Stephanie Russell, Enric Larregola, Nicholas Maurer and Shane Nolan

How To Pronounce CHIPOTLE or Should We Say chee-POHT-leh

 

Brief Overview

Headquarters: Denver, ColoradoNumber of Locations: 1084Areas Served: United States (38 States), Canada (Toronto, Ontario)  and England (London)Number of Employees: 26,500

Areas Served 

Top Management Team

• Steve Ellis: Chairman & Co-CEO • Montgomery F. Moran: Co-CEO• John R. Hartung: Chief Financial Officer• Robert Blessing: Chief Development Officer• Mark Crumpacker: Chief Marketing Officer

Chipotle's Story

1993- First Chipotle opened at a former Dolly Madison ice cream location.

1995- Added second and third Chipotle locations.

1996- Opened five more Denver area restaurants. 1998- Chipotle brings on outside investors.1999- First Chipotle's opened outside of Colorado: Minneapolis, MN and Columbus, OH.

Chipotle's Story (contd.)

1999- Steve Ells learns about the way most pork is raised in the US. Decides to do things in a different way. 2000- Started serving naturally raised pork. As of 2010 100% of pork is naturally raised.2002- Started serving naturally raised chicken. Now, 100% of chicken is naturally raised.2004- Ahead of the curve, Chipotle starts using zero trans fat frying oil.

Chipotle's Story (contd.)

2006- Chipotle goes public on NYSE.

2007- Over 60% of our beef is naturally          raised. As of 2010 85% of beef is           naturally raised.

2007- Stopped using cheese and sour cream with rBGH for Chipotle.

2008- As of 2010, 40% of our black beans are certified organic.

2009- Steve Ells testifies before Congress to try to eliminate the use of antibiotics in ranching.

Chipotle & McDonald's 

1993: Chipotle is founded by Steve Ells 1998: McDonald's enters the picture, purely as an investment partner 2001: McDonald's becomes the majority owner of the firm, making Chipotle a fully-owned subsidiary of McDonald's 2001-2006: Chipotle expands from under 100 locations to 466, expanding into more than 30 states 2006: McDonald's says goodbye to Chipotle, spinning off the company in an IPO on the NYSE (CMG)

Mission Statement

• Chipotle has re-vamped their mission statement to a simple but effective, “Food with Integrity.”  This embodies Chipotle’s position on the importance of using animals that are naturally raised in “happy” environments.

• Chipotle believes it is important for people to know where their food comes from

• Steve Ells is working to create a  business in which all of their animal byproducts are naturally raised  (free from steroids and chemicals)  

    

Mission Statement (cont.)

• They receive 100% of their pork from naturally raised pigs from those producers who can meet their strict guidelines.

• 85% of their beef comes from farms held with the same criteria• 35% of their dairy comes from cows that are pastured raised.

o 100% of their dairy comes from cows that have never received the rBGH hormone.

• Trying to get their chicken from farmers who do not use antibiotics

• They believe that happy animals produce better tasting food

Chipotle's Fast Food Facelift

Mission Statement AnalysisWho: A man or woman living life on the run, but does not want to sacrifice quality for convenience.  Mid 20s to late 30s.  Most are successful, urban and trendy.  What: Mexican cuisine, specializing in burritos, tacos, bowls and salads.  All of which are made with the highest quality products (naturally raised).  How: An assembly line style, where the food is cooked and prepared in front of the customer and served with the highest possible customer service. Why: "Food with Integrity" is their commitment to finding the very best ingredients, raised with respect for the animals, the environment and the farmers.  

Income Statement 

Balance Sheet

 

Statement of Cash Flows 

 

Objectives

• Serve 100% of naturally raised animal meat and dairy products at all Chipotle stores (Food with Integrity).o The demand for pasture-raised animals has increased, thus the

supply has also seen an increase.o An attempt to take control of the healthier (organic) food

consumer.

