Chipotle Mexican Grill began as a fast-casual Mexican restaurant. The restaurant started in Denver, Colorado in 1993 by Steve Ells and was centred around the values of using locally sourced produce. In 1995, Chipotle opened their second and third restaurants with a $1.5 million investment from Ells father alongside a $1.5 million private stock offering. Toward the tail end of 1996 they opened up five more restaurants. In 1998, McDonald's eyes were opened to Chipotle's potential in their niche market and quickly invested in the company. In 1999, Chipotle expanded its business into 37 restaurants nationally. Also in 1999 McDonald's increased to a majority investor in the company. In 2006, Chipotle went public were soon after their relationship with McDonald's seized to exist. Chipotle wasn't discouraged by the split and continued to succeed. In 2008 Chipotle's expansion plan began to grow even more and set its sights onto more international expansion.
After review of the case, Chipotle has many challenges facing them that need to be corrected and strategic plan must be developed. These challenges include increased competition, reliance on supplier's success, lack of healthy options, and customer awareness in international expansion and domestic cannibalization. If Chipotle can find alternatives to these issues they will be able to expand into their additional growth and gain an increased competitive advantage.
Most consumers do not realize but Chipotle's limited menu is actually one of their core competencies mainly due to the fact that the menu is fundamental to its operations and provides a distinctive value to the consumer. The restaurant's challengers have some trouble contesting against or duplicating this competency because the times on Chipotle's menu are examined and established. Opponents do not usually have time or ability to test this model or perfect their menu items. Chipotle on the other side has successfully applied this limited menu concept to its other ventures such as their two Shop House locations in our nation's capital, DC.
Another one of Chipotle's core competencies, is their devotion to high quality ingredients such as the organic farming of produce and naturally raised meat. Chipotle is focused on meeting its customers' high expectations with their ‘Food with Integrity' campaign. Chipotle's contestants have not taken anywhere near as strong of a stance, and still has not moved as rapid as Chipotle has in regards to increasing their efforts for more sustainable and humane cultivation of ingredients being used in their food. The restaurant chain continually leads the pact of fast-casual dining.
Another competency to point out the success of Chipotle is around how the effectiveness and efficiency of their friendly and cross trained employees serve customers. Chipotle employees are trained at every position. This allows them to be able to glove up and aid any other coworker at any time during preparation or service. The employees, alongside the serving style of consumers pointing out what ingredients they would like aids in maximizing efficiency because the crew is excited to get the consumers rapidly through the line to the register while working as a team. Rivals have a hard time replicating this mainly because of the gaps between their employees.
It is easily assumed that the food must be one of the company's primary components within their value chain. More specifically the healthy, homegrown, and fresh food is what help sets them apart from its competitors. Chipotle takes pride in its quality foods through its use of nutritional ingredients. The restaurant makes its meat utilizing a refined sous-vide technique. “The power of sous vide is that it enables you to precisely prepare food with more tenderness and flavor than can be obtained through traditional cooking techniques. Sous vide makes it possible to unlock the full potential of food.” (Dr. Bruno Goussault, Sous Vide Pioneer). Also, all of its restaurants do not contain microwaves, can openers, or even freezers. Chipotle was the first restaurant to openly share about the use GMO's in their food and have since done away with GMO's in their ingredients. The chain is committed to raising, the animals they have chosen for the production of their food, in the most humanely way possible and also has kept an eye on how they affect the environment as a whole. Alongside the food aspect menu development, recipe creation, and recipe testing. These factors all play a role in the food the organization chooses and what helps make them profitable adding a primary component to the value chain. Another primary component would be their excellent supply chain management. Chipotle has built a resilient relationship with its suppliers who have agreed on their fixed pricing method. Along with that is the operations team which makes it all possible. This team creates the standards for what they consider to be quality and start with who they choose to purchase from all the way to the way the food is served to the customer. A secondary component of the value chain is the employees themselves with their fast-pace and friendly service. The HR department works on hiring enthusiastic and team oriented employees. Also through the use of the assembly line, customers are able to customize their food to what they want in the moment and luckily this process is quite quick and painless keeping customers happy. The final secondary component to be discuss is how selective the menu is. Most may see this as a negative but in reality, it helps get rid of customer indecisiveness and aids in keeping the line moving at a quick pace. Time is money as they say and if an organization is able to get customers in and out without compromising quality of the experience and product then it is safe to say there is a lot of money to be made at a quick rate.
Based around Porter's Five Forces, Chipotle most closely resembles the focused differentiation strategy in terms of their competitive approach. “A focused differentiation strategy provides unique features that fulfil the demands of a narrow segment of market. Some firms using a focused differentiation strategy use the efforts on a particular sales channel, such as selling products online only. Others target specific demographic niches.
A differentiation strategy includes providing unique features to attract a variety of customers. However, the need to satisfy a narrow market demand means that the desire of uniqueness is taken to the “next level” by firms in a focused differentiation strategy.” (tutorialspoint.com) It is said that they are more focused based mainly due to the fact that Chipotle goes after a niche market of Mexican-style food lovers that are willing to pay top dollar for quality food.
There are about a handful of main or “chief” differences between Chipotle and Moe's Southwest Grill. Moe's offers franchises within their restaurants where as Chipotle does not offer that as an option. Another differentiator is that Moe's offers chips, salsa, and queso sauce as part of any meal or order and Chipotle only offers these options as sides with an additional cost to whatever the customer orders. Some consumers may argue that this makes Moe's the most bang for their buck. A huge differentiator between the two chains is that Moe's has quite more menu options then Chipotle does. Some of these items include fajitas, nachos, kid's menu, and desserts. Although Moe's has more options for consumers to choose from this could cause a longer wait time for consumers mainly because these options may create a lag in communications between employees and decrease overall efficiency. This is due to the requirement of a separate kitchen completely to make these other food options. Finally, Moe's also utilizes all natural ingredients but unlike Chipotle they do not use this as a marketing campaign. Instead, Moe's makes use of weekly promotional events to help attract more customers. An example of their promotions is their “Moe's Monday's” where customers are able to take advantage of a BOGO burrito special on a weekly basis.
There are a few options in terms of recommendations that Chipotle may want to consider in regards to continuing both their success and future growth. One of the first things the company should look into would be gaining more power over their supplies. This could be possible by doing some sort of backwards integration. Chipotle can make an investment in regards to using their own farms to make the products they want to use in their restaurants and also to control the way their meat is raised so that is up to par with their standards and avoiding any more food related illnesses. Another recommendation would be make use of acquisitions like they have with Shop House, by taking their model and using it for other niche cuisines. By doing this the company can create an umbrella of smaller organizations which focus on narrow markets where Chipotle has thrived in. This will give them a constant revenue stream from all different angles. The final recommendation to Chipotle would maybe look into healthy drink options specifically around the Mexican Niche it serves. Chipotle could form a small team that will do some research and development around fruity Mexican drinks which are created with all natural fruits. This could help bring in more costumers specifically those whom are in the health-conscious mindset. This will help them reach that goal of healthy fast food and could turn a quite substantial profit for the organization.
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