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Capabilities

Chipotle has a carefully crafted people culture that emphasizes hiring and training the right
employees for performance. The hands-on training and promotion from within, develops strong,
empowered teams. Food is prepared fresh and in small batches throughout the day and the
focused menu provides preparation time efficiencies.
The Four Pillars of Great Throughput is an internal process that helps manage order
transaction time and provides Chipotle with operational efficiencies that are difficult for
competitors to match:

Aces in their placestop servers on the front lines


The linebackerreplenishes food and supports the Aces
The expediterbundles orders, prepares chips and drinks
Mise en place everything in its place (French), meaning all ingredients and utensils
are ready to hand.

Chipotle uses a Differentiation Strategy that generates rents from higher consumer willingness to
payas evidenced by the recent price rise that did not impact record earnings. Other evidence
suggests the competitive position for Chipotle is sustainable:

Differentiated product positioning

Operational efficiencies

People culture based on performance

Growth that far outpaces the fast-casual sector and the restaurant industry in general

Growing sector with large target audience

Resources
The resources that Chipotle uses are best characterized by Assets versus Processes and
Tangible versus Intangible. Among Chipotles most crucial tangible assets are its employees, due
to their specialized talent.

Chipotle Mexican Grill Inc's average inventory for the three months ended in Dec. 2015 was
$16 Mil. Chipotle Mexican Grill Inc's cost of goods sold for the three months ended in Dec. 2015
was $802 Mil. Hence, Chipotle Mexican Grill Inc's days inventory for the three months ended in
Dec. 2015 was 1.85. During the past 13 years, Chipotle Mexican Grill Inc's highest Days
Inventory was 1.87. The lowest was 1.59. And the median was 1.72. Chipotles days inventory
increased from Dec. 2014 (1.81) to Dec. 2015 (1.85). It might indicate that Chipotles sales
slowed down.

Financial

Chipotles gross profit margin for the fourth quarter of its fiscal year 2015 has
significantly decreased when compared to the same period a year ago. Sales and net income have
dropped, underperforming the average competitor within its industry. Chipotle is extremely
liquid. Currently, the Quick Ratio is 2.71 which clearly shows the ability to cover any short-term
cash needs. The company's liquidity has decreased from the same period last year, indicating
deteriorating cash flow. During the same period, stockholders' equity ("net worth") has increased
by 5.74% from the same quarter last year. Overall, the key liquidity measurements indicate that
the company is very unlikely to face financial difficulties in the near future. Chipotles P/E ratio
indicates a premium compared to an average of 30.66 for the industry and a premium compared
to the S&P 500 average of 22.72. To use another comparison, its price-to-book ratio of 6.77
indicates a significant premium versus the S&P 500 average of 2.70 and a significant discount
versus the industry average of 13.44. The current price-to-sales ratio is well above the S&P 500
average and above the industry average, indicating a premium. The valuation analysis reveals
that Chipotle seems to be trading at a premium to investment alternatives within the industry.

Price/Earnings On Par
Chipotle: 31.21 vs. Peers 30.66
Average- An average P/E ratio can signify an industry neutral price for a stock and an average
growth expectation.

Price/Cash Flow Premium


Chipotle 21.08 vs. Peers 15.10

Premium- The P/CF ratio, a stocks price divided by the company's cash flow from operations, is
useful for comparing companies with different capital requirements or financing structures.
Chipotle is trading at a significant premium to its peers.