3. 2
Appendix A
Executive Summary
Chipotle has grown to be a serious contender in the ever changing market of fast food.
They have created their own niche that is now changing the way we look and think about fast
food. Consumers have fallen for the fresh food that is fully individualized to their liking and
preference (Appendix F), while also receiving their food in a timely manner that fits into the fast
passed lifestyle of the new generation. (Appendix K) Over the few short years that Chipotle has
been around they have been able to grow exponentially. (Appendix G) As a company they have
inspired others to attempt to imitate their process in order to enter the market as competition.
The company’s need for a fast efficient restaurant has helped create their ideals that are
based on simplicity. Consumers can order quick and easy due to the simple menu that only
contains a few options, but are filled with fresh organic ingredients. (Appendix F) The open
concept floor plan for the restaurant allows the area to be used fully and efficiently and also
provides an atmosphere for conversation and socializing. Chipotle has grown their business
exponentially over the years. They have increased revenue by 20.2% over the years of 2007 to
2011. (Appendix G) This growth is largely contributed to their ability to prep food in house and
make use of little time and space. They have few employees that are all given specific task, while
refiling foods only when necessary in order to reduce over producing an item that wouldn’t be
consumed. (Appendix E) There efficiency is one of the main ways they keep a leg up on their
competition.
Though Chipotle seems to be leading the fast food industry into a new higher quality
generation, there are still many threats to their company. The low barriers to entry and the high
competition create a hostile environment for Chipotle to thrive in. (Appendix L) Also Chipotle
enjoys advertising their organic foods that are GMO and paraben free but due to the increasing
health awareness, multiple other companies have jumped on the health craze band wagon. There
are now more options for healthier foods and many are similar to the ones in which Chipotle is
serving. (Appendix H) The ability for others to imitate Chipotle is high, so brand loyalty plays a
large role in keeping their consumers from going to the completion.
One of the plans Chipotle can enact in order to further grow in the future would be to add
new and innovative items to their menus. These things could include different takes on Mexican
food or, new flavors and salsas. (Appendix L) They could also follow a poplar trend of having
seasonal items that coincide with the different holidays and time year. (Appendix D) Chipotle
needs to constantly be looking toward the future for new ways to innovate and reinvent
themselves; otherwise they will be left behind. (Appendix J) They have many ways in which
they could update their kitchens and appliances to include interesting things such a brick oven or
a roaster. Having these items would further add to the fresh mentality that Chipotle represents.
The next plan would be to update their technology. By adding in a kiosk where customers
could simply type in their order and even pay before they pick up the meal would increase
efficiency and decrease lag time. (Appendix C) Wi-Fi could also be added to Chipotle in order
for people to be able to grab a quick meal while accomplishing some work or simply enjoying
down time. Some other options for technology could be adding items such as TVs in order for
people to keep up with current events. Since Technology is one of the fastest growing industries
it would be one of the most lucrative areas for Chipotle to invest their time and money.
4. 3
Technology has become of great appeal to the younger generation and is growing at a steady
rate.
Overall Chipotle has emerged from being an underestimated small company to growing
into one of the main contenders in the fast food restaurant industry. (Appendix J) They have
transcended the name of fast food and created their own genre for new age innovation. They
have set the bar high and now their next goal will be to continue growing in this ever changing
market. (Appendix K) Rather than resting on their loans Chipotle needs to continue thinking of
what the next big thing in fast food will be. (Appendix D) If they are able to forecast what is to
come they will continue to gain a reputation for quality and value that has already become
synonymous with their name.
5. 4
Appendix B
Dominant Economic Characteristics
1. Mexican Lovers
a. Customers enjoy the new take on Mexican food
b. High quality/ raw ingredients
2. Customization/Specialization
a. The customers are able to create exactly what they want
b. They also have different options of bowls or burritos
3. Convenience
a. Location is always close by
b. Quick, easy and able to get to go on the run
4. Price Conscious
a. Transcends through class income levels due to reasonable low price of around
average 8 dollars per meal/bowl
Conclusion:
Chipotle has been able to dominate the market by offering fresh and organic foods with a
high quality atmosphere, which is different from any fast food place. With their simple
ingredients they allow you to perfectly customize your meal to fit your specific wants. Their
essence of high quality and value has allowed them to move through the market and gain a
prestigious reputation in a short amount of time. Their driving forces of reasonable prices mixed
with healthy fast food options, make them the perfect combination of healthy eating on the go.