Current Company Strategies

• Provide the highest quality raw materials (naturally raised beef, chicken, and pork)

• Figure out the best recipe and provide our customers with a high quality experience (fast-casual dining)

• Focus on cooking techniques while providing customers with reasonable prices

• Maintain a trendy culture inside the storeo Music

Chipotle Radioo Architectureo Friendly employees

• Serve food quickly and efficiently 

Chipotle Goes Green

• Chipotle is working closely with farmers and ranchers to ensure their operations create as small an impact as possible on the environment

• Thus they realize the importance of ensuring that all Chipotle restaurants are as Green as possible

• Their restaurants in Gurnee, IL and in Minnetonka, MN are registered with the United States Green Building Council o The nations first ever Platinum

LEED certified restauranto The highest level- in the

Leadership in Energy and Environmental Design (LEED)rating system 

 

Nick's Chipotle Visit

 

Macro Analysis

Economic• Market is rebounding

(Chipotle stock is climbing)• "Going Global" movement• Unemployment rate at 9.2%• 3 year consistent decrease in

median household income (2008-2010)

• Decline in spending money• Franchised stores are gaining

popularity

Macro Analysis

Cultural/Social• Trendy stores are gaining popularity

(casual dining)• People are demanding healthier food• People are eating out more• More people are living by

themselves or with unknown roommates

• "Going Green" movement•  Rise in Hispanic population in the

U.S.

Macro Analysis

Political/Legal• Government regulations on

food products (possible fat tax)

• Increased pressure on unethical businesses(treatment of farm animals)

Macro AnalysisTechnological• New social media technology

available• Businesses embracing

technology• Rise in online food ordering• Increase in smart phone devices• Newer and faster ways to

prepare foodo Chipotle introduced new

heating machines that heat tortillas faster and more evenly, (NO MORE RIPPING!)

Macro Analysis

Competition• Increase in casual dining

o Increase in Mexican grill chain restaurants (Moes, Qdoba)

• Very competitive market• Many big business to compete

with (Taco Bell, McDonald's, Wendy's)o Low priceso Great brand nameso Huge growth potential

•  Possible price war

Moe's Southwest Grill

• Run their business a unique way, they have out of the world name for their food menuso (Homewrecker, Fat Sam, Joey Bag of Donuts)

• The atmosphere at Moe's is also different, they only play music from dead musicians to get people’s attention

• Focus heavily on customer serviceo The way they welcome you is different from any other

restaurant, "WELCOME TO MOE'S."• Offer healthier food products which has helped attract new

customers

Qdoba Mexican Grill

• Very similar business and food options• Much deeper menu• Cannot customize burritos• Don't use all natural and organic food items • Actually have cooks in the back cooking food in pans• Similar trendy style, play music inside the store• Huge burritos at a bit cheaper of a price• Not as fast

McDonald's

Fast-Food Industry Leader• Generate new products more aggressively than in the past

o Create new selections that are tried out in one market for several weeks to see how the sales, costs, and margins grow and how easy they are to prepare by the company's constantly-changing staff

• Current trend focuses more heavily on social responsibility• Attempting to create healthier options for their consumers like

salads, apple slices or milk instead of fries and soda

Wendy's/Arby's Group

• Their number 1 focus is qualityo All Wendy’s restaurant guarantee the highest quality

• Prices are higher than other fast-food competitors because they want to be seen as a higher end fast food restauranto They are willing to sacrifice quality for a price increase 

• The Late Night Window is open until 1am or latero An advertising campaign designed around it proves its

importance• Increasing their menu options to help attract more customers

o (Baked Potatoes, Chili, Boneless Wings and Salads)

YUM Brands (Taco Bell/KFC)

• Focus many of their strategies around marketingo (example: iPhone app “why pay more” )

• Fast-food restaurant that focuses heavily on customer service • Try to make service as fast as they can, so they can get more

money, and more customers• Cater towards families by offering bulk dinner packages

Porter 5 Force Model

• Rivalry Among Competing Firms: (high)

• Entry of New Competitors: (low)

• Potential Development of Substitute Products: (medium)

