Stephanie Russell, Enric Larregola, Nicholas Maurer and Shane Nolan

How To Pronounce CHIPOTLE or Should We Say chee-POHT-leh

Brief Overview
Headquarters: Denver, Colorado Number of Locations: 1084 Areas Served: United States (38 States), Canada (Toronto, Ontario) and England (London) Number of Employees: 26,500

Areas Served

Top Management Team

Steve Ellis: Chairman & Co-CEO Montgomery F. Moran: Co-CEO John R. Hartung: Chief Financial Officer Robert Blessing: Chief Development Officer Mark Crumpacker: Chief Marketing Officer

Chipotle's Story
1993- First Chipotle opened at a former Dolly Madison ice cream location. 1995- Added second and third Chipotle locations. 1996- Opened five more Denver area restaurants. 1998- Chipotle brings on outside investors. 1999- First Chipotle's opened outside of Colorado: Minneapolis, MN and Columbus, OH.

Chipotle's Story (contd.)

1999- Steve Ells learns about the way most pork is raised in the US. Decides to do things in a different way. 2000- Started serving naturally raised pork. As of 2010 100% of pork is naturally raised. 2002- Started serving naturally raised chicken. Now, 100% of chicken is naturally raised. 2004- Ahead of the curve, Chipotle starts using zero trans fat frying oil.

Chipotle's Story (contd.)

2006- Chipotle goes public on NYSE.

2007- Over 60% of our beef is naturally raised. As of 2010 85% of beef is naturally raised. 2007- Stopped using cheese and sour cream with rBGH for Chipotle.
2008- As of 2010, 40% of our black beans are certified organic.

2009- Steve Ells testifies before Congress to try to eliminate the use of antibiotics in ranching.

Chipotle & McDonald's

1993: Chipotle is founded by Steve Ells
1998: McDonald's enters the picture, purely as an investment partner

2001: McDonald's becomes the majority owner of the firm, making Chipotle a fully-owned subsidiary of McDonald's
2001-2006: Chipotle expands from under 100 locations to 466, expanding into more than 30 states 2006: McDonald's says goodbye to Chipotle, spinning off the company in an IPO on the NYSE (CMG)

Mission Statement
Chipotle has re-vamped their mission statement to a simple but effective, Food with Integrity. This embodies Chipotles position on the importance of using animals that are naturally raised in happy environments. Chipotle believes it is important for people to know where their food comes from Steve Ells is working to create a business in which all of their animal byproducts are naturally raised (free from steroids and chemicals)

Mission Statement (cont.)

They receive 100% of their pork from naturally raised pigs from those producers who can meet their strict guidelines. 85% of their beef comes from farms held with the same criteria 35% of their dairy comes from cows that are pastured raised. o 100% of their dairy comes from cows that have never received the rBGH hormone. Trying to get their chicken from farmers who do not use antibiotics They believe that happy animals produce better tasting food Chipotle's Fast Food Facelift

Mission Statement Analysis

Who: A man or woman living life on the run, but does not want to sacrifice quality for convenience. Mid 20s to late 30s. Most are successful, urban and trendy. What: Mexican cuisine, specializing in burritos, tacos, bowls and salads. All of which are made with the highest quality products (naturally raised). How: An assembly line style, where the food is cooked and prepared in front of the customer and served with the highest possible customer service. Why: "Food with Integrity" is their commitment to finding the very best ingredients, raised with respect for the animals, the environment and the farmers.

Income Statement

Balance Sheet

Statement of Cash Flows

Objectives
Serve 100% of naturally raised animal meat and dairy products at all Chipotle stores (Food with Integrity). o The demand for pasture-raised animals has increased, thus the supply has also seen an increase. o An attempt to take control of the healthier (organic) food consumer.

Current Company Strategies

Provide the highest quality raw materials (naturally raised beef, chicken, and pork) Figure out the best recipe and provide our customers with a high quality experience (fast-casual dining) Focus on cooking techniques while providing customers with reasonable prices Maintain a trendy culture inside the store o Music Chipotle Radio o Architecture o Friendly employees Serve food quickly and efficiently

Chipotle Goes Green

Chipotle is working closely with farmers and ranchers to ensure their operations create as small an impact as possible on the environment Thus they realize the importance of ensuring that all Chipotle restaurants are as Green as possible Their restaurants in Gurnee, IL and in Minnetonka, MN are registered with the United States Green Building Council o The nations first ever Platinum LEED certified restaurant o The highest level- in the Leadership in Energy and Environmental Design (LEED) rating system

Nick's Chipotle Visit

Macro Analysis
Economic
Market is rebounding (Chipotle stock is climbing) "Going Global" movement Unemployment rate at 9.2% 3 year consistent decrease in median household income (2008-2010) Decline in spending money Franchised stores are gaining popularity

Macro Analysis
Cultural/Social
Trendy stores are gaining popularity (casual dining) People are demanding healthier food People are eating out more More people are living by themselves or with unknown roommates "Going Green" movement Rise in Hispanic population in the U.S.

