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CASE 7
CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
I. CASE ABSTRACT
Founded by Steve Ells in 1993, Chipotle Mexican Grill quickly became one of
the fastest growing restaurant chains in US history. People loved Chipotle
because of the tasty and healthy food as well as its edgy, trendy, cool brand
image. Chipotle established itself as a successful company practicing
“conscious capitalism” by serving “food with integrity”–its supply chain and
corporate culture were closely integrated from the time that ingredients were
farmed, raised, harvested, and shipped to stores to the time the final
product was placed on a customer’s serving tray.
Through luck and hard work, Chipotle attracted the attention of MacDonald’s
Corporation whose investment of $350 million plus expertise in processes,
systems and real estate allowed Chipotle to grow to over 500 restaurants by
2006. Chipotle filed its initial public offering (IPO) that same year. In
2007, McDonald’s divested itself of Chipotle, resulting in an impressive
return of $1.5 billion on its original investment. However, McDonald’s then
missed out on CMG’s huge growth in share price after the divestiture.1
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CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
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2009, Steve Ells testified before Congress to try to eliminate antibiotics
completely from farming.1
Chipotle’s brand power, customer engagement, and loyalty became evident in
the year 2000 when Chipotle began to serve naturally raised pork in its
Decision Date: 2014 FY Sales: $3.2 billion
FY Net Income: $327 million
II. CASE SUBJECTS AND ISSUES
Strategic Direction Conscious Capitalism
III. STEPS COVERED IN STRATEGIC DECISION–MAKING PROCESS
IV. CASE OBJECTIVES
1. To discuss Chipotle’s sustainable sourcing.
2. To discuss Chipotle’s business level strategy.
CASE 19
CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
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V. SUGGESTED CLASSROOM APPROACHES TO THE CASE
1. This is an excellent case for instructor–led discussion.
2. This is an excellent case for an exam or written case analysis.
VI. DISCUSSION QUESTIONS
1. How was the ‘fast food’ segment different from ‘fast casual’ and
‘casual dining.’
2. What was Chipotle’s business level strategy?
VII. CASE AUTHOR’S TEACHING NOTE–Not Available
VIII. STUDENT STRATEGIC AUDIT
I. Current Situation
a. Performance
i. History
1. Steve Ells founded Chipotle Mexican Grill in 1993.
2. From 1993 to 2014, Chipotle has grown to over 1600
ii. Economic Performance
1. As of 2014, Chipotle has no long–term debt.
2. Free cash flow increased by 49 percent (132.55
million) in the first quarter of 2014, which allowed
CASE 19
CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
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iii. Rankings and Accolades
1. #1 Producer and consumer of solar energy in the
restaurant industry.
2. #10 Top Social Restaurant—Virtue, 2009. *
b. Strategic Posture
i. Mission
1. “Chipotle’s mission is to change the way people think
about and eat fast food.”
ii. Vision
1. “Is to serve delicious food made with fresh
ingredients from sustainable resources and sell it
for a reasonable price.”
iii. Objectives
1. Practice conscious capitalism
2. Provide ‘food with integrity’
iv. Strategies
1. All locations are corporately owned.
2. Maintains a consistent image, regardless of
restaurant location.
3. Business model—serve ‘a few things a thousand ways.’
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CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
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10. Human component at all levels.
v. Policies
1. Serve ‘food with integrity.’
2. Concern for the environment and animals.
II. Corporate Governance
a. Board of Directors
i. Eight members
ii. One internal and seven external
v. Experience in both domestic and foreign markets.
b. Top Management
i. Co–CEO, Chairman, & Founder: Steve Ells
1. Attended Culinary Institute of America, graduating in
1990.
ii. Four Executives:
1. Experience of these individuals include:
a. Outside Chipotle restaurant experience
(McDonalds)
III. External Environment: Opportunities and Threats
A. Societal Environment
a. Economic
i. Fast-casual restaurants strengthened from 4 percent growth
in sales in 2009 to 9 percent growth in sales in 2012 and 8
ii. Fluctuations in the commodities market could cut profits
(T).
CASE 19
CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
iii. Food truck sales soared in 2013, with estimates of $5
billion, as a result of the convenience and variety offered
(T).
b. Technological
i. Network upgrades will enable future technological
advancements, such as payment via barcode. Chipotle viewed
these upgrades as a marketing initiative because it would
c. Political–legal
i. In 2009, Steve Ells testified before Congress to try to
eliminate antibiotics completely from farming. By 2007, all
of the beef served in Chipotle restaurants was naturally
percent of its black beans were organically grown (O/T).
d. Sociocultural
i. Chipotle viewed societal issues as a means of innovation
and increased productivity. Various initiatives were
employed by the company: the use of organically grown
(O).
e. Differences in other regions of the world
i. Organically grown ingredients and health–conscious food
options are not as important to all regions in the world.