• Bargaining Power of Suppliers: (medium)

• Bargaining Power of Consumers: (high)

Rivalry Among Competing Firms: (high)

This is usually the most powerful of the 5 competitive forcesRivals (Direct Competitors)• Moe’s Southwest Grill and Qdoba Mexican Grill are both widely

known and similar fast casual dining establishments  • They create a threat to Chipotle because they serve the same kind

of productsSubstitutes (Indirect Competitors)• Other fast food companies (MCD, YUM, WEN)

Entry of New Competitors: (low) 

• Hard to successfully enter the industry (very high failure rate)

• Already fierce competitiono Very difficult to compete with such big companies (Chipotle,

MCD, Wendys/Arbys, Yum Brands)

Potential Development of Substitute Products: (medium)Rather than eating at Chipotle, one could opt to:• Stay home and make a burrito or taco • Go to another fast-food restaurant 

o Substitutes are not limited to our rival competitors of places such as Moe’s, Taco Bell and Qdoba but also include other fast food chains such as McDonalds, and Wendy’s/Arby’s Group.  

• Seek a more “authentic” Mexican experienceo (example: Allegany’s Don Luchos)  

Bargaining Power of Suppliers: (medium)

•  The ingredients that they use for their products is not low in supply (chicken, pork)o However since Chipotle uses the best raw materials, they often

have to pay a premium to stay consistent with their "Food with Integrity" mission

o Additionally, there are fewer farms that Chipotle views as acceptable for their purchasing needs 

• Chipotle products also require a large amount of fresh produce, which are all seasonal products (tomatoes, onions, lettuce, etc). o As a result the prices for these products may be higher due to

seasonality factors• Rising prices in oil also affect Chipotle 

Bargaining Power of Consumers (high)

• This force will be high because the consumers are what runs Chipotle’s business

• If people do not enjoy the service and products that the business is producing, Chipotle's profits will decline and may lead to eventual closing of locations 

• Chipotle will need to ensure that there prices remain competitive to their competitors within the market placeo We believe this is a place where Chipotle will need to seek

improvement as their prices are currently higher than their competitors on average

Direct Competitive Profile Matrix

 

Indirect Competitive Profile Matrix

 

Financial Ratio Analysis

 

External Factor Analysis (EFE)

 

Core Competence

• Some of the value chain activities that Chipotle performs especially well are:o High quality products with the best raw materials

(naturally raised beef, pork and chicken) o Healthy ingredients o Good, clean and friendly environment

(decor, music)o Provide customers with a fast-casual dining experience at an

affordable price o Fast-serviceo Serve alcohol

Distinctive Competence

• The firm's strenghts that cannot easily be matched by competitors are:o High quality products with the best raw materials (Moe's vs

Chipotle)o Healthier ingredients compared to other fast food

establishments (compare a Chipotle burrito with a McDonalds hamburger)

o Serve alcohol

Competitive Advantage

• Chipotle provides high quality Mexican food at a reasonable price, with a short weighting period

• They use naturally raised animals for their meat and place great emphasis on quality in the production of all their products and services

• The main competitive advantages that seperate them from competition are:o Naturally raised meat in food (healthy)o Unique flavor of high quality products

Value Chain Analysis

Inbound Logistics: (high)• Their high quality raw materials add a lot of value to the final

product• They use naturally raised animals for almost all their meat• Better vegetables than competitors

 Operations: (low)• This stage doesn't add that much value to the product compared

to their competitors• A lot of competitors use a similar type assembly line to make

their productso They are considered a fast-casual restaurant rather than

traditional fast food so they are not known for their speediness

Value Chain Analysis (cont.)

 Distribution: (very low)• Chipotle's distribution is inexistent

o  They do not deliver their products. Sales and Marketing: (low)• Chipotle spends 1% of their total revenues on ads compared to

their larger rivals that spend 4% or more. They spend less in a year than MCD in 48 hours. They need to increase their market campaigns in order to compete with their larger competitors.