Macro Analysis
Political/Legal
Government regulations on food products (possible fat tax) Increased pressure on unethical businesses (treatment of farm animals)

Macro Analysis
Technological
New social media technology available Businesses embracing technology Rise in online food ordering Increase in smart phone devices Newer and faster ways to prepare food o Chipotle introduced new heating machines that heat tortillas faster and more evenly, (NO MORE RIPPING!)

Macro Analysis
Competition
Increase in casual dining o Increase in Mexican grill chain restaurants (Moes, Qdoba) Very competitive market Many big business to compete with (Taco Bell, McDonald's, Wendy's) o Low prices o Great brand names o Huge growth potential Possible price war

Moe's Southwest Grill

Run their business a unique way, they have out of the world name for their food menus o (Homewrecker, Fat Sam, Joey Bag of Donuts) The atmosphere at Moe's is also different, they only play music from dead musicians to get peoples attention Focus heavily on customer service o The way they welcome you is different from any other restaurant, "WELCOME TO MOE'S." Offer healthier food products which has helped attract new customers

Qdoba Mexican Grill

Very similar business and food options Much deeper menu Cannot customize burritos Don't use all natural and organic food items Actually have cooks in the back cooking food in pans Similar trendy style, play music inside the store Huge burritos at a bit cheaper of a price Not as fast

McDonald's
Fast-Food Industry Leader Generate new products more aggressively than in the past o Create new selections that are tried out in one market for several weeks to see how the sales, costs, and margins grow and how easy they are to prepare by the company's constantly-changing staff Current trend focuses more heavily on social responsibility Attempting to create healthier options for their consumers like salads, apple slices or milk instead of fries and soda

Wendy's/Arby's Group
Their number 1 focus is quality o All Wendys restaurant guarantee the highest quality Prices are higher than other fast-food competitors because they want to be seen as a higher end fast food restaurant o They are willing to sacrifice quality for a price increase The Late Night Window is open until 1am or later o An advertising campaign designed around it proves its importance Increasing their menu options to help attract more customers o (Baked Potatoes, Chili, Boneless Wings and Salads)

YUM Brands (Taco Bell/KFC)

Focus many of their strategies around marketing o (example: iPhone app why pay more ) Fast-food restaurant that focuses heavily on customer service Try to make service as fast as they can, so they can get more money, and more customers Cater towards families by offering bulk dinner packages

Porter 5 Force Model

Rivalry Among Competing Firms: (high) Entry of New Competitors: (low) Potential Development of Substitute Products: (medium) Bargaining Power of Suppliers: (medium) Bargaining Power of Consumers: (high)

Rivalry Among Competing Firms: (high)

This is usually the most powerful of the 5 competitive forces Rivals (Direct Competitors) Moes Southwest Grill and Qdoba Mexican Grill are both widely known and similar fast casual dining establishments They create a threat to Chipotle because they serve the same kind of products Substitutes (Indirect Competitors) Other fast food companies (MCD, YUM, WEN)

Entry of New Competitors: (low)

Hard to successfully enter the industry (very high failure rate) Already fierce competition o Very difficult to compete with such big companies (Chipotle, MCD, Wendys/Arbys, Yum Brands)

Potential Development of Substitute Products: (medium)

Rather than eating at Chipotle, one could opt to: Stay home and make a burrito or taco Go to another fast-food restaurant o Substitutes are not limited to our rival competitors of places such as Moes, Taco Bell and Qdoba but also include other fast food chains such as McDonalds, and Wendys/Arbys Group. Seek a more authentic Mexican experience o (example: Alleganys Don Luchos)

Bargaining Power of Suppliers: (medium)

The ingredients that they use for their products is not low in supply (chicken, pork) o However since Chipotle uses the best raw materials, they often have to pay a premium to stay consistent with their "Food with Integrity" mission o Additionally, there are fewer farms that Chipotle views as acceptable for their purchasing needs Chipotle products also require a large amount of fresh produce, which are all seasonal products (tomatoes, onions, lettuce, etc). o As a result the prices for these products may be higher due to seasonality factors Rising prices in oil also affect Chipotle

Bargaining Power of Consumers (high)

This force will be high because the consumers are what runs Chipotles business If people do not enjoy the service and products that the business is producing, Chipotle's profits will decline and may lead to eventual closing of locations Chipotle will need to ensure that there prices remain competitive to their competitors within the market place o We believe this is a place where Chipotle will need to seek improvement as their prices are currently higher than their competitors on average

Direct Competitive Profile Matrix

Indirect Competitive Profile Matrix

Financial Ratio Analysis

External Factor Analysis (EFE)

Core Competence
Some of the value chain activities that Chipotle performs especially well are: o High quality products with the best raw materials (naturally raised beef, pork and chicken) o Healthy ingredients o Good, clean and friendly environment (decor, music) o Provide customers with a fast-casual dining experience at an affordable price o Fast-service o Serve alcohol

