenced. He initially raised
capital through franchising, a small number of restaurants, which he has since stopped doing to
uphold brand continuity. Ells had 16 restaurants, all in Colorado, when McDonald’s became his
main investor in 1998. That investment allowed Chipotle to quickly expand from 16 restaurants
to over 500 by 2005. On January 26, 2006, Chipotle made its initial public offering and had to
increase their share price twice due to high pre-IPO demand, at which time McDonalds fully
divested itself. According to Yahoo! Finance, their stock is currently trading at a volatile
$441.16. Chipotle currently owns and operates 1,971 units and employs more than 45,000
Americans, according to CNN Money, 2015’s syndicated report. Chipotle is dually expanding
operations internationally and are in the growth stages of two subsidiaries. Their global
expansion includes restaurants in five countries, including 11 in Canada; 7 in England; 4 in
France; and 1 in Germany. Furthermore, they operate ten ShopHouse Southeast Asian Kitchens”
and one “Pizzeria Locale” restaurant. (10)
C.E.O:
The founding and current CEO, Steve Ells, is a classically trained chef, who graduated from the
Culinary Institute of America in 1990. Prior to that, he earned his Bachelor’s Degree from the
University of Colorado. Before launching the first Chipotle restaurant, Steve worked for two
years at Stars restaurant in San Francisco. (10) His vision is that food served fast doesn’t have to
be low quality and that delicious food doesn’t have to be expensive, this the foundation on which
Chipotle was formed. Subsequently, this thinking transpired in Chipotle serving more naturally-
raised meat and meat bi-products than any competitors in the industry. Steve’s vision became his
mission which is the principal, driving force behind making Chipotle an innovative, market
leader. He is a proactive advocate for ingredients that are natural, organic and promotes
sustainability. He exhibited hands-on, involvement on the fulfillment of his personal mission by
testifying before the U.S. Congress in 2009 for the elimination of the use of antibiotics in all
ranching on animals. (11)

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Chipotle’s “Food with Integrity” Mission:
“Food with Integrity is our commitment to finding the very best ingredients raised with respect
for the animals, the environment and the farmers”.—Chipotle’s “Food with Integrity” Mission
taken off Chipotle’s Official Website
Chipotle implements traceability methods on all of their suppliers which enables the company to
reverse-track the sources of all of their fresh food back to its original supplier, including the farm
where its produce is grown. “Our Food with Integrity mission is the foundation for all of our
business practices, and traceability supports that mission by helping to create a more transparent
supply chain.” — JASON VON ROHR, Executive Director of Supply Chain. (13) In 2011,
Chipotle Mexican Grill established the “Chipotle Cultivate Foundation” to extend its
commitment to creating a more sustainable food future. The foundation is dedicated to providing
resources and promoting good stewardship for farmers, raising healthier livestock, and
encouraging sustainable agriculture practices; such as fostering food literacy, cooking education,
and nutritious eating. (11) Since its inception, the foundation has contributed more than $3
million to likeminded organizations committed to cultivating a better world through food. (13)
Current Events
Chipotle Alerts CDC:
Last half of 2015 was, by far, the most taxing period in the restaurant chain’s twenty-two years
of operations. The company experienced one setback after the next over a remarkably short span
of time. In September, salmonella contaminated tomatoes, supplied to the company, which was
recorded in twenty-two Minnesota locations and infected over sixty people. Multiple locations’
health violations went public; rumors spiraled alleging Chipotle uses dog-food meat in their
burritos, along with other minor incidents which were over-publicized in the media, intensified
by the main fiasco, the E.coli and norovirus outbreaks.
The mass-contamination had a material effect on the company, financially, and on the brand’s
reputation as many customers’ perceptions has changed indefinitely. Chipotle took full
responsibility for getting more than 400 people sick. According to the Center of Disease
Control, two waves of different strains of the E.coli bacteria swept the nation. The first occurred
mid-October, encompassing twelve states and the second, determined to be a different strain,
affecting three additional states. Consecutively, the highly-contagious Norovirus caused over 300

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patrons in California and Massachusetts to fall ill, all incidence resulting in numerous
hospitalizations and many open lawsuits against the Mexican food-chain. The specific food item
being linked to these illnesses is unknown. (14). In the midst, the Salmonella bacteria was
linked to the restaurant chain as well, reported in three states and infecting over a hundred more
people. (5) The stock plunged over 40% in three months, and Chipotle was ringing in the new-
year with a 15% decrease in sales for the fourth quarter. (7)
Damage Control:
Ells made several public apologies for the outbreaks, taking out a full-age ad in several major
U.S. newspapers including the New York Times, Wall Street Journal, and USA Today. They
gave away millions of burritos, chips and guacamole via digital coupons, text message, and by
“winning” online matching games. To get customers back inside the restaurants, Chipotle
anticipates circulating 21 million coupons to redeem a free entrée, in total, and expects two-
thirds to be redeemed. (15) Millennials are a highly unforgiving generation, and with numerous
Mexican casual dining spots popping up all over the place, there are local alternatives to get a
taco, burrito, or salad.
After a half hour Q&A January 13th
, they released their plan to implement new quality control
protocol. Working with an epidemiologist, their plan included improved food handling and
preparation procedures; doing more research on their supply chain, prepackaging of their lettuce
and tomatoes to receive a rigorous washing, enhance food training by implementation of DNA-
based testing on their produce and meats in a central kitchen. “They've also introduced measures
at the farms they source their ingredients from and in restaurants themselves, where they've
focused on "kill steps" to eliminate any microbes that do make it into the kitchen.” This plan
seemed to moderately sooth investors as the stock rose 13% merely hours afterward. (8)
Implementing these new protocol procedures are going to be costly. Since opting for lower
quality goes against their mission, they are going to have to spend to ensure the quality of their
food, to protect their loyal customers, brand reputation, regain credibility, and prevent this
disaster from recurring in the future. (7) With reports of Norovirus making Chipotle’s headlines
in a Boston location as recent as March 9th
, (6) the company faces an arduous road to regain
momentum, and do not anticipate recovering their profit margins until 2017, at which time
they’ve forecasted they’d remain 100-200 basis point lower than before the E.coli outbreak. (8)