B. Task Environment (Industry)
a. Threat of new entrants: moderate
i. In recent years, double–digit revenue growth created a high
threat of new entrants in the market. By 2014, the fast
b. Bargaining power of buyers: moderate
i. Customers were willing to pay higher prices for better
c. Threat of substitute products or services: high
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CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
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i. The biggest substitution threat is supermarkets because
d. Bargaining power of suppliers: moderate
i. Chipotle’s restaurants are company–owned and supplied by
independently owned and operated distribution centers,
whose suppliers are assessed based on the quality of their
e. Rivalry among competing firms: High
i. Primary competitors include Taco Bell, Qdoba Mexican Grill,
Panda Restaurant Group, Panera Bread Co., Baja Fresh
Mexican Grill, El Pollo Loco Holdings, Inc., Panchero’s
competition.
f. Relative power of unions, governments, special interest groups,
etc.: Moderate
i. Potential for store workers to form a union and demand for
Summary of External Factors—see EFAS Table Exhibit 1
IV. Internal Environment: Strengths and Weaknesses
A. Corporate Structure
a. Operations and restaurants managed based on seven regions. (S)
b. Focus on identifying, hiring, and empowering top performing
employees: (S)
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CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
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1. Mentoring system
2. Can be further promoted to “apprentice team leader”
B. Corporate Culture
a. “Food with Integrity:” (S)
C. Corporate Resources
a. Marketing
i. Overview:
1. The basis of Chipotle’s marketing reflects their
company mission “to change the way people think about
and eat fast food.”
1. Offered higher quality food at a slightly
higher price which created “premium image.”
ii. Advertising is done in house:
1. Did not use traditional media “sustainable
effort.” (W)
2. Focus on brand experience and drive to create a
iii. Marketing performance:
1. A “cool brand”—Chipotle has made their brand a
household name and is known to be edgy, trendy,
and cool. (S)
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CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
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iv. Marketing performance compared to similar corporations:
1. Although their price was slightly higher than
other fast food alternatives, Chipotle hoped
that customers would pay the premium for higher
quality food. (S)
b. Finance
i. Current financial objectives, strategies, policies, and
programs:
1. CMG’s main objective was profitability achieved
through staff and operational efficiencies,
designed to offset the higher than average cost
of its organic ingredients.
2. No long–term debt (S).
3. Grow organically, growth funded by retained
earnings (S).
7. Outperformed industry average and S&P 500 (S).
8. Subject to commodities risk. (W)
9. Stock price up to $500. (S)
10. Finance objectives are clearly stated and
also reflected by performance and strategy.
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CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
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1. Revenue and operating margin have steadily
increased from 2004–2013 (S).
2. Revenue growth rate was 24.41 percent (S).
Key Ratios
2013
2012
2011
Current Ratio
3.34%
2.93%
3.18%
iii. Chipotle is considered a growth company and uses most of
its retained earnings to reinvest into the company.
c. Research and Development
i. R&D objectives, strategies, policies, and programs.
ii. Operational efficiencies, yielding record high restaurant
iii. In 2014 Chipotle spent $10 million on mobile payments (S)
1. Research proved that fast service and fast
casual markets speed of delivery was essential
CASE 19
CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
d. Operations and Logistics
i. Operations objectives, strategies, policies, and programs:
1. The supply chain is closely integrated with the
corporate mission and strategy of serving ‘food with
ii. Type and extent of operations capabilities:
1. The operations of the organization include ingredient
sourcing (meat, poultry, beans, corn, lettuce, etc.)
and service.
2. Since the vision of the organization was oriented
around sustainability and healthier food options, it
3. All Chipotle’s restaurants were supplied by its
4. All Chipotle restaurants are also wholly owned by the
organization, as compared to the franchise route
5. Efficiency: simple and customizable menu meant
6. Inventory management: CMG was able to maintain low
inventories through its accurate forecasting
mechanisms, which resulted in locally grown, fresher
ingredients to reach the customer (S).
CASE 19
CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
raised pork were allowed to join Niman Ranch network
for every 2 new CMG locations.) (S).
iii. Vulnerabilities
1. CMG has higher than average cost of ingredients
2. CMG is always exposed to price fluctuations of the
3. CMG has the ability to maintain low operating costs
through economic recessions and booms, but at the
iv. Competitive Analysis
1. CMG’s strategy has been very effective and most of
2. Inventory management is one aspect in which CMG was
ahead of its competitors. Due to their accurate
3. Throughout rates: Much higher compared to the
4. Company–owned restaurants rather than the franchising
strategy (S).
5. Leaders of the fast casual dining (including Mexican
6. Healthy foods fast were their mantra. While
competitors put organically grown ingredients and
7. From this analysis, it is quite clear that CMG has
always been ahead of their competitors and will most
likely be able to stave off the competition if it
continues its practices that are aligned with the
company strategy.
e. Human Resource Management
CASE 19
CHIPOTLE MEXICAN GRILL INC.:
CONSCIOUS CAPITALISM BY SERVING ‘FOOD WITH INTEGRITY’
i. Human Resources objectives, strategies, policies, and
programs
1. The company strategically decided to pay its
employees above minimum wage to offset the high cost
2. They also promoted 80 percent of the store managers
from within the organization which cultivated a sense
3. CMG instilled people culture which was evident from
4. CMG had one of the highest retention figures in the
industry and that was a clear metric which set them
apart from their competitors (S).
f. Information Systems
i. Information Systems objectives, strategies, policies, and
programs
1. CMG did rely on Data Analytics to find out expected
2. They have a dynamic website that they used to
3. Using the power of the internet: they did rely on
4. CMG invested heavily on network improvements in 2014
to enable future improvements.
5. They plan to introduce mobile payments, via barcode,
to increase efficiency at payment counters, result in
D. Summary of Internal Factors—See IFAS Table Exhibit 2
V. Analysis of Strategic Factors (SWOT)
A. Situational Analysis—See SFAS Table Exhibit 3