Distinctive Competence
The firm's strenghts that cannot easily be matched by competitors are: o High quality products with the best raw materials (Moe's vs Chipotle) o Healthier ingredients compared to other fast food establishments (compare a Chipotle burrito with a McDonalds hamburger) o Serve alcohol

Competitive Advantage
Chipotle provides high quality Mexican food at a reasonable price, with a short weighting period They use naturally raised animals for their meat and place great emphasis on quality in the production of all their products and services The main competitive advantages that seperate them from competition are: o Naturally raised meat in food (healthy) o Unique flavor of high quality products

Value Chain Analysis

Inbound Logistics: (high) Their high quality raw materials add a lot of value to the final product They use naturally raised animals for almost all their meat Better vegetables than competitors Operations: (low) This stage doesn't add that much value to the product compared to their competitors A lot of competitors use a similar type assembly line to make their products o They are considered a fast-casual restaurant rather than traditional fast food so they are not known for their speediness

Value Chain Analysis (cont.)

Distribution: (very low) Chipotle's distribution is inexistent o They do not deliver their products. Sales and Marketing: (low) Chipotle spends 1% of their total revenues on ads compared to their larger rivals that spend 4% or more. They spend less in a year than MCD in 48 hours. They need to increase their market campaigns in order to compete with their larger competitors. Advertise with Billboards and radio ads Take advantage of word of mouths campaigns Give-a-ways They sponsor teams o (cycling)

Value Chain Analysis (cont.)

Service: (Medium) They rank among the top in fast food customer services based on price, environment, meal, and service.` Conclusion: Most value is added in the raw materials stage by getting the best ingredients available. Additional value is added during the actual process of making the burrito delicious (and fast). The Finally value is added with great service in a well kept, and highly enjoyable store. o Chipotle's key to success

Corporate Culture
Take social responsibility seriously o Use natural wholesome ingredients and promote responsible farming Trendy- Management establishes a positive work experience and also a enjoyable place to eat. Chipotle serves beer, plays music, has unique furniture decor (very modern), and maintains an exceptionally clean dining space Love what they do o Chipotle tries to establish a loyal customer base through taking great pride their work. This leads to great customer service Workforce values o Value workers to establish a positive working envirnment o "Promote from within" Line workers can be promoted to store managers at new locations

Internal Factor Analysis (IFE)

Further Evaluation of Strategy

CONS PROS A lot of money, time and Increase total revenues research to o will increase the amount successfully enter international of money to be spent markets of advertising Language barriers Increase the overall size of Different law systems the company (so they can Exchange rates compete with their larger Political instability competitors) Money spend in training new High acceptance rate employees to meet Chipotle's in European countries values (different style of life, more healthy, socially responsible) Increase in sales

Strategy #2: Implement a Short Term Mass Marketing Strategy

Start clever television ads that are consistent with Chipotles culture by advertising: o Social responsibility o Health o Taste Magazine ads, sponsorships, and product placement o Boost brand image o Help boost company growth Keep advertising short term o Gain awareness then revert back to W.O.M. campaign o Sudden surge of advertising to seperate them from direct competition (Moes, Qdoba)

Further Evaluation of Strategy

PROS Boost brand awareness Increase sales Expensive CONS May not be consistent with Chipotle's values

Generate greater revenue

Allow for easier growth into new markets

May deter current investors due to high initial expense

QSPM

QSPM (cont.)

The 7-S Framework

Structure The division of tasks as shown on the organization chart
The management teams will play a crucial role in the implementation of both of these strategies (CMO Mark Crumpacker and CEO Steve Ells) Additionally the lower level employees will need to adapt to the new environment and continue the firms core values Responsibility for actions must be strictly enforced o Deadlines

Strategy The coherent set of actions selected as a course of action

The set of actions for each of our two strategies have been presented previously o Increase Growth Plan o Short Term and Aggressive Marketing Strategy

The 7-S Framework

Systems The processes and flows that show how an organization gets things done
Chipotle heavily relies on their top management teams interaction with lower level employees Implementation will start with the top and trickle down within the organization o It is crucial for management to set the tone

Style How management behaves

Management needs to tackle the proposed strategies head on if they are going to be successful Completet strategy formulation, implementation and evaluation are crucial

The 7-S Framework

Staff The players in the organization
The players in the organization are the employees It is vital for all levels of the organization to understand the goal of the proposed strategies Success starts with understanding A strategy is essentially a short-term mission

Skills Capabilities possessed by the organization

The managers at Chipotle are highly capable of executing the proposed strategies They have a strong passion and desire for the firm and work to ensure that success is a constant within the organization Managers from all departments must work together o Collaboration is Key

The 7-S Framework

Subordinate Goals The values shared by all in the organization
The mission is to successfully enter new markets (internationally) while remaining faithful to the already established Chipotle name of quality (Food with Integrity), exceptional customer service and an ambiance of a sophisticated and trendy dining experience, o by introducing franchising and o implementing a short term marketing strategy

How To Eat A Burrito