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They know 2016 is going to be a volatile, first quarter’s report is being release this week and is
expecting to show revenue decline in the double-digits for the first time in the company’s
history. (12)
Business Model:
The “casual dining” section of the market is a newer industry which is becoming increasingly
more popular due to millennial preference. Casual dining is a mix between fast food and a sit-
down restaurant; it has the fast-food convenience aspect of a Taco Bell or Mc Donald’s, the
quality of food from a full-service restaurant, and is priced between the two. The appeal for this
type of industry is millennials desire for faster service and the willingness to pay extra for better
quality food.
 “Casual dining” style restaurant incorporates restaurant quality with fast food wait time
- One to two minute prep time per order
 A defined menu focusing on tacos, burritos, burrito bowls and salads prepared to order
- Assembly line system enables chipotle to prepare menu items in front of customers
 High-quality food sourcing
- Organic, natural ingredients
- No prepackaged, processed, or frozen products
- Works with local farms and ranchers who treatment animals in a humane manner
above what is required by the USDA
 Ambiance
- Each restaurant’s décor is a modern-styled metal and light wood
- Providing customers with an aesthetically pleasing, clean atmosphere to dine in as
well as maximize functionality for operations.
 Employees
- Hires individuals motivated to be part of a team and takes pride in working for a
company which has positive effects on the environment, therefore elevating customer
service
7 External Factors
Demographics:
The demographics which hold the consumer majority of Chipotle restaurants are, by far, the
millennials. As previously stated they virtually created the casual dining industry with their
desire for quickness, convenience, and sacrificing extra money for better quality food. This is
why traditional fast food restaurants, like McDonalds, has been struggling to compete by
modifying their menu in attempt to make healthier, appealing items, such as the “snack wrap”
and started labeling nutrition facts to their menu items. Millennials have been making their

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presence known, asserting their purchasing power as vital current and future consumers of the
market. They comprise 20% of the consumer population in the United States’ market, Chipotle’s
“food with integrity” advertisement targets the 18-34 year old, “upper-middle class”, “mass
affluent” market segment who are generally more educated, socially, environmentally and health
conscious. Nearly every aspect of their business strategy, mission statement, vision statement
markets sustainability in those areas. (2)
Natural Environment & Social Factors:
As previously mentioned, CEO Steve Ells is an involved advocate for sustainable and healthy
foods. Chipotle lives by the “Food with Integrity” slogan he created and campaigns. The natural
environmental factor from which Chipotle derives their food sources from is arguably held to the
highest standards in the industry. It is a major selling point and dominant social factor as well
for a majority of Chipotle’s most loyal customers and they have accredited its success and
continued growth to the quality of their ingredients. (12) The necessity for natural ingredients is
non-negotiable as it is the foundation of the company’s business model.
Above all, all of their ingredients are organically produced and locally sourced. Their produce is
fresh and is from smaller, locally grown farms. Their rule of thumb is that the food is sourced
within a 350 mile radius of its destination. They’re very particular in the manner the livestock is
raised. In addition to not receiving any antibiotic or growth hormone, pigs are fed a 100%
vegetarian diet and cattle are grass fed. Because they denounce factory farming, all the animals
are uncaged. Chipotle believes that using this technique produces better tasting, healthier meat. It
is an important aspect on the treatment of their livestock because many factory farming methods
have animals in extremely poor, inhumane conditions. Even the cows which produce Chipotle’s
bi-products, such as cheese and sour cream, are growth hormone free, and have outdoor access.
(9) In addition to the health benefits of natural foods without additives, the humanitarian
requisites incorporated into choosing their distributors are also social factors which contribute to
making Chipotle one of the market leaders in the industry.
Aside from the health factors which appeal to many, another social factor (that can also be
included in the economic category) which enhances chipotle’s appeal is the help they provide to
the “middle class”, “mom and pop” farmers. Larger companies paying a bit more to support
small business owners and increase the “strengthening of the middle class” is socially respected

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and economically beneficial. Larger corporations have tended to give themselves a bad
reputation,
There are larger-scale, corporate, organic farms but Chipotle choosing to conduct its business in
this way, appeals to the corner of the market that advocates for social justice and small-business
support. “While industrial farming practices have evolved to maximize profits and production,
we make an extra effort to partner with farmers, ranchers, and other suppliers whose practices
emphasize quality and responsibility…We make our choices with farmer, animals, and the
environment in mind.” (12) This quote, taken directly from the company website, exemplifies
Chipotle’s marketing strategy to differentiate themselves from competitors.
Economic Conditions & Global Forces:
The economy has improved over the last few years with inflation at approximately 1%, and all-
time low unemployment, with rates just under 5%. However, there are plans in place preparing
to raise minimum wage over the next few years upward of $15 dollars an hour. This is going to
have a material effect on Chipotle’s operating costs. Chipotle currently expends approximately a
quarter of its sales on labor expenses. (3) This figure is already optimized by their lack of menu
changes. Menu consistency saves in the retraining of employees, necessary when introducing
new menu items. (3) They’ve just incurred numerous new expenses for quality control and
they’ve stated their plans are not to cut cost. Since they are still working on re-securing their
customer loyalty, it isn’t feasible to immediately raise prices. They have plans to recover their
losses by continuing to grow corporately, as they want to maintain the integrity of their brand by
opting out of franchising. Their goal to increase cash flow is to expand brand recognition and
global presence. They are focusing on new ventures in Europe and Canada; therefore whatever is
not covered by their international expansion plan, will ultimately cut into their margins.
Technology:
Chipotle has a new app available for most smart phones. The app allows Chipotle locations to be
easily found and connects to Google Maps for GPS directions. It also offers view of their full
menu to order, customize the order, and pay for the order all from customer’s fingertips. This
purchasing method will be most successful among their target market, the millennials. They are
generally more technologically savvy than most generations before and have an appreciation for

