With an $85,000 loan from his father and the realtor's help, Ells found and renovated an old ice cream parlor near the University of Denver.Post-culinary school, Ells moved to San Francisco to work under the tutelage of celebrity chef Jeremiah Tower. While living in the city, Ells was inspired by watching an assembly line of workers at a local taqueria, efficiently feeding hungry masses of patrons.
“I remain confident that our performance is rooted in our long-term vision to change the way people think about and eat fast food…This focused approach makes us unique in the restaurant industry, and continues to differentiate Chipotle in significant ways.” -Steve Ells, Creator of Chipotle
Continue cautious approach to international expansion
Chipotle offers a sleek, modern “eclectic design”
Issues with management and effective communicationLesser ability to understand local and cultural differences
With a combination of company owned and franchised restaurants, Panera is able to rely primarily on cash generated from operations to fund new company owned locations while maximizing expansion through new franchises.
Management 494BI:Diana Salvucci, Antonio Monteiro, Ravina Jangra, NickForgione
MEET STEVE ELLS Founder, Co-CEO Graduate of CulinaryInstitute of America(New York) Chipotle Visionary $80,000 loan $85,000 in investments
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
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
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
Manager Incentives Consistency is the ultimate goal Managers are offered large bonuses tostay in store Promoting from within allows greatersuccess Inspires employees and createsdedication
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
FAST-CASUAL Among the most successful restaurants in the up andcoming niche fast- casual industry Fast-casual dining offersHigher average ticketsMore upscale fareBetter decor and atmosphere compared to fast food restaurantsNo drive through in fast casual restaurants Able to offer high-quality food ingredients that are createdfaster and less expensive than full-service restaurants
ORGANIC AND SUSTAINABLE Use of organic and sustainable ingredientsAll farmers are approved and must have qualityspecificationsPrefer farms that are family owned and operatedChipotle is the largest restaurant buyer of locallygrown produce All restaurants are sustainable in theenvironment
THE CHIPOTLE ADVANTAGE Exceptional servicefrom hard workingmanagers andemployees Managers are offeredbig bonuses forrunning a productivebusiness somanagers work hardto please thecustomer
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
STRENGTHS Sustainable supply chainAble to leverage supply chain managementcapabilities from McDonald’s No steroids or growth hormonesCustomers willing to pay premium price First-mover (fast-casual)Customers seek something “hipper, faster, andcheaper than full-service”
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
OPPORTUNITIES Healthier options menu International and domestic expansionContinue cautious approach to foreignexpansionExplore franchising to reap the benefitsReduction in overhead costs
THREATS Lack of franchisingCompetitors moving quickly to expandinternationally and domestically Threat of new entrantsSourcing and offering quality ingredients is arelatively simple business model to mimicEG. Fast food chainsNew concepts
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
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.
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
IMPROVING SOCIAL MEDIA PRESENCEBrand 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.
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.
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.