6. 5
Appendix C
PESTEL Analysis
1. Political Factors:
a. Clean organic food movement
2. Economic Conditions:
a. Thrived through recession
b. Aware of customer needs/incomes
c. High competition
d. In house preparation of meats and herbs
3. Sociocultural Forces:
a. Increasing variety of consumer wants
b. Health conscious movement
c. Simple and easy menu
4. Technological Factors:
a. Upgrade kitchen
b. Kiosk for preferential ordering
5. Environmental Forces:
a. High efficiency/ low energy cost
b. Health food craze/ farm fresh/ raw and organic
c. Environmental Outreach
6. Legal and Regulatory Factors:
a. Fresh ingredients from commissaries
b. Competitive pricing
c. Labor intensive
Conclusion:
Chipotle brings a fresh feeling of quality to an original idea of fast food. They are giving
the experience of high class while including a quick and easy experience. This is what is helping
them thrive in the economic world and be able to hold their own against competition. The fresh
ingredients at reasonable prices allow people who usually choose to eat at home to opt into
eating out. The ability to advertise a healthy alternative to fast food is keeping them above their
less health conscious alternatives such as McDonalds.
An upgrade in their technological factors is another way in which they could improve in
the future. The greater the demand becomes for fast healthy foods the broader the taste in
consumers will become. By integrating new and different choices of flavors and foods they could
grow their services to include a larger variety. With an increased variety of taste comes a need
for an improved high tech kitchen in order to prepare food in different or artfully appealing
ways.
7. 6
Appendix D
Five Forces Analysis
1. Competitive Rivalry: High
a. Fast food Mexican and Restaurants
b. Reasonable price
c. Fresh ingredients
2. New Entrants: High
a. Fresh ideas on previous products
b. Better foods and new flavors appeal to new customers
c. Greater options for size could attract more customers
d. Few barriers
3. Substitutes: Moderate to High
a. Multiple Fast food options
b. Markets with Fresh ingredients (Grocery store)
c. Other fast foods offering healthier options
4. Buyer’s bargaining Power: High
a. Customers can choose price
b. Fast food industry is high
c. Trends are constantly changing
5. Supplier’s bargaining Power: Medium
a. Premium cost for organic products
b. Seasonal problems for produce
c. Limited amount of suppliers
Conclusion:
The fast food industry has always been cut throat and with fast growing companies
Chipotle has even more competition than ever. Consumers have the ability to choose low price
and decent quality from a variety of different places. Chipotle may deter new customers simply
because they don’t understand how their restaurant works or customers may choose to go
somewhere familiar to stay in their comfort zone. Another issue is the low barriers to entry; other
companies can effortlessly come in with more innovative and popular ideas which would create a
higher market for competition.
One of the weaker threats would be from substitutes. If someone wanted to gather all the
ingredients to make a bowl at home it would take a lot of time, energy and sufficient funds. It
would costly to buy fresh market/ organic ingredients and time consuming to marinate the meats.
In a society focused on efficiency it is unlucky someone would put forth the effort to go to the
grocery store rather than simply passing through the line at Chipotle. The other option is similar
fast food places such as Moe’s. The problem there is some customers prefer the flavor of
chipotle marinade over Moe’s or enjoy the different salsa options that are fresh made every day
at Chipotle.
8. 7
Appendix E
Driving Forces
1. Product innovation
2. Change in cost and efficiency
3. Technological improvements
4. Social and societal changes
Conclusion:
The driving forces behind Chipotle would be product innovation, changes in the cost and
efficiency, technological improvements, and sociocultural changes. Each of these forces are
working together to keep Chipotle moving forward and to continue to innovate. Many fast food
places have had issues as of late due to their inability to keep up with the changing social culture.
Chipotle has a leg up on its competitors with their new style of dinning. Their open concept with
very simple ideals allows for a casual experience that people crave. The demand might not hold
constant and the best thing for Chipotle is to continue moving and changing with the market in
order to stay relevant with the times.
In many ways Chipotle has created its own culture in the new generation. They have
become popular on social media and are trending in many other social forms. For the success to
continue Chipotle needs to continue to innovate. The best thing would be to capture the attention
from social media and find a way to harness it. They can add social media to their business by
creating their own hash tag or asking people to post pics of them with their Chipotle meal.
