Stephanie Russell, Enric Larregola,

Nicholas Maurer and Shane Nolan

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

Headquarters: Denver, Colorado

Number of Locations: 1084
Areas 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 Analysis
Who: 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 store
o Music
 Chipotle Radio
o Architecture
o 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 restaurant
o 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 Analysis
Technological
• New social media technology
available
• Businesses embracing
technology
• Rise in online food ordering
• Increase in smart phone devices
• Newer and faster ways to
prepare food
o 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 prices
o Great brand names
o 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 menus
o (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 service
o 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 quality

o 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 restaurant
o They are willing to sacrifice quality for a price increase 
• The Late Night Window is open until 1am or later
o 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 marketing

o (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 forces

Rivals (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 products
Substitutes (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 competition

o 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 experience
o (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 place
o 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-service
o 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 products
o 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 seriously
o 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 do
o 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 envirnment
o "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  markets
• 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
• 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 responsibility
o Health
o Taste
•  Magazine ads, sponsorships, and product placement
o Boost brand image
o Help boost company growth
• Keep advertising short term
o Gain awareness then revert back to W.O.M. campaign
o 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
Structure
The division of tasks as shown Strategy
on the organization chart The coherent set of actions
  selected as a course of action
• The management teams will play a  
crucial role in the implementation of • The set of actions for each of our two
both of these strategies (CMO Mark strategies have been presented
Crumpacker and CEO Steve Ells)  previously
• Additionally the lower level o Increase Growth Plan
employees will need to adapt to the o Short Term and Aggressive
new environment and continue the  Marketing Strategy
firms core values    
• Responsibility for actions must be
strictly enforced
o Deadlines
The 7-S Framework

Systems Style
The processes and flows that How management behaves
show how an organization gets  
things done • Management needs to tackle the
proposed strategies head on if they are
  going to be successful 
• Chipotle heavily relies on their top • Completet strategy formulation,
management teams interaction with implementation and evaluation are
lower level employees crucial 
• Implementation will start with the top
and trickle down within the
organization
o It is crucial for management to set
the tone
The 7-S Framework
Staff
The 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
Skills
Capabilities 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 together
o  Collaboration is Key
The 7-S Framework
Subordinate Goals
The 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 and
o implementing a short term
marketing strategy
How To Eat A Burrito