• Advertise with Billboards and radio ads• Take advantage of word of mouths campaigns• Give-a-ways• They sponsor teams 

o (cycling) 

Value Chain Analysis (cont.)

Service: (Medium)• They rank among the top in fast food customer services based on

price, environment, meal, and service.`Conclusion:• Most value is added in the raw materials stage by getting the best

ingredients available. • Additional value is added during the actual process of making

the burrito delicious (and fast).• The Finally value is added with great service in a well kept, and

highly enjoyable store. o Chipotle's key to success

Corporate Culture

• Take social responsibility seriouslyo Use natural wholesome ingredients and promote responsible

farming• Trendy- Management establishes a positive work experience and

also a enjoyable place to eat. Chipotle serves beer, plays music, has unique furniture decor (very modern), and maintains an exceptionally clean dining space

• Love what they doo Chipotle tries to establish a loyal customer base through taking

great pride their work. This leads to great customer service•  Workforce values

o Value workers to establish a positive working envirnmento "Promote from within" Line workers can be promoted to store

managers at new locations

Internal Factor Analysis (IFE)

 

Further Evaluation of Strategy

PROS• Increase total revenues

o will increase the amount of money to be spent of advertising 

• Increase the overall size of the company (so they can compete with their larger competitors)

• High acceptance rate in European countries (different style of life, more healthy, socially responsible)

• Increase in sales

CONS• A lot of money, time and

research to successfully enter international markets

• Language barriers• Different law systems• Exchange rates• Political instability• Money spend in training new

employees to meet Chipotle's values

Strategy #2: Implement a Short Term Mass Marketing Strategy

• Start clever television ads that are consistent with Chipotles culture by advertising:o Social responsibilityo Healtho Taste

•  Magazine ads, sponsorships, and product placemento Boost brand imageo Help boost company growth

• Keep advertising short termo Gain awareness then revert back to W.O.M. campaigno Sudden surge of advertising to seperate them from direct

competition (Moes, Qdoba)

Further Evaluation of Strategy

PROS• Boost brand awareness

 • Increase sales

 • Generate greater revenue

 • Allow for easier growth into

new markets

CONS• May not be consistent with

Chipotle's values • Expensive

 • May deter current investors

due to high initial expense

QSPM

QSPM (cont.)

The 7-S Framework

StructureThe division of tasks as shown on the organization chart • The management teams will play a

crucial role in the implementation of both of these strategies (CMO Mark Crumpacker and CEO Steve Ells)

• Additionally the lower level employees will need to adapt to the new environment and continue the firms core values  

• Responsibility for actions must be strictly enforcedo Deadlines

StrategyThe coherent set of actions selected as a course of action • The set of actions for each of our two

strategies have been presented  previously o Increase Growth Plano Short Term and Aggressive

 Marketing Strategy

 

The 7-S Framework

SystemsThe processes and flows that show how an organization gets things done  • Chipotle heavily relies on their top

management teams interaction with lower level employees

• Implementation will start with the top and trickle down within the organizationo It is crucial for management to set

the tone

StyleHow management behaves • Management needs to tackle the

proposed strategies head on if they are going to be successful 

• Completet strategy formulation, implementation and evaluation are crucial 

The 7-S Framework

StaffThe players in the organization • The players in the organization are the

employees• It is vital for all levels of the

organization to understand the goal of the proposed strategies

• Success starts with understanding • A strategy is essentially a short-term

mission

SkillsCapabilities possessed by the organization • The managers at Chipotle are highly

capable of executing the proposed strategies

• They have a strong passion and desire for the firm and work to ensure that success is a constant within the organization

• Managers from all departments must work togethero  Collaboration is Key

The 7-S Framework

Subordinate GoalsThe values shared by all in the organization  • The mission is to successfully enter

new markets (internationally) while remaining faithful to the already established Chipotle name of quality (Food with Integrity), exceptional customer service and an ambiance of a sophisticated and trendy dining experience,o by introducing franchising ando implementing a short term

marketing strategy

How To Eat A Burrito