Chipotle Case-Study

1. Management 494BI:
Diana Salvucci, Antonio Monteiro, Ravina Jangra, Nick
Forgione

2. MEET STEVE ELLS
 Founder, Co-CEO
 Graduate of Culinary
Institute of America
(New York)
 Chipotle Visionary
 $80,000 loan
 $85,000 in investments

3. 1993: First Chipotle in Boulder, Colorado
1998: McDonald’s purchases first minority stake in
Chipotle
1999: Chipotle expands to 37 locations
2000: Venture into organic and sustainable
ingredients
2008: International expansion into Canada
2010: Chipotle goes to London

4. CHIPOTLE RESTAURANTS: STATE-BY-STATE BREAKDOWN

6. 2000
• Started
serving
naturally
raised pork.
• 2010: 100%
of pork is
naturally
raised
2002
• Started serving
naturally raised
chicken.
• 100% of chicken
comes from
farms that meet
Chipotle’s high
standards.
2007
• Over 60% of
Chipotle’s
beef is
naturally
raised
• Now, 100%
of the beef
is naturally
raised
2007
• Chipotle
stops usage
of cheese
or sour
cream with
rBGH
2010
• As of 2010,
40% of the
black beans
are certified
organic

7.  Nontraditional marketing is key to Chipotle’s business
model. They focus on creating positive Word-of-Mouth
as opposed to spending money on advertising
 When a new store opens, they give their neighbors free
food to create customer loyalty
 Professional athletes are given vouchers for a free
burrito each day which leads to social media publicity
 Only 2% of revenue is spent on advertising

8.  Manager Incentives
 Consistency is the ultimate goal
 Managers are offered large bonuses to
stay in store
 Promoting from within allows greater
success
 Inspires employees and creates
dedication

9. BUSINESS STRATEGY
“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,
Founder of Chipotle

10. FAST-CASUAL
 Among the most successful restaurants in the up and
coming 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 created
faster and less expensive than full-service restaurants

11. ORGANIC AND SUSTAINABLE
 Use of organic and sustainable ingredients
All farmers are approved and must have quality
specifications
Prefer farms that are family owned and operated
Chipotle is the largest restaurant buyer of locally
grown produce
 All restaurants are sustainable in the
environment

12. THE CHIPOTLE ADVANTAGE
 Exceptional service
from hard working
managers and
employees
 Managers are offered
big bonuses for
running a productive
business so
managers work hard
to please the
customer

13. STRENGTHS
• Sustainable supply chain
• No steroids or growth hormones
• First-mover (fast-casual)
WEAKNESSES
• Single corporate office
• Relationship with suppliers
• Unhealthy menu items
OPPORTUNITIES
• Healthier options menu
• International and domestic expansion
THREATS
• Lack of franchising
• Threat of new entrants into “fast-
casual” market
Chipotle

14. STRENGTHS
 Sustainable supply chain
Able to leverage supply chain management
capabilities from McDonald’s
 No steroids or growth hormones
Customers willing to pay premium price
 First-mover (fast-casual)
Customers seek something “hipper, faster, and
cheaper than full-service”

15. 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 2,030
mg of sodium
 Qdoba offers healthier and less filling options
 Mexican lettuce wraps

16. OPPORTUNITIES
 Healthier options menu
 International and domestic expansion
Continue cautious approach to foreign
expansion
Explore franchising to reap the benefits
Reduction in overhead costs

17. THREATS
 Lack of franchising
Competitors moving quickly to expand
internationally and domestically
 Threat of new entrants
Sourcing and offering quality ingredients is a
relatively simple business model to mimic
EG. Fast food chains
New concepts

18. KEY COMPETITOR DATA

19. Chipotle’s marketing
strategy is to replace
traditional advertising with
emotionally engaging
stories.
Example: Back to the Start
The 2-minute animated film
symbolizes Chipotle’s shift
away from factory farms and
its increasing commitment
to naturally-raised animals
and locally grown produce
Organic Sustainable
Local

20.  The short film generated a lot of publicity and positive
feedback.
 Chipotle should continue with this strategic, selective use of
television advertising and capitalize on the success of the
first film.
 Using consistent animation and use of imagery, Chipotle
should continue advertising with emotionally-evoking short
films during popular prime time events, such as the Super
Bowl or the Academy Awards.
 Each film could highlight a different aspect of sustainable
agriculture or feature different naturally-raised animals.

22. Chipotle should invest more resources in
the Chipotle Student Brand Manager
Program
Before each new location is opened, a brand
manager should already be promoting Chipotle at
local campuses, schools, and community centers
Brand managers should be used to both increase
Chipotle’s social media presence and educate
consumers about sustainable farming

23.  IMPROVING SOCIAL MEDIA PRESENCE
Brand managers should receive incentives for
the number of people in their network that
begin following them on social media sites.
Brand managers should utilize technology to
allow people to like social media pages on the
spot and be rewarded with coupons and
promotional deals.

24.  EDUCATING PEOPLE ON SUSTAINABLE FARMING
 All coupons and promotional materials should also be
informative about Chipotle’s commitment to sustainable
agriculture and their dedication to naturally-raised animals
and locally-grown produce.

25. Older
Segment Younger
Segment

27. INTRODUCING THE SMALL(ER) BURRITO
 Chipotle could introduce a smaller burrito to allow
customers to experience the same great taste, but in smaller
portions.
 Through social media, Chipotle should actively endorse this
smaller burrito which will be available with white or wheat
tortillas.
 This new option will target consumers who are seeking
healthier options.