Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Table of Contents
Page 1- Cover Page
Page 2- Table of Contents
Page 3- Executive Summary
Page 4- Executive Summary/Recommendations
Page 5- Recommendations/Appendix A (Dominate Characteristics)
Page 6- Appendix A/Appendix B (PESTEL Analysis)
Page 7- PESTEL analysis
Page 8- Appendix C: Five Forces Analysis Chart
Page 9- Appendix C
Page 10- Appendix D: Key Success Factors
Page 11- Appendix E: Financial Analysis
Page 12- Appendix F: Resources and Capabilities Analysis
Page 13- Appendix G: Weighted Competitor Strength Analysis
Page 14- Appendix H: Strategic Group Map
Page 15- Appendix I: Current Strategy
Page 16- Appendix J: TOWS (SWOT) Analysis
1
Ladies and Gentlemen:
Steve Ells founded Chipotle Mexican Grill in 1993 in Denver, Colorado, with the
idea of providing healthier, fast food in an up-scale setting. Since then, John Ells has
transformed the vision of the company “to change the way people think about and eat fast
food.” In 1998, McDonald’s showed an interest into the company, and by 2000,
McDonald’s had bought a controlling interest in the company. Because of the vision
Steve Ells had, McDonalds kept Ells in charge of the company. In 2004, through
investment capital gained from McDonald’s and the use of its expertise in supply chain
management, restraint expansion, and operating efficiency, Chipotle embarked upon a
long-term plan of expansion. By fiscal year end 2005, Chipotle had grown to 489
locations in 24 states. At the end of 2005, however, McDonald’s decided to let the
company go and grow on its own, and in 2006 Chipotle went public. At an initial offering
price of $22 per share, Chipotle closed on its first day doubling that to $44 per share.
During 2012, Chipotle reached record highs of $440 per share, and eventually staggered
back down to $243 per share over six months from pressures from its competitor Taco
Bell. However, overcoming fears of slowing growth led the company on its path for the
next 28 months, and by March 2014 price per share was at an all time high of $611.
Beginning as a 1-unit operation, Chipotle has grown into a 1,595-unit operation
serving around 1 million customers daily in 43 states, Canada, London, Paris, Frankfurt,
and the District of Columbia as of February 2014. Chipotle reported revenues of $3.2
billion, net income of $327.4 million, and diluted earnings per share of $10.47 in 2013.
Everything was made possible through Steve Ellis’s mission and strategy to transform
Chipotle into a fast-casual dining restaurant serving a focused menu of burritos, tacos,
burrito bowls, sofritas (vegetarian), and salads. With a strict vision to use only high-
quality raw ingredients and classic cooking methods to generate great tasting, quality
priced dishes ready to be served to customers minutes after they order their food. Ells
also struck at creating an efficiently operated restaurant with a pleasing and distinctive
interior setting nicer than that of its competitors, or as Ells would say, “up-scale”.
Chipotle is strategized around having outgoing, nice and friendly employees take care of
each one of their customers. Chipotle also thrives to increase the awareness and respect
for our environment and ecosystem. They show this by using organically grown fresh
produce, free of GMO’S, and meats from a farm where a humane manner is used to
nurture the animals without adding hormones and antibiotics.
Competing in the restaurant industry, Chipotle focuses on the fast-casual sector, a
smaller industry that shows great potential for generating profits and sustainable
competitive growth (appendix B). As stated earlier, Chipotle’s vision is “to change the
way people think about and eat fast food.” Ells’ vision was executed through means of
fast service, serving 300 people an hour in 2014. It was also executed through
implementing a standard of high quality meats and produce, along with an experienced
exec that fosters efficient means of supply chain and operation management (appendix
D). Ells also believed that from the fundamental principles that built the foundation of
Chipotle Mexican Grill could be applied to other types of cuisines. To test his theory, the
2
first Shophouse opened its doors on DuPont Circle in Washington, D.C., in September
2011. Shophouse uses the same model behind Chipotle, but is applied to Southeast Asian
food, creating a fantastic cultural experience that shows extreme potential.
Recommendations Number 1: Current Location and International Expansion
Following a thorough examination of Chipotle Mexican grill, it was found that
growth in profit was generated through the execution of a great strategy, subsequently
generating market and revenue growth (appendix c). When it comes to the competition,
Chipotle is well off when compared to companies such as Taco Bell, Moe’s South West
and Qdoba (Appendix B), generated from its supreme current strategy. Because of this,
Chipotle should continue and pursue expansion, especially in the foreign market to foster
growth in net income and sales, along with profit. With Chipotle already being located in
43 states, Canada, London, Paris, Frankfurt, and the District of Columbia, I believe it to
be imperative for Chipotle to expand further to keep a competitive advantage over rival
Qdoba. As of 2013, Qdoba was located in 46 states, Canada, and the District of
Columbia. Qdoba is the second largest fast-casual Mexican brand dining behind Chipotle.
Expanding into markets such as Beijing, Moscow, Hong Kong, or Tokyo should be
explored. In regards to Chipotles current foreign market locations, more locations should
be established as well in order to compete on a level of that of McDonald’s.
Recommendations Number 2: Capital Reinvestment for further growth
Pursuing new development through innovation should be sought after by
introducing a drive thru, freestanding location. If possible, market share and profits
would increase significantly. Of course, the drive through should be tested in locations
centered on a smaller community. Once the production process and strategy
implementation have been tried and tested, Chipotle should move into more urban
locations by fiscal year 2016. Likewise, in urban areas, Chipotle should look into having
a walk-up window where customers can order on the go from the street, either looking to
move into pre-made selections, or to have street side custom ordering. A strategy could be
developed where on one side of the building you order a menu items, and then a second
window is established for pick-up. Through strong information systems, and a cutting
edge technology department, an app can be created similar to that of Chick Fila, where
customers can order online and pick up at the store, or the street window, as well as
looking to diversify into delivery options by 2025.
By reinvesting in the company to further expand Chipotle into a possible drive-
through fast food restaurant, further diversifying Chipotle’s services and experience. It is
good for the company to pursue other ventures such as Shophouse, but I recommend we
focus on growth in Chipotle by reinvesting in our company’s services to generate a more
competitive portfolio to combat larger corporations and to increase earnings per share.
With continued pursuit of promoting catering by Chipotle, kitchens can be designed to
accommodate more catering needs while still fulfilling the needs of the business mission
and vision. All of these things can help Chipotle to increase its Revenue, Net Income,
3
EPS, profit, and stakeholder value, along with other things, which is something needed to
promote growth.
Recommendations Number 3: Continued Transition Towards 100% Organic
ingredients
Chipotle should continue to transition into using 100% organically grown local
produce and meats from naturally raised animals for all ingredients. Once this
transformation is complete, Chipotle will have created a network of clients who receive
superior customer service that provide all the ingredients the store needs to feed its
customers. A transformation like this takes time to create this supplier network. This
transformation will also give Chipotle an increase in positive public relations resulting in
free marketing and will hopefully increase sales overall. To change the industry, this
transformation must be made, and the networking created from it must be kept to ensue
the transformation works. Once completed, not only will awareness be generated towards
humane farming practices, an even broader range of clients will be reached as we seek to
offer healthy, good food choices that are enjoyable and fun, not the dull and bland healthy
choices offered currently today.
In 2013 alone, Chipotle handled more than 15 million pounds of locally grown
produce. This number was up from its previous year at 10 million pounds handled. By
eliminating genetically modified seeds in all of our dishes in 2013, a move towards a
more GMO friendly menu would be politically smart for the company. Not only would it
4