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features which enhance convenience and time management; this new service does just that by
omitting the customer’s necessity to wait on line.
A different technological feature gaining popularity, which has already been added to most
corporate restaurants, and is making its way into the fast food and casual dining industry are
kiosks. However, this is a technological device that, similar to Subway, Chipotle may not have
to invest in. Since Chipotle’s business model is built around the “face to chef” experience, their
presentation of menu items prepared in front of the customer removing the need for additional
kitchen staff in the back as well as the need for the virtual-ordering kiosks.
7 External Factors (Full Analysis)
1. Demographics:
 Who eats at Chipotle Mexican Grill?
- “Millennials” are the age group that Chipotle attributes their success
- Health Conscious: Stays away from processed foods and mechanically separated
meats
2. Social forces:
 Health conscious, unprocessed foods, not previously frozen or prepackaged,
Environmentally friendly, and humane
 Chipotle is one of the few fast food restaurants with many vegetarian options
 Values the support Chipotle gives to local business opposed to large factory farming
corporations such as KFC
3. Regulations:
 Food and Drug Administration
- The FDA is the main agency which regulates the food industry
- There were several acts and requirements passed when labeling, recordkeeping,
and reporting
- Inspections from FDA’s offices of regulatory affairs
 Federal Trade Commission
- Franchising is regulated by the U.S. Federal Trade Commission (FTC) and by
various state agencies.
- Chipotle is mainly corporately owned, with very few exceptions from the early
days, and they intend to keep it that way; Chipotle is currently not offering to
franchises
4. Natural environment:
 Local Ranching livestock
- The animals are uncaged free roaming
- Pigs fed 100% vegetarian diet
- Cows are grass fed
 Local Farming Produce
- All organic vegetables
- Not loaded with pesticides and insecticides

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 They do not use frozen or canned food, all natural ingredients
5. Global forces:
 Company has a presence in five countries
 Continued expansion into European market
6. General economic conditions:
 Unemployment the lowest it has been in decades, (under 5%)
 Inflation is less than 1%
 Plans to increase minimum wage
- will lead to operational cost restructuring
- with labor expenses accounting for approximately a quarter of its sales it will
have a strong impact the company (3)
 Morgan Stanley predicted 20% of an economic recession in 2016 (4)
7. Technology
 Chipotle’s mobile app offers convenience for on-the-go accessibility, at customer’s
fingertips.
 Features include :
- Finding the closest location
- Order ahead of time from their full menu, avoiding human mistakes with
computerized customization
- Pay ahead of time via debit card, to pick-up the order upon arrival and avoid lines
natural ingredients
Industry analysis:
The restaurant industry has grown over the past five years due to change in consumer
preferences and is expected to continue to expand in the next five years according to IBISWorld.
Fast food locations will benefit and continue to grow as the economy improves and as consumers
continue to eat out. Restaurant industry sales are around $783 billion in the United States. The
industry is highly fragmented with a total of around 1 million locations in the United States. The
restaurant industry is responsible for the employment of approximately 14.4 million workers in
the U.S., according to the National Restaurant Association. Overall it employs about 10% of the
workforce in the United States and is expected to create about 1.7 million more jobs by the year
2026.
The restaurant industry is extremely competitive because of the need to constantly find new ways
to innovate and reinvent themselves. Restaurant growth remains moderate year round. For
example around 4,500 new locations are opened in the United States but according to the NPD
Group, 9000 fail each year. Business insider said 80% of new restaurants are likely to fail. The
reason why this is likely occurs could be due to location , product pricing ,and promotion styles,

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these aspects are essential for a restaurant to succeed. It is also important that Investors know
that running an independent restaurant is different from managing or operating a restaurant
chain.(16)
There are many types of restaurants that offer a variety of food and experiences. These include
Full Service restaurants and Limited services restaurants. Full-time services restaurant offer full
table services and is further classified into casual dining and family dining. Limited –service
restaurants have no table services can be futher classified into fast food and fast casual formats.
These restaurants rely on high –marging items and effective marketing.
Fast food restaurants
Fast food restaurants specialize in serving food they can prepare and serve quickly . Their
menus are priced on the lower end .Most fast food restaurants have a drive thru due to their fast
service. The food quality at these locations are on average high in calories and low nutritional
value. Fast food restaurants are known for offering items as low as $1, and the average amount
spent at these locations is about 4 to 10 dollars. The biggest player in the fast food restaurant
industry is McDonalds(MCD) with a market share of 17.8%. McDonald annual . Yum brands,
which own KFC, Pizza Hut, and Taco Bell . Other popular fast food restaurants include Burger
King, Wendy’s, Popeyes, Jack in the Box, and Arbys. At all these locations food is served
quickly and their staff is limited to food preparation, manager, and cashiers. Many analyst
consider that the fast food industry has reached its mature stage in the United States. Due to this
several fast food chains are focusing on international expansion like in Asia, the Middle East and
the African region. For example in China McDonald’s has opened 275 locations. Yum Brands
have opened 1300 locations worldwide. (17)
Fast casual
Fast casual restaurants are a combination of fast food and casual dining restaurants, they offer
minimal table service. Fast casual currently represents approximately $30 billion of the $783
billion total restaurant industry in the U.S., but is projected to grow to an additional $100 billion.
The menu is limited and moderately priced somewhere between $8 to $15 per person. People
like the fast –casual restaurant style because of the high quality food and the affordable price.
Food at these restaurant is usually prepared fresh , with high- quality ingredients. Unlike fast
food restaurants and casual restaurants, fast-casual restaurants are experiencing growth in the

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United States gaining share from other restaurant format. Some of the reasons for this growth
include shifting demographic, preferences in taste, food quality, and food ordering methods.
Chipotle Mexican Grill (CMG) emphasizes in the high –quality food and hand-held
characteristics that make fast casual a fast growing trend. Chipotle Mexican grill for example
sources its ingredients from local producers and their menu can be customized at the counter.
Chipotle has about 2000 locations in the U.S. Other examples include Panera Bread, Qdoba
Mexican grill, and Smash burger.
Full Services Restaurants
The casual dining restaurant environment has a relaxed and a casual ambiance with a lot of
seating. They offer full service such as appetizers, entrees, desserts and may also have a wine
menu or full bar service. The portion sizes are usually large and they do not use disposable
cutlery. Compared to fast food locations the food takes longer to prepare, you have greater
control over customizing your order and you pat after you have eaten the meal. The menu is
moderately price because of full table services and tips. The total amount spent at these
restaurant locations is moderately priced from 10 to 25 dollars per person. Examples include
restaurants like Olive Garden and Red Lobster (DRI). Chili’s bar & Grill and Little Italy (EAT) .
Other casual dining restaurant includes names like Applebee’s, Outback Steakhouse, TGI
Friday’s, and Ruby Tuesday’s.(18) The casual dining restaurant is declining due to changes in
customer preference and increasing competition from fast-casual format restaurant.
Family dining restaurants
Family-Dining restaurants also offer full table services which include breakfast, lunch, and
dinner menus but they differ from casual dining because they do not offer alcohol. Some family-
dining restaurant may be open for longer hours ,up to 24 hours a day for seven days a week. The
average check at a family restaurant is between 20 to 60 dollars. Family restaurants include
IHOP ,Denny’s, Cracker BarrelOld country Store and the Waffle House .
Pizza Locations
Pizza places are also very popular in the United States restaurant industry. Pizza locations may
have limited seating space focusing more on take out or home delivery. Pizza places not only
offer pizza but may also include some entrees, sides, and dessert. Pizza places include

