CASE 10
Chipotle Mexican Grill, Inc.:
Disrupting the Fast–food Business
TEACHING NOTE
■ SYNOPSIS ■
Steve Ells opened the first Chipotle Mexican Grill in Denver in 1993; by the end of 2015 there were
almost 2,000 Chipotle restaurants making it the most successful new fast food chain of the past three
decades. Chipotle strategy is interesting because it has taken a well-established ethnic that was
successfully transformed into a mass-market, fast-food offering by Taco Bell and other chains, and
■ TEACHING OBJECTIVES ■
Chipotle offers a straightforward, but illuminating case in how a company can use a novel strategy to
establish a competitive advantage in a mature, intensely-competitive industry and its prospects for
sustaining the resulting competitive advantage. The case applies a number of the concepts and principles
outlined in Chapter 7 concerned with establishing and sustaining a competitive advantage. What students
learn from the case is:
How to devise a strategy that takes account of external changes in an industry (notably consumer
Applying the ideas of business system and business model to recognize the role of
complementarity among the different components of a firm’s strategy and operations, and its
implications for challenges of business development and the sustainability of competitive
advantage.
■ POSITION IN THE COURSE ■
I teach this case in the section of the course that deals with the analysis of competitive advantage.
■ ASSIGNMENT QUESTIONS ■
1. What is Chipotle’s strategy? Why has this strategy been so successful?
■ READING ■
R. M. Grant, Contemporary Strategy Analysis (9th edn.), Wiley, 2016, Chapter 7: “The Sources and
■ CASE DISCUSSION AND ANALYSIS ■
Chipotle’s Strategy
Chipotle’s strategy represents a combination of product ideas and business concepts drawn from several
sources:
The products—tacos and burritos—were inspired by traditional tacqueria in California.
The result is a strategy that combines efficiency, differentiation, and innovation
In terms of efficiency, Chipotle’s restaurant design and operating system allows levels of
productivity that lead the industry—notably in terms of labor productivity (e.g. Chipotle’s small
restaurant teams achieve up to 350 customer transactions per hour) and asset productivity
In terms of innovation, Chipotle has established what it regards as a new category within the
restaurant market: what it calls the “fast–casual.” It’s novel positioning in terms of the
combination of product features, operations, dining experience, and values represents what Kim
and Mauborgne describe as “blue ocean strategy”—Chipotle has carved out a niche for itself in
the fast food industry that avoids direct competition with established players. This novelty is
also reflected in its marketing—for example, its use of social media to communicate to
consumers “about issues that are important to us.”
Why has Chipotle’s strategy been so successful? In terms of basic notions of strategic fit that were
introduced in the first Chapter of the book:
The Sustainability of Chipotle’s Competitive Advantage
Chipotle’s growth, profitability, and shareholder returns between 1993 and 2014 have been spectacular.
Although its share price has come off its highs in 2015, Chipotle’s market capitalization ($21 billion—
which is about ten times the book value of its shareholders’ equity—see Table A1) suggests considerable
optimism about future profits growth.
The key threat to the sustainability of competitive advantage—as outlined in Chapter 7 (pp. 172-176,
“Sustaining Competitive Advantage”) is imitation by competitors. Chipotle’s barriers to imitation include
the following:
Preemption: Has Chipotle preempted potential rivals through its rapid expansion (in the same
Taken together it’s not apparent that in an entrepreneurial industry like fast food, where the time lags
between conceiving, launching and expanding a new restaurant chain tend to be short, that competitors
will not attach chipotle on more or less equal terms.
A final consideration concerns the sustainability of consumer interest. To what extent is the restaurant
market subject to fashion trends and is it likely that the customers will get bored with the Chipotle’s
Should Chipotle Diversify into Other Types of Cuisine?
If Chipotle’s competitive advantage in its Mexican grills is subject to erosion through competition, then
perhaps Chipotle’s best prospects lie in transferring its capabilities and variants of its business model into
different types of cuisine.