[CHIPOTLE SITUATION ANALYSIS] 1 2 [CHIPOTLE SITUATION ANALYSIS] History Chipotle Mexican Grill, Inc. is a Mexican food restaurant that was founded by Steve Ells in 1993 when he opened the first Chipotle in Denver, Colorado. Chipotle specializes in fresh Mexican food such as burritos, tacos, and salads. Today, there are over 1,200 Chipotle’s that cover 46 states and now include Canada, France and England. Committed to creating a gourmet burrito Steve Ells took a loan from his father of $85,000 and bought an old ice cream shop in Denver, a year later the first Chipotle opened. Over the next few years Chipotle expanded to 16 stores before catching the attention of the most famous fast-­‐food corporation in the world, McDonalds. In 1998, McDonald’s Corp. invested in the company and expanded the then 16 stores to over 500 by 2006. In 2006, McDonald’s sold their “B” shares and Chipotle Mexican Grill was put up on the New York Stock Exchange. Until today, CMG is publically trade on the NYSE. Ells determined to take his gourmet burrito to the next level, started researching where his meats were produced. In 2000, he decided he wanted to do things differently and from then on out he began serving naturally raised pork. By 2010, Chipotles world-­‐wide only served naturally raised pork. The company continued it research and two years later began serving naturally raised chicken and in 2007 expanded to naturally raised beef as well. In 2004, Chipotle got ride of their old frying oil and began using zero trans fat frying oil. The same mentality continued on to their cheese and beans, coming from only the freshest, healthiest and all organic ingredients. Chipotle is just a gourmet burrito is a healthy option and is also a better choice to the world. Unsatisfied by just making Chipotles a healthier choice and better choice for animals, Steve Ells testified before Congress in attempt to eliminate the use on antibiotics in ranching. Today, Chipotle’s model is “Food with Integrity” which is expanded not only through food but all aspects of the brand. Chipotle is committed to finding the very best ingredients for their food. Chipotle’s across the world are being building from reusable and recyclable materials in attempt to continue with their “Food with Integrity” mentality. In the near future, Chipotle expects supply its food to each restaurant by buying all locally growing vegetables and ingredients. [CHIPOTLE SITUATION ANALYSIS] 3 Chipotle is growing rapidly around the world and within the fast-­‐casual category of food ranking number seven in the top 100 Fast-­‐Casual restaurants in the United States, beating out its competition like Panera Bread, Noodles and Company and many others. Many companies are even looking to Chipotle as an example with its healthy approach and naturally raised meats. TARGET AUDIENCE BRAND ANALYSIS FOOD WITH INTEGRITY In 1993 the first Chipotle opened and by 1998 Chipotle had outside investors. The brand took shape in 1999 when the owner, Steve Ells learned about the way most pork is raised in the U.S. This sparked his decision to make the Chipotle brand slogan “Food With Integrity.” Chipotle serves only organic and natural ingredients. In 2009, Steve Ells testified before Congress to try and eliminate the use of antibiotics in ranching. Chipotle also incorporates sustainable design and community building into their brand. FOOD “Food With Integrity” is Chipotle's core philosophy and competitive advantage. It is their commitment to changing traditional "fast food" culture by serving customers the very best ingredients, all raised with respect for the animals, the environment and the farmers (chipotle.com). On Chipotle’s website, they provide their audience with numerous facts that go into detail about their core values as a brand. Chipotle doesn’t just want to feed their audience but educate as well. Chipotle finds farmers that allow animals to display their natural tendencies. As stated on the Chipotle website, “when sourcing meat, we work hard to find farmers and ranchers who are doing things the right way” (chipotle.com). Pigs are raised “naturally,” meaning that they are bred in an outdoor environment, not given any antibiotics and fed a vegetarian diet. Since 1999, Chipotle has worked hard to source their beef, as well as, chicken from farmers who meet their 4 [CHIPOTLE SITUATION