Keeping consumers interested will help them continue to grow in the market.
9. 8
Appendix F
Key Success Factors
1. Cost efficiency:
a. Fast service
b. Quick meal prep time
c. Few employees
2. Food Design:
a. Simple and fresh
b. Food with integrity
3. Operational Attributes:
a. Welcoming environment
b. Environmentally aware
c. Food prepared fresh throughout the day
d. Low stress work environment
4. Competitive Components:
a. Fresh market products
b. Bright open atmosphere
c. High customization options
5. Strategically using employees:
a. Fewer employees with specific jobs
b. Trained and competent with kitchen prep
c. Social and inviting to customers
Conclusion:
Chipotles consumers are drawn in by multiple factors. The concept of being a quick place
to grab a healthy meal appeals to many consumers. It is also an enjoyable atmosphere to grab a
quick lunch or dinner. You get convince of fast food but with the feeling of an open inviting
restaurant. Everything is in order and easy to understand. A light menu with few options but
multiple capabilities to customize gives each individual customer exactly what they want.
Strategically Chipotle is functioning on a high efficiency level. They are able to prep
meals and make everything fresh in store, except for fresh market items brought in. They use
what is needed and nothing more. They accomplish this by preparing food only when it is
needed. Once an item begins to decrease they prepare just enough to refill it, this keeps
everything full and fresh but doesn’t over produce more then what is being consumed.
10. 9
2007 2008 2009 2010 2011
Revenu: $1,085,782.00 $1,331,968.00 $1,518,417.00 $1,835,922.00 $2,269,548.00
CAGR: 16.14% 17.50% 18.26% 19.13% 20.24%
Margins:
GPM 23.73% 22.43% 25.52% 26.14% 26.67%
OPM 9.96% 9.31% 13.42% 15.70% 15.45%
NPM 6.50% 5.87% 8.35% 9.75% 9.47%
Liquidity:
Current Ratio: 2.75 2.74 2.91 3.3 3.18
Leverage:
D-E Ratio: 0.22 0.25 0.27 0.28 0.27
Raturns:
ROE 13.73% 14.27% 19.28% 23.64% 23.17%
ROA 10.75% 9.98% 14.30% 17.49% 17.03%
Appendix G
Financial Analysis
Conclusion:
From the financial chart we able to see that Chipotle grew its company exponentially
from the years 2007 to 2011, this is interesting to see since not only was it a fairly new company
but this was also a time of economic depression. Chipotle was one of the few companies that
were able to thrive through the recession and grow in profit margin. The company could
contribute this to their reasonable prices and high quality that led to a consumer growth. The
company was also able to keep their debt to asset ratio under moderate control while expanding
the company.
11. 10
Appendix H
Resources and Capabilities Analysis (VREN)
1. Valuable:
a. Value level High
b. Organic Products
c. Green Initiative
2. Rarity:
a. Medium to moderate level
b. Products are seasonal, could cause shortage
c. Few suppliers for organic products
d. Some ingredients harder to acquire then others
3. Inimitable:
a. Easily imitated
i. Other organic ingredients
ii. Similar quick and simple restaurants
b. High level of similarities
4. Non-substitutable:
a. High levels of substitutes
b. Many other forms of product
i. Fresh ingredients
ii. Multiple fast food options
Conclusion:
Though Chipotle has a high product value they are lacking in rarity and inimitability. The
products are organic and fresh but many others are able to accommodate for improved
ingredients. It would also be fairly easy for a similar fast food place to enter the market, due to
low barriers, and simulate the same type of atmosphere and quality of Chipotle. They also have
many substitutes which could cause future problems, subsequently; Chipotle needs to continue
innovating and marketing in order to stay ahead.