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Domino’s(DPZ) and Papa John (Pzza). According to your Guide to Pizza and Pizza Marketplace
there are around 70,0000 Pizzerias in the United States alone.
Cafes
Cafes do not offer lunch or dinner and focus heavily on beverages and breakfast during the
day. Cafes often prepare orders to go but they may also offer seating places and free wifi
connections to its customers. Cafes example include Dunkin Brands (DNKN) ,
Starbucks(SBUX) and Krispy Kreme (KKD) .(20)
Getting into the Restaurant Industry
There are two main models that are commonly used when opening a new location in the
restaurant industry. These include The Company Operated Model and Franchise and License
Model. In the company operated model the company finances all of the cost .The company takes
ownership of the operation at the restaurant location. The company uses its own resources to get
the location ready for business, which include purchasing or leasing the land or building, hiring
the staff , buying furniture ,kitchen equipment and inventory supplies The company takes on the
risk of litigation. In this model the company require a significant amount of capital upfront, but
it a gives the company full control over the day to day management of the restaurant and protects
its brand value. This gives the company the right to any implementation and execution of any
strategic changes made at the restaurant company’s corporate headquarters. In a franchise model
the franchisor, for example McDonald’s,and the franchisee enter into a agreement to sell the
franchisor’s branded product. The Franchisee pays an initial fee as well as a percentage from the
restaurant’s sales, paid rent, and has to develop the restaurant.(19) For example hire staff, take
care of daily operations and manage cost for running the restaurant. The success depends on the
owner. The Franchisor(McDonald’s) is able to expand locally and globally very quickly, own
the location , has lower risk if the store underperforms, and focus on product and operation
research. Overall the franchisor has less control over management.
Driving forces
One of the greatest driving forces is Social Forces. Social forces includes the greater demand for
healthy fast foods led by the millennial generation, which is highly critical to the restaurant
industry. Millennial are people between the age of 23 to 36 and represent 20% of the US
population .This population focuses on demanding food of better quality ,food made with

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ingredients that are free of additives, antibiotics ,and other artificial components. Not only the
millennial but people in general are getting smarter about their health and making better choices
about the food they eat. This trend has made a big impact in the fast food industry making them
change and improve their menus. In recent years 56 % of food companies have shortened their
ingredient lists. Mindful dining customers want to feel good about themselves, for example
wanting products that are organic, meaning they are not give growth hormones or antibiotics and
most importantly are not mistreated.(21)
Economic forces are also one of the main driving forces. For instance, when the economy drops
people tend to spend less money causing to cut back in dining out causing pressure to the
restaurant industry Restaurant will either have to lower prices or increase quality at the same
price to compete.Many customer are selecting restaurant that offer a good prices mixed with fast
food options
Political forces also play a role. An example of this is minimum wage. Low wages are leading
people to srtike and demand higher wages, health care reform forcing restaurant to provide
medical insurance for their employees.
Technology forces have an impact in restaurant industry growth. . With the growth of internet
users the restaurant industry has to invest more in technology and modify the way they do
business. Among millennial ,the availability of technology is an important factor when choosing
a restaurant. Now most of the people want a restaurant that offers Wi-fi, consumers want to be
able to used the internet to do online reservations, place orders , and track their orders online .
The restaurant industry can also use social media to communicate with the customers via
internet by showing new products, and offer promotions. Social media platforms like Facebook
and twitter have now become a part of the dining experience. Social media has helped in
advertising because of pictures that are posted which lead to people choosing the restaurant.
Another way that the internet has helped the restaurant industry is through online reviews.
Porter's Five Forces – The “Fast-Casual” industry
Rivalry amongst competing sellers- Strong – As Chipotle is having food integrity issues,
Chipotle records its first quarterly loss and is losing customers to other fast casual

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restaurants like Panera, Moe’s, and Qdoba. The fast casual industry is growing and
consumers have many options of where to eat.
Amongst all Mexican fast food restaurants overall, Chipotle is second only to taco bell. As of
late 2014 Taco bell had 5,769 locations to Chipotle’s 2,010 locations. But Chipotle isn’t trying to
be a fast food restaurant and run the kind of business that taco bell runs. Chipotle describe their
industry as “ethical quick serve restaurant” and is run in differentiation from a restaurant like
taco bell. They’ve led a food revolution and millennials have become attracted to the Brand’s
non-GMO stance, and organic options as a healthier alternative to traditional fast food. This
approach has thus far proved very successful, since 2007 they’ve nearly tripled the amount of
locations, and gone from 820 million in revenue to 4.1 billion. (22) However, if defined by the
Fast Casual, sit down style dining approach their rivals would be Panera, Moe’s southwestern
grill, Qdoba Mexican grill, and Baja Fresh. Rivals in this industry pride themselves in
comfortable dining areas, unique and quality taste, and food integrity are key. Although those
that differentiate based on healthy options have done particularly well. The cost for a customer to
choose one fast casual restaurant over the other is low, so it is important to create loyalty
amongst its customers. When Chipotle recently had food integrity problems they asked their
customers to give them another try by improving its food preparation and offering free burrito
coupons. Rivals in this industry’s biggest costs are food costs. Chipotle has been able to fend off
rivals in the past by being the leader in the health conscious food movement. Their uniqueness,
simplistic menu, and quality has given them some distance in market share from their rivals but
their latest food integrity problems could give their rivals a chance to gain market share. Its
biggest rival Panera (and only other publically traded in the fast casual industry) is taking some
of the customers discouraged from going to Chipotle after their recent food integrity problems.
Despite their recent food issues, Chipotle has strong financials. Many analysts think Chipotle
will rebound after time and the food integrity problems die down. They also believe the future is
bright for Panera. Analyst James Gellert says “Panera, similarly, has a clean bill of financial
health. They’re investing heavily in their stores to enhance their service and improve their
overall operating efficiencies. While that increase in spending is taking a bite out of their profits
in the short term, the market should watch for how well these investments translate into value
creation.” (23) In 2015 Panera bread earned 2.6 billion dollars in revenue and now has 1900

