Bangalore Burrito STRT 571 – Final Project (Coming to a New Delhi Near You) TJ Lowden Kathy Wang Onkar Kapoor Bryan Jolly Chipotle: Moving to India Company Overview 22,000 Employees $1.3B Revenue / $140M Profits 25% Average YoY Revenue Growth over last 5 Years First International Expansion: April 2010 in London Analysis of Expansion into India Strategy Profitability “Few Things Well” $10M Initial FDI Use 49/51 Joint Venture 40% Contribution Margin Two Locations 8-Year Breakeven Point New Delhi Bangalore 12.5% Return on Investment Risks JV for Social and Legal Risk Mitigation Controlled Political and Technological Risks Volatile Rupee: 39 to 51 Decision: Go (with the Right Partner) Strategic Fit USA India Consistent Key Strengths: 2) Financial Stability; 5) Available Capital; 7)Restaurant Efficiency ID Key Resource Improvement Strategy 1 Marketable Cuisine Adapt menu to address demographic 3 Brand Improve brand awareness in India with similar US promotions Business Acumen Improve via strong JV partner for expansion into right markets and conduct business operations 8 FDI Assessment Revenue Stores Revenue per Store Expenses Food, Beverage, & Packaging Costs Labor Costs Occupancy Costs Total Expenses Stores Expenses per Store Contribution Margin per Store 1,331,968,000 837 1,591,360 Recent Recession reduced FDI in India 431,947,000 351,005,000 98,071,000 881,023,000 837 1,052,596 538,763 Contribution Margin in US Stores 33.86% Expected Contribution Margin in India 40.00% Increasingly Open Capital Flows Managed Floating XR RBI Controlled Monetary Policy Risk Analysis and Mitigation Risk type Implications Mitigation Plan Political (low) Local Government Corruption leading to unfair treatment of foreign entities Diversify to different states Enter with JV partner familiar with India politics. Legal (med) Bureaucracy and lack of FDI policy transparency leads to failed entry Utilize JV partner familiar with Indian policies and methods to handle bureaucratic layers. NR/USD XR Fluctuations lead to higher investment than anticipated Establish local supply chain. Limit currency risk exposure to initial investment. General social and cultural acceptance of the type of cuisine Adapt menu to cultural tastes and preferences Leverage relationship with experienced JV partner. Currency (low) Social (med) Expansion poses risks but they can be managed with the “Right” JV Partner 5 Questions?