12. 11
Weighted Competitive StregthAnyalsis
Chipotle Moes Qdoba Taco Bell
Measure Weight Rating Score Rating Score Rating Score Rating Score
Technology 0.25 7 1.35 8 1.25 7 1.24 6 1.1
Convience 0.15 5 2.5 8 1.7 8 1.6 8 1.5
Price 0.15 8 1.3 7 1.2 6 1.1 8 0.9
Menu 0.1 9 1 6 0.8 4 0.8 6 0.6
BrandImage 0.1 7 0.7 7 0.5 7 0.7 4 0.4
Service 0.1 8 0.8 9 0.3 7 0.5 5 0.2
Quality 0.1 10 1.4 7 1.2 6 1 4 0.8
Total 1 54 9.05 52 6.95 45 6.94 41 5.5
Appendix I
Weighted Competitive Strength Analysis
Conclusion:
Consumers have multiple ways to rank a place in order to determine likes and dislikes.
Each segment holds its own importance to an individual, with some having more weight than
others. A great example would be the way Taco Bell try’s to be the most convenient place for
you to visit in order to gain more traffic. Then you have Chipotle who has a large focus on
quality and image in order to better them in the market place for the long run. While not all
competition holds the same level of attributes in each area, all the different places have their own
segment in which they focus the most attention. This is what helps create competition on
multiple levels. In many ways technology appeals to a younger crowd so places such as Chipotle
focus on innovating and creating a unique experience with updated attributes. Then you have
Moe’s who also enjoys being convenient and will usually have a location near the center of
town. Different rankings mean different things to each individual and hold importance on
different levels, the job of the company is to determine what elements to focus on most.
13. 12
Appendix J
Strategic Group Map
Conclusion:
Chipotle gains market shares through a substansial amount of high quality services at a
reasonable value. Taco Bell, Moe’S Southwest Grill and Qdoba Mexican Grill are able to
maintain middle market shares due to lower cost and reasonable value, but they don’t meet the
high quality standards of Chipotle. With the home market or grocery store you have some value
but less market coverage since its difficult to match the price and superior products of Chipotles.
Although, the need for farm fresh and organic ingrediants are offered at new grocery stores, such
as Fresh Market, Whole Foods and Trader Joe’s, it would be expensive to compaine all the items
Chipotle offers and in return it will lead to an increase in consumers tatse for Chipotles Organic
GMO free ingrediants that are readly available.
14. 13
Appendix K
Current Strategy
1. Focused Menu
a. Simple, with few items
b. Few offerings of alcohol (certain stores)
2. High quality ingredients
a. Organic and fresh
b. GMO free/ no parabens
3. Efficient Restaurant
a. Clutter free
b. Easy to use kitchen tools
4. Friendly Service
a. Few highly trained employees
b. Welcoming environment
5. Environmental Awareness
a. Recycling
b. local farm produce
Conclusion:
Chipotles CEO Steve Ells had a clear vison for what he wanted the company to be like.
His mentality was to keep things simple and easy to understand while providing an atmosphere
different from any ordinary fast food place. He wanted the experience to be one of quality with
an emphasis on efficiency. He understands the profitability of buying from local organic farmers
and the marketing that comes along with offering fresh ingredients. His strategy has brought
Chipotle up in the market with the company continuing to grow and develop its own essence.
15. 14
Appendix L
SWOT Analysis
Strengths:
1. Brand Loyalty
a. Customers will bypass other options
b. Use as go to option for social dining
2. Personalized Menu
a. Preference options
b. Individualized
3. High Margins
a. Control over cost
b. High profitability
4. Store Design
a. Easy upkeep
b. Open design
c. Higher Quality Atmosphere
Weaknesses:
1. Limited Menu Options
a. Lacking verity
b. Doesn’t accommodate to multiple different taste
2. Off Brand Mexican
a. Not an authentic experience
b. Similar to Tex-Mex
3. Expensive Organic Ingredients
a. Few sellers for products
b. More costly for fresh / organic
c. Limited time span for produce (seasons)
Opportunities:
1. Call in order option
2. Home delivery
3. More authentic Mexican options
4. Stronger “go green” presence
5. More emphasis on diversification
6. Building globally
16. 15
Threats:
1. Insufficient amount of suppliers
2. Low barriers to entry
3. Loss of loyalty if standards not met
4. Low or negative publicity
Conclusion:
The biggest advantage for Chipotle is going to be their loyal customers who enjoy all
they have to offer. Brand loyalty will not continue to float them though if a high competitor were
to enter into their area. There are many threats facing Chipotle, such as, the low barriers to entry
and an insufficient amount of suppliers. This being said they have a high opportunity option list.
Chipotle has many ways in which it can further its company through delivery options and
expanding the market to a global level.