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locations. (24) The industry is growing fast, and many companies in the fast casual industry such
as Moe’s are adding many locations and make healthy profits.
Threat of new entrants – Moderate - Entry costs in entering the fast casual industry are
relatively low, regulations are relatively low and growth in industry is good, but the big
companies such as Chipotle are obviously make much larger profits, more locations, and
brand recognition and loyalty.
The segment of fast casual dining is a relatively new market. Chipotle as a brand itself has only
been around for just about 15 years when they opened their first location and has grown rapidly
since then. Similar restaurants (such as Moe’s southwestern grill with 500 locations) are growing
in popularity right now and could potentially take market share from Chipotle in years to come.
The startup costs to opening a fast casual low are relatively low compared to many other
industries. The outlook for the fast casual industry is good as consumer’s tastes have switched to
a more health conscious, environmentally friendly and ethically conscious. Chipotle, Panera, and
other fast casual restaurant’s growth rate has grown much more than traditional fast food
restaurants. The industry is regulated by the FDA and zoning regulations by local governments
but the regulations on the industry aren’t insurmountable as to create a difficult barrier for new
entrants. An established fast casual restaurant such as Chipotle and Panera obviously have more
capital and brand recognition than new entrants, but if a new fast casual restaurant comes along
that becomes popular, barriers to compete with Chipotle and others are not great enough to
prevent expansion of a trendy start up restaurant as Chipotle and Panera came from humble
beginnings not too long ago. There are many new competitors in this industry within this
industry within the past 10 years and the demand for this style of restaurant has increased.
Threat of Substitute products – Moderate – Numerous, large traditional fast food
companies make way bigger revenues, compete for consumer’s dollars when people are
looking to eat, and are a cheaper option, but fast casual is growing fast and popular
amongst key demographic, millennials.
The top substitute products that compete with the fast casual industry, is traditional fast food
operators such as McDonald’s, Wendy’s, and Burger King. In 2014 Chipotle earned 4.1 billion
in revenue which when compared to top fast food company McDonald’s seems insignificant.

18. 18
However, McDonald’s revenue grew by 2% in 2013 and since then their growth has declined,
meanwhile, Chipotle’s revenue has grown by 20% for the past five years. (25) (Although now
that growth has slowed by their recent food integrity issues.) The average meal at McDonald’s
cost $3-$6 at traditional fast food restaurant, while at a fast casual restaurant the average meal
costs from $8-$15. This puts fast casual at an in between price point between traditional fast food
and casual dining restaurants, like TGI Friday’s and Applebee’s. The concept of fast casual
restaurants is to be not only the price point between these two restaurant styles but aesthetically
in between as well. Fast casual restaurants have a differentiation from fast food restaurants.
Typically, fast casual restaurants have a more inviting dining area than traditional fast food
restaurants but not quite as comfortable as a typical casual dining restaurant. It’s not necessary
that they have organic, or healthy food as there are some new burger places such as shake shack,
and smash burger which are considered fast casual which are not necessarily healthy. What is
key to being considered part of this industry is offering high quality food at a higher price point,
usually ready to eat in under 5 minutes, typically no drive through, and a unique comfortable
sitting area. As a result of millennial’s spending habits and the boom in growth of this fast
casual industry, Wendy’s and others in the traditional fast food industry are trying to add
healthier options on their menu and making customers dine-in experience more hospitable and
comfortable.
Power of buyers – Strong - As consumers have many options for where and how they get
their meal.
In the fast casual industry buyers have many options from local restaurants that offer quick
service, upscale décor and different styles of food. However, when buyers are deciding where
they are going to eat they can choose a high price point, high quality meal at a casual dining
restaurant or fast casual restaurant, or even a low price point and something to grab through a
drive-thru window at a fast food restaurant. Consumers can even eat at home, or prepare a meal
to bring with them for lunch. Buyers have many options so the power of buyers is strong.
Therefore, Chipotle and others in the fast casual industry have to create loyalty among its buyers
by giving them quality food and a unique and create a great customer experience.
Power of Suppliers - Moderate to strong – Suppliers would compete for a supply contract
with a big company like Chipotle. So Chipotle has some leverage in dealings with suppliers.

19. 19
However, finding reputable suppliers is important to Chipotle and other fast casual
restaurant’s identity.
Fast casual restaurants and Chipotle in particular are concerned in overseeing their supply chain
after their recent E. Coli and food integrity issues. Also as seen in 2013 shortages in crops can
affect availability, food prices, and affect margins. According to Great Speculations an analyst
group for Forbes, in 2013 “The cost of food, beverage and packaging, accounted for 33.5% of
the sales, up 1.3% from the fourth quarter of 2011. Apart from the higher commodity costs, the
lack of higher menu prices is squeezing the profit margins. As a result, operating margins
declined 150 basis points to 24.6%.” To combat the rise in food costs Chipotle raised prices “The
company should get some respite once it raises its prices, which could be as early as in the
summer of 2013.” (26) And analysts think these prices may even need to go higher in the future
as Chipotle implements new quality controls and continues its commitment to using local, cage-
free, hormone free food costs more. According to Kevin O’Marah of Forbes, “Local, sustainable
farming sounds great in a marketing pitch and may even taste better, but it absolutely increases
the burden on procurement. A reality of food supply chains is that elimination of variability in
sourcing and production is essential to achieving low costs while maintaining quality. Chipotle,
by avoiding the industrial food supply chain as a matter of principle ends up needing to
accommodate massive variability in its supply base.” (27) So unless consumers chip in more for
their food, Chipotle will not get the margins it has the potential to make.
Key Success Factors
Quality of Food
Food quality is the most important key success factor and is essential to the core of the industry.
By quality I don’t necessarily mean healthy, organic, or locally sourced (although these attributes
can create differentiation and attract the niche of people that are looking for healthy food) but in
superior taste and ingredients. A burger place such as Bobby’s Burger Palace (highly recommend
it) is considered a fast casual restaurant, it fits the price range, the unique dining area, and the
quality of food, preparation, and presentation is far above anything offered by any traditional fast
food burger chain. Quality is what creates brand loyalty from consumers, the feeling of when a
customer pays extra money for a premium product they feel it’s well worth the value. Chipotle
creates this premium buy by using locally sourced food, hormone free, GMO free, organic and

