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Chipotle Case-Study

Published in: Technology, Business


  1. 1. Management 494BI:Diana Salvucci, Antonio Monteiro, Ravina Jangra, NickForgione
  2. 2. MEET STEVE ELLS Founder, Co-CEO Graduate of CulinaryInstitute of America(New York) Chipotle Visionary $80,000 loan $85,000 in investments
  3. 3. 1993: First Chipotle in Boulder, Colorado1998: McDonald’s purchases first minority stake inChipotle1999: Chipotle expands to 37 locations2000: Venture into organic and sustainableingredients2008: International expansion into Canada2010: Chipotle goes to London
  5. 5. 2000• Startedservingnaturallyraised pork.• 2010: 100%of pork isnaturallyraised2002• Started servingnaturally raisedchicken.• 100% of chickencomes fromfarms that meetChipotle’s highstandards.2007• Over 60% ofChipotle’sbeef isnaturallyraised• Now, 100%of the beefis naturallyraised2007• Chipotlestops usageof cheeseor sourcream withrBGH2010• As of 2010,40% of theblack beansare certifiedorganic
  6. 6.  Nontraditional marketing is key to Chipotle’s businessmodel. They focus on creating positive Word-of-Mouthas opposed to spending money on advertising When a new store opens, they give their neighbors freefood to create customer loyalty Professional athletes are given vouchers for a freeburrito each day which leads to social media publicity Only 2% of revenue is spent on advertising
  7. 7.  Manager Incentives Consistency is the ultimate goal Managers are offered large bonuses tostay in store Promoting from within allows greatersuccess Inspires employees and createsdedication
  8. 8. BUSINESS STRATEGY“I remain confidentthat ourperformance isrooted in our long-term vision tochange the waypeople think aboutand eat fastfood…This focusedapproach makes usunique in therestaurant industry,and continues todifferentiate Chipotlein significant ways.”~Steve Ells,Founder of Chipotle
  9. 9. FAST-CASUAL Among the most successful restaurants in the up andcoming niche fast- casual industry Fast-casual dining offersHigher average ticketsMore upscale fareBetter decor and atmosphere compared to fast food restaurantsNo drive through in fast casual restaurants Able to offer high-quality food ingredients that are createdfaster and less expensive than full-service restaurants
  10. 10. ORGANIC AND SUSTAINABLE Use of organic and sustainable ingredientsAll farmers are approved and must have qualityspecificationsPrefer farms that are family owned and operatedChipotle is the largest restaurant buyer of locallygrown produce All restaurants are sustainable in theenvironment
  11. 11. THE CHIPOTLE ADVANTAGE Exceptional servicefrom hard workingmanagers andemployees Managers are offeredbig bonuses forrunning a productivebusiness somanagers work hardto please thecustomer
  12. 12. STRENGTHS• Sustainable supply chain• No steroids or growth hormones• First-mover (fast-casual)WEAKNESSES• Single corporate office• Relationship with suppliers• Unhealthy menu itemsOPPORTUNITIES• Healthier options menu• International and domestic expansionTHREATS• Lack of franchising• Threat of new entrants into “fast-casual” marketChipotle
  13. 13. STRENGTHS Sustainable supply chainAble to leverage supply chain managementcapabilities from McDonald’s No steroids or growth hormonesCustomers willing to pay premium price First-mover (fast-casual)Customers seek something “hipper, faster, andcheaper than full-service”
  14. 14. WEAKNESSES Single corporate office Organizational and cultural challenges Relationship with suppliers Supplier shortages Difficult to find substitutes (interruptions in supply chain) Unhealthy food items Average burrito: 900-1,000 calories, 50 grams of fat, and 2,030mg of sodium Qdoba offers healthier and less filling options Mexican lettuce wraps
  15. 15. OPPORTUNITIES Healthier options menu International and domestic expansionContinue cautious approach to foreignexpansionExplore franchising to reap the benefitsReduction in overhead costs
  16. 16. THREATS Lack of franchisingCompetitors moving quickly to expandinternationally and domestically Threat of new entrantsSourcing and offering quality ingredients is arelatively simple business model to mimicEG. Fast food chainsNew concepts
  18. 18. Chipotle’s marketingstrategy is to replacetraditional advertising withemotionally engagingstories.Example: Back to the StartThe 2-minute animated filmsymbolizes Chipotle’s shiftaway from factory farms andits increasing commitmentto naturally-raised animalsand locally grown produceOrganic SustainableLocal
  19. 19.  The short film generated a lot of publicity and positivefeedback. Chipotle should continue with this strategic, selective use oftelevision advertising and capitalize on the success of thefirst film. Using consistent animation and use of imagery, Chipotleshould continue advertising with emotionally-evoking shortfilms during popular prime time events, such as the SuperBowl or the Academy Awards. Each film could highlight a different aspect of sustainableagriculture or feature different naturally-raised animals.
  20. 20. Chipotle should invest more resources inthe Chipotle Student Brand ManagerProgramBefore each new location is opened, a brandmanager should already be promoting Chipotle atlocal campuses, schools, and community centersBrand managers should be used to both increaseChipotle’s social media presence and educateconsumers about sustainable farming
  21. 21.  IMPROVING SOCIAL MEDIA PRESENCEBrand managers should receive incentives forthe number of people in their network thatbegin following them on social media sites.Brand managers should utilize technology toallow people to like social media pages on thespot and be rewarded with coupons andpromotional deals.
  22. 22.  EDUCATING PEOPLE ON SUSTAINABLE FARMING All coupons and promotional materials should also beinformative about Chipotle’s commitment to sustainableagriculture and their dedication to naturally-raised animalsand locally-grown produce.
  23. 23. OlderSegment YoungerSegment
  24. 24. INTRODUCING THE SMALL(ER) BURRITO Chipotle could introduce a smaller burrito to allowcustomers to experience the same great taste, but in smallerportions. Through social media, Chipotle should actively endorse thissmaller burrito which will be available with white or wheattortillas. This new option will target consumers who are seekinghealthier options.