Internal Factor Evaluation Paper
Example 1: Chipotle
Weight
Rating
Weighted
Score
1. Commitment to providing healthy food
options
17%
4
0.68
2. Strong supplier relationships w/organic
producers
15%
3
0.45
3. Unconventional marketing methods
11%
3
0.33
4. Hiring and training employees
8%
2
0.16
5. Maintaining restaurants that are companyowned
6%
4
0.24
6. Strong financial condition (liquid, profitable,
increasing revenues, and well capitalized)
6%
4
0.24
1.Rising labor costs
9%
2
0.18
2. Expanding into markets with diversified
tastes
9%
2
0.18
3. Low depth of menu options
11%
2
0.22
4. Seasonality of sales
8%
2
0.16
Strengths
Weaknesses
Total Weighted Score
100%
2.84
Internal Analysis:
Two of Chipotle’s greatest strengths essentially relate to each another. These consist of the
company’s commitment to providing healthy food options combined with strong supplier relationships
with its organic, produce, poultry, and pork producers. Organic food is typically contains the healthiest
types of ingredients and contain no steroids or other synthetic chemicals. Certainly, as Chipotle continues
to seek out relationships with the top U.S. organic food producers, its commitment to serving healthy food
with the highest quality ingredients can be achieved much more easily (Rolf, 2009). It is absolutely
necessary that Chipotle remain committed to these two strengths as they are very much the main parts of
its mission, “Food With Integrity.” In order to maintain a proactive approach with the relationship with its
suppliers, Chipotle management meets regularly with organic farmers, ensuring that the farmers and the
restaurant remain on the same page with each other’s agreement (Gaven, 2009).
Chipotle has always used rather unconventional marketing methods since it went public in 2006.
Many fast food and fast casual restaurants have had very mainstream marketing campaigns and have
incurred significant expense in doing so. However, Chipotle has emphasized a “word of mouth” approach
to its marketing (Loops, 2010). The organization focuses on ensuring that its product, coupled with the
experience, fully satisfies the customer to the extent that the customer will tell others about the great
experience. When Chipotle has chosen to utilize more conventional methods, it typically has advertised
through a variety of social mediums such as Internet radio, billboards, and social networks. This remains
a great idea as this type of marketing appeals to the younger generation to which Chipotle targets.
Hiring and training employees remains a cornerstone of the Chipotle experience (Gavin, 2009).
The restaurant actively seeks out and trains employees that share a passion for food and Chipotle’s
mission and vision. In doing so, the company can be reasonably assured that when the customer is in
contact with an employee, the meeting will be a good experience. It is also important to note that of
Chipotle’s 1,084 stores, none are currently franchised. Thus, predominately all of Chipotle’s restaurants
are company-owned. This allows the company to keep control over all operations. Maintaining a uniform
experience across all restaurants is important in order to ensure the “Chipotle experience” for all
customers to enjoy at all locations (Lavin, 2011)
Chipotle is liquid, well capitalized, and profitable. They have shown annual growth in revenues
since inception and have consistently performed profitably. Through the retention of earnings capital
levels have increased as a percent of total assets and a substantive cash account has been maintained. This
positions Chipotle well with regard to future expansion and/or research and development efforts.
Rising labor costs within Chipotle can be harmful because it takes several employees in order to
successfully run a Chipotle restaurant. One must not only consider the hourly wages paid, but also
employee benefits such as retirement accounts and health insurance. Benefits are typically one of the
largest liability accounts on a company’s balance sheet. Given the amount of employees Chipotle must
have working each shift, it is important for management to consider planning to combat this weakness.
As Chipotle expands into market with differentiated tastes, it is important that management
approach the matter with much caution. This matter is discussed in the 2010 10-k and the company warns
that it does not have a vast amount of experience in the different food markets (2011). Thus, it is
important to carefully move into another market with a good strategic plan. Although the new brand can
enjoy moderate success simply because of the reputation of the Chipotle name, it is important to deliver
quality in order to prevent tarnishing that reputation.
Perhaps one of the largest weaknesses within the organization is the low depth of menu options.
There are basically four items a customer can order although it is customizable. With one basic food
preference being offered, it is important that the restaurant attempt to keep consumer confidence in its
menu either by expanding options or increasing marketing operations and this is discussed in the
management discussion and analysis section of the company’s annual report (Chipotle 10-k, 2011).