20. 20
now because of its recent issues, more intensive food safety preparation. These ideals connect
with its health conscious target demographic. Despite its recent problems, Chipotle prides itself
in its quality of food and incorporates it in its branding and as its mission as a company, “Food
with integrity”.
Quick Service
Fast Casual restaurants have a similar atmosphere to a casual dining restaurant, but try to have
food served in the time it would take to get a meal from a traditional fast food restaurant. Time is
a big factor to those looking to eat especially a working class lunch crowd that may be short on
time and can’t sit down and wait at a casual dining restaurant. This is a major reason why the fast
casual industry has grown the way it has, people want their food to be good and they want it fast.
As we’ve discussed in the General Mills case study, people have become more “on-the-go”, but
still desire a high quality product not offered at traditional fast food restaurants.
Medium Price Point
While traditional fast food companies vie for the lowest possible price point, (e.g. Wendy’s 4 for
$4, McDonald’s value meals) fast casual restaurants set their price point at around $8-$15. While
it is more expensive than fast food, price points remain below that of casual dining restaurants,
making it a moderate price option. This price point is attractive to those who are willing to pay a
little more for better quality ingredients and better tasting food.
Inviting Atmosphere
Another core competency of the industry is its unique dining areas that implore guests to stay
and eat. This welcoming and relaxing atmosphere also creates brand loyalty because customers
are more likely to return where they feel comfortable. It gives the consumer the option of sitting
comfortably with friends and family in a unique environment, without relying on wait staff and
tipping that is required at casual dining. Chipotle typically has a dining area that is relaxing and
facilitates ease of use with plenty of condiments and access to anything a customer needs with
their meal.

21. 21
Value Chain Analysis
Primary Activities
Supply Chain Management:
Chipotle has built strong long term relations with industrial suppliers. It relies heavily on
industrial suppliers for its ingredients and supplies. Despite its “food with integrity” mission, it
doesn’t rely on local produce for its ingredients. Nevertheless, taking up local suppliers has been
one of its goals over recent years. Chipotle looks to work its way toward that goal by adapting a
local program through most of the U.S. from June through October. In the program, it will resort
to local produce to keep its food quality premium and fresh. After its E.coli breakout, it has
tightened its regulations in terms of supply chain. However, Chipotle is not backward integrated.
Operations:
Chipotle favors human skills over rules, robots and timers. They have tight regulations within the
supply chain for specifications and requirements. They employ a Quality Assurance department
that monitors the quality and food safety efficiently. This department additionally maintains the
standards of the suppliers, distributors and food. Chipotles also employs a “restaurateurs
program” which facilitates hourly crew workers to rise up to senior management positions.
Distribution:
Chipotle owns and operates 23 distribution centers to supply ingredients and other supplies to the
restaurants. These distributions centers are independently owned and operated in different
regions. The number of distributions centers will only go up as Chipotle has been expanding its
number of restaurants steadily over recent times.
Sales and Marketing:
Chipotle deliberately used to spend less on marketing. By doing so they believed they could
afford to spend more on higher quality ingredients. Chipotle doesn’t rely much on TV
commercials although they did air a commercial once during the Grammys in 2012. After the
E.coli and Norovirus outbreaks, they plan to spend 50 million on marketing and promotion
campaigns to win back customers who have been driven away. Chipotle plans on stepping up on
digital and in-store marketing. They also rely heavily on publicity from articles and social media.

22. 22
Promotional activities within newly opened stores are also one of its strategies to raise awareness
about the new stores. Chipotle’s average sales per store were “2.42 million US Dollars” in 2015.
[39]
Service:
Chipotle changed American fast food forever. Its food is produced fast and inexpensively, yet the
quality and flavor is not compromised as is in typical fast food. Chipotle’s biggest goal with
service is to have a customer’s order ready as quickly as possible, and impressively they achieve
it. Chipotle began a trend i.e. dubbed “fast-casual” which offers an upscale dining environment,
premium food quality, high prices and fast food service. They have a convenient service line
where the employee and customer move through quickly in which the customer gets to see the
fresh food and ingredients used to create the meal. In 2015, Chipotle took appropriate measures
to keep up with the toughening labor market of the restaurant industry. A recent survey indicated
that the worst may be over for Chipotle and that the willingness of people to eat at Chipotle has
gone up since the E.coli outbreak in the fourth quarter of last year.
Support Activities
Product R&D, Technology, and Systems Development:
When Chipotle started their “Food with Integrity” campaign, it involved researching ways to use
organically grown ingredients. They researched farming companies who practiced animal ethics
and cared about the environment. In 2014, Chipotle implemented new software that enhanced
traceability to increase efficiency and food safety. This update to their systems has enhanced
their overall awareness and execution of their products and services.
Human Resources Management:
Chipotle employs a general manager, an apprentice manager, a kitchen manager, and an average
of twenty full and part time crewmembers. Chipotle came with a list of 13 traits they want every
employee to have: Conscientious, respectful, hospitable, high energy, enthusiastic, happy,
presentable, smart, polite, motivated, ambitious, curious and honest. Due to tightening market of
restaurant labor, Chipotle hired 4000 employees in one day back in 2015.

23. 23
General Administration:
Chipotle employs a team of real estate managers who research potential locations for new
restaurants. For the most part the team is dedicated to projected sales in an area and targeted
return on investment. In 2015 alone, Chipotle opened 227 stores. Although Chipotle’s growth
has been stagnant in the past couple of years and is expected to slow down more after the E.coli
and Norovirus break out, it looks to expand its growth globally. After the E.coli and Norovirus
break outs, Chipotle quickly took the initiative to shut down restaurants and take precautionary
measures. In recent times, Chipotle started two side projects: ShopHouse that serves Southeast
Asian style rice bowls and Pizzeria Locale that serves gourmet pizza.
Financial Analysis
Growth
Chipotle has experienced steady growth over recent times. In terms of unit numbers, it has seen
annual increases over the past years. The number of restaurants worldwide has grown “from 704
in 2007 to over 2000 in 2015.” [43] Chipotle’s total number of assets have increased “from 1.1
billion U.S. dollars to 2.7 billion U.S. dollars” [43] between 2010 and 2015.
Revenue: $ 4,501,000,000

24. 24
Revenue benchmarked to competitors:
Profitability: $ 475,602,000 x 6.8% = $ 32,340,936 (Net Profit)
Liquidity
Current Assets: $ 814,647
Current Liabilities: $ 279,942
Current Ratio: Current Assets / Current Liabilities = $ 814,647 / $ 279,942 = 2.910
Working Capital: Current Assets – Current Liabilities = $ 814,647 – $ 279,942 = $ 534,705
Leverage
Total Assets: $ 2,725,066
Total Liabilities: $ 597,092

