Chipotle

1 January 2017

Chipotle is also active in its environmental commitment to working to reduce its carbon footprint by reducing its reliance on fossil fuels through the implementation of various environmental initiatives, including green building and depending on solar power energy. It is also well known for its philanthropic activities, including its support of FarmAid and its local communities. Ells’ philosophy is simple: “to eat real food – unprocessed, whole food that has been cooked in a classic way and sourced from real farmers, as opposed to large corporate farms” (Going green, 2010).

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This philosophy apparently appeals to Americans; Chipotle opened its 1,100th store in 2011 (Chipotle cultivates, 2011). Chipotle History Founder Steve Ells first opened the doors to Chipotle Mexican Grill in 1993 in a former Dolly Madison ice cream location, near the University of Denver, in Denver, Colorado. Although he had no experience running a fast food restaurant, he had graduated from the Culinary Institute of America in 1990 and worked for two years as sous-chef under Jeremiah Tower at Stars, in San Francisco (Sheehan, 2010).

While working in San Francisco, he became acquainted with the local burrito vendors, or taquerias, in the Mission District who sold flour tortillas stuffed with an assortment of fillings to create a giant burrito, wrapped in aluminum foil, a local favorite. He thought there was a market for this simple menu item, so he borrowed $85,000 from his father (structured as part loan and part equity investment) to open his first Chipotle, that served a limited menu of tacos and burritos (Ells, 2007). Ells applied the combined training and techniques he learned at the CIA and as sous-chef to perfect the food he served.

He determined to have a different type of fast-food restaurant; he was emphatic about his belief that only the highest quality ingredients were included in the burritos and tacos he served. Chipotle’s salsa ingredients are made fresh from scratch, and the avocados used in making the guacamole are hand-mashed (they never serve frozen avocadoes). The philosophy paid off when people kept coming back for his simple yet great-tasting food; the small restaurant was so popular that customers typically encountered waiting lines out the door.

As a result, the company quickly grew, adding two additional locations in 1995 and five more in 1996 (Chipotle Mexican Grill, 2010). Chipotle is best defined as a trendy and healthier version of fast food (although calories for one of the giant burritos is comparable to those of a typical fast food meal), but it doesn’t fit the standard fast-food label; its style of gourmet fast food has brought about a new label: ‘fast casual,’ which fills a niche market between fast food and sit-down dining.

The company serves high-end Mexican food set in an environment that is sleek in design. Although made from the same materials, no two Chipotle restaurants are designed the same; most are made of plywood, corrugated metal, concrete floors, stainless steel counters and tables, wooden chairs, and lighting hanging from exposed ductwork. McDonald’s apparently agreed that it was a restaurant worthy of investment; the company bought into the chain in 1998, the first time it had ever backed a business other than its own, after Ells sent them a business plan for his restaurant.

There were only 15 locations at that time, but within three years, McDonald’s significant investment (nearly $360 million) helped grow the company to more than 500 restaurants (Ells, 2007). In 2006, Chipotle went public and McDonald’s divested its stake in Chipotle’s by allowing shareholders to exchange 16. 5 million Chipotle Class B shares for 18. 6 million of McDonald’s own common shares (Shore, 2006). Chipotle has continued to grow, today has 1,100 locations in 39 states, Toronto and Ontario, Canada, and London, England; its net income in 2010 was $178 million, and it has a staff of 26,500 employees (2010 Form 10-K, Chipotle).

II. Identification of the Industry and Competitors Industry Definition and Competitors Chipotle Mexican Grill (NYSE: CMG) is a quick-service and casual Mexican-inspired restaurant chain based out of Denver, Colorado. The company takes pride in doing a few things exceptionally well: To serve high quality and delicious food quickly with an experience that not only exceeded, but redefined the fast food experience. Chipotle focuses on sourcing the best possible ingredients, serving the tastiest food, and growing the most capable team possible.

Steve Ells started Chipotle in 1993, and expanded the chain to over 400 stores within 12 years. Chipotle is supported by the financial power and sprawling distribution network of owner McDonald’s Corp, and is the largest Mexican-style concept among a number of fast-casual competitors that also have been picked up by quick-service companies in recent years (Peters, 2005). Major competitors include other Mexican fast casual locations such as Baja Fresh, Del Taco, Qdoba Grill, and market leader Taco Bell.

Additional competitors in the broader market include other fast casual locations such as Panera Bread and local similar cuisine like Freebirds (Hein, 2006). Macro-environmental factors affect all organizations; political-legal, economic, social, and technological forces affect Chipotle, specifically. Chipotle’s Strengths One of Chipotle’s greatest strengths is its commitment to serving fresh, high-quality products. Chipotle aims to find the freshest ingredients available so that it can produce the most delicious and flavorful food as possible (Brandau, 2010). Another strength is Chipotle’s commitment to community involvement.

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