25. 25
Total Stockholder Equity: $ 2,127,974
Debt-To-Asset Ratio: Total Debt / Total Assets = $ 597,092 / $ 2,725,066 = 0.219
Debt-To- Equity Ratio: total debt / total stockholders’ equity = $ 597,092 / $ 2,127,974 = 0.280
Stock Performance
$442.73 as of April 22, 2016
Generic Strategy
Differentiation
Chipotle uses a focus differentiation strategy through its “Food with Integrity” campaign which
has contributed to its growth by providing customers a timely service and quality food. Its
mission has been to source ingredients friendly to animals, farmers and the environment. The
social motive of protecting animals and supporting local farmers facilitates drawing in
environmental and health conscious customers. Chipotle believes that although costs of organic
ingredients are higher, customers are willing to pay extra for healthier food. Chipotle also
believes that using environmental friendly organic ingredients and a modern upscale
environment sets it apart from competitors and meets consumer demands.
Low Cost

26. 26
Instead of implementing a low cost strategy, Chipotle spends a great amount of money on its
food. They are willing to spend such due to the need of complying with their campaign “Food
with Integrity”. Nevertheless, they are hesitant to make a complete switch to local ingredients
due to higher costs. They would prefer sticking to industrial suppliers to regulate lower costs.
Regardless of costs, Chipotle still intends to use organic ingredients which are higher in price in
comparison to regular ingredients. Chipotle does not plan to raise the prices of food due to food
safety measures after the E.coli and Norovirus outbreak. Although Chipotle already “raised its
prices 6.3 percent” [39] back in 2014 to keep up with the increase in meat prices.
Niche
If you think of Chipotle’s niche, it has to be ‘fast casual dining’. Chipotle was one of the first to
begin the trend of the fast casual dining. It strikes the balance between fast food and fine dining.
This niche has blossomed from nothing to a major trend over the past 25 years. Chipotle’s
revenue growth “has declined 6.8% year over year” [41] which is the first decline in the decade
long history of Chipotle being a public company. This drop is mainly due to the E.coli and
Norovirus outbreak in the fourth quarter of 2015. Nevertheless, Chipotle is still the leading
restaurant in its niche of fast casual dining.
Another niche of Chipotle would be ‘fresh food’ which comprises of organic ingredients. Several
years ago Chipotle brought to the table the unique combination of fresh ingredients, fast pace and
upscale environment. This achievement of Chipotle has driven its success for the most part.
Having fresh ingredients and serving fresh food is what has mainly kept Chipotle at the top of its
game. However, ever since the outbreak of E.coli and Norovirus in December 2015, the
company’s niche has been compromised and it has taken a hit in its sales, growth, customer
loyalty and stock price. Even though the outbreak of E.coli has come to an end, the questions
arise whether Chipotle will regain its reputation of its niche i.e. fresh food, boost its growth and
sales, and rise in terms of stock price.
Core Competencies
Chipotle’s core competency is its ability to offer high quality food at a reasonable price. It can
afford to offer this quality at a reasonable price because it limits its menu and does not expand

27. 27
itself too much. This preserves its ability to keep prices low through effective supply chain
management.
Competitive Advantage – It meets their customer needs more effectively with products/services
that customers value more highly or more efficiently at a lower cost.
The average person at Chipotle spends about $9 per visit and the average American spends $5-
$10 per meal anywhere. Therefore, if you take the quality of the food Chipotle offers, plus their
portion size, and the average $9 per visit, you get competitive advantage. No other place offers
all three. For example, Panera has certain items with good quality and their food items are also
about $9 per visit, but their portion sizes are not as big. Some other things that differentiate
Chipotle from other businesses in their industry are that their food is made with integrity, farm
raised produce, and have no added hormones in their meats. Unlike Panera, much of their food is
not frozen. According to an article by tasteterminal.com, many of Panera’s soups and their mac
and cheese is frozen, not made fresh every day. Also, a lot of their pasta is frozen as well. This is
a competitive advantage for Chipotle because most of its food is not frozen and made fresh daily
(28). This is also because it has a smaller menu compared to Panera; it is focused on only two
items: burritos and burrito bowls.
SWOT Analysis
Strengths
Focus on food made with ingredients from sustainable sources
Chipotle’s main focus is to provide food that tastes good and is healthy for the customers.
Chipotle uses naturally raised meats such as beef, chicken, and pork. According to an article
from business source complete, the cheese and sour cream they use to serve is made with milk
from cows and have no added antibiotics or hormones such as RBGH (recombinant bovine
growth hormone.) Anything milk related in the company comes from pasture-raised cows.
Chipotle also gets a lot of their produce from local farms (30). This guarantees the freshness of
their produce to best satisfy their customers. On average, chipotle buys 155 million pounds of
naturally raised meat, 20 million pounds of local produce for its restaurants, 4 million of organic
black beans and 2.5 million of organic pinto beans (30). This is something that Chipotle does
well, better than their competitors. As I have mentioned, Panera, a big competitor in the fast

28. 28
casual industry, keeps a lot of its food frozen such as its soups, mac and cheese, and much of its
pasta (28). This makes its products not as fresh as Chipotle’s products. As a result of Chipotle’s
hard work to keep their food fresh and organic for their customers lead to an increase in sales and
has enhanced the brand image that everyone is familiar with.
Marketing Position
Chipotle does not just stick to standard advertising like commercials on TV and the radio.
Instead it has specific and unique marketing programs. For example, it has in-store
communications and unique design elements that attract customers. They advertise through
‘owned media’, communication channels that are within one’s control, such as websites, blogs,
and email (32). This is unlike paid media such as advertisement on television, radio or Google
Ad Words (32). Owned media is a cheaper way of advertising and very beneficial if executed
properly. Chipotle has unique video and music programs that it uses to attract customers. For
example, 4 years ago, Chipotle released a 2:30 music video that went viral on the internet. This
video is called “Back to the Start” and it talks about how all it wants is to bring healthy and fresh
food for its customers. It also has an original song in it. Again, 2 years later, another video made
by Chipotle went viral. This one is called “The Scarecrow”, it is 4 minutes long and it talks about
how a lot of companies now are very industrialized with the use of hormones and inorganic
substances. In this online ad, it distinguishes itself from the rest of the businesses in its industry
by saying we are better because we have no hormones in our food. Chipotle has also developed
games around that ad. Chipotle does a good job keeping up with the millennials. Many
millennials do not watch TV as much anymore. They do not see commercials on TV; instead
they navigate themselves through the web. The ability to build awareness about its brand with
relatively low advertising expenditure makes this a strength for Chipotle. Unlike Panera, Moe’s,
and Qdoba, Chipotle’s brand is more familiar and well-known to the millennials.
Fast growth in terms of revenues and operations
Chipotle opened its first restaurant in Denver in 2003. By 2006, the company had opened over
570 stores in 26 states and 8 franchise restaurants. Though Chipotle is not very well-developed
internationally, 7 years after opening its first store, it opened its first international store in
London in 2010. By 2014, it was operating 1755 stores, 7 in Canada and multiple internationally.
That that number is still growing. By early 2016, it had 2020 stores and it is still growing (30). In

29. 29
2012, average store sales were 2.5 million annually. In 2013 it had revenues of 3.2 billion. In
2014, it had revenues of 4.1 billion (31). That is a 28% increase. That is a huge increase in
revenue and it is mainly because it does a well job in branding itself and provides healthy,
organic, fresh food for its customers. Its fast growth is definitely a huge strength for Chipotle.
Weaknesses
Limited items on menu
All chipotle offers is a menu of burritos, salads, and burrito bowls. Unlike its competitors,
Panera and Qdoba. Panera offers a wider range of food items than chipotle. Panera is known for
its bread and soups, but it offers more than that. It offers a wide range of pastries, sweets, bagels,
spreads, cheese, salads, broth bowls, pasta, sandwiches, and drinks (33). Chipotle needs to try to
differentiate a little more. For some, this can be a turn off for chipotle. They want to see
selection. Qdoba offers more than just burritos and bowls; it offers nachos, special quesadillas,
chips and dip, and taco options (33). Even though Chipotle is trying to increase their menu size a
little by adding quesadillas and tacos to the menu, they still need to add more like Qdoba does.
Items such as nachos and different types of chips and dip.
Higher food cost (compared to fast-food industry)
Some of Chipotle’s competitors are McDonald’s, Burger King, Taco Bell, and KFC. Their
average food cost is lower than Chipotle’s food cost. As a result, Chipotle does lose some of its
customers because of that. Chipotle’s food, beverage, and packaging cost has been increasing
(30). For the food, it is because there is inflation on a lot of it such as the beef, avocado, and
dairy. This is one of the reasons why Chipotle’s average cost is higher than a lot of fast-food
chains. Since the food is organic and the produce is fresh and local, it results in a higher food
cost which some customers are not willing to pay but as years go on, people, mostly the
millennials, are more health conscious. Since people are more health conscious, they are willing
to pay a bit more for their food. Still though, the high food cost can negatively impact customer
traffic in the restaurants and affect their future sales (30).
Not Globally Developed
A major weakness for Chipotle is that it is not globally developed. Most of Chipotle’s restaurants
are in the U.S. They do have a couple of stores in Canada and parts of Europe, but not enough;

30. 30
unlike some fast-food restaurants that they are globally developed and bring in a lot of revenue
internationally (30).
Opportunities:
International Expansion
Chipotle has done a great job expanding inside the United States, but they can improve on
expanding internationally. Chipotle opened its first international store in 2010, but since then
they did not open many more. Currently, Chipotle has 6 restaurants in England, 3 in France, and
one in Germany (30). I believe that with full international expansion, Chipotle can double its
revenue, but yes, it is not as easy as it sounds. They do need the resources to do so. In certain
places, it would hard to keep local produce coming in and keep the motto about healthy food. It
would be harder to maintain what it established here in the U.S. In Europe, restaurants and cafés
are the largest segment of the restaurant industry. If they are able to establish a supply chain
outside the United States, they should support it and expand internationally, as it would increase
their brand recognition and revenues.
Growing Industry
With Millennials still growing and still a huge part of consumers, the fast casual industry is still a
growing industry. This gives a great opportunity for Chipotle to continue to prosper and increase
its revenues and brand recognition. The reason the fast causal industry is still growing is because
the economy is growing. If the economy was declining, people would not be as health conscious
as they are now and would settle for the fast-food industry. Instead, the U.S. economy is growing
and people are becoming more and more health conscious and eating healthier. As a result of the
economic growth, Chipotle will continue to prosper and improve its overall sales.
Burger Chain- “Best Burger”
In March 2016, Chipotle filed for a trademark under “Best Burger”. As a way of expanding and
increasing their sales and brand, Chipotle plans to open a burger chain restaurant called “Best

31. 31
Burger”. They are doing this as a way to compete with burger joints such as Five Guys, Shake
Shack, and more. They are also doing this as a way to bring their sales back up since they had
their worst quarterly performance as a publicly traded company (29). They are hoping this idea
can bring back sales since net income fell 44% to 67.9 million (29). Chipotle did not say much
about their plan except that they are opening this burger chain restaurant. As an overall idea of
the industry, burger chain restaurants generated about $73 billion in sales in 2014, according to
trade publication burger business (29). Also, burger joints account for 7.4% of all U.S.
restaurants internationally and Chipotle plans to get in on that action to increase in size.
Threats:
Rise of Competition
Since this industry is still a growing industry, a lot of competition will be rising. The competition
in the fast casual industry is fierce. In order to prosper in this industry, restaurants need to attract
customers in taste, food quality, presentation, service, location, and price. Yes, people are willing
to pay a bit more to be health conscious, but they are not willing to pay a lot. Therefore, prices
cannot be too high. Restaurants do not have to be a multi-billion dollar companies in order to
compete with Chipotle. For example, any locally-owned restaurants, national restaurants, or
regional restaurants can compete with chipotle (30). Any business is taking away from
Chipotle’s. The company’s main competitors are Panera, Qdoba and Moe’s. If Moe’s and Qdoba
become more and more popular, that will definitely hinder Chipotle’s revenues and sales. It is
going to be a threat to them.
Increase in labor cost
Due to the increase in labor cost, Chipotle will have to change some of its operations or increase
their prices to avoid their profit taking another hit.
Increase in food safety regulations
There are many of food safety regulations that Chipotle has to go through and that is expensive
to maintain. With the E. Coli outbreak, Chipotle lost a lot of business. Their sales fell more than
15% (31). With two outbreaks, one in 2015, Chipotle has to pay a lot of fines to settle these law
suits. All that takes away from their gross profit and hinder their future brand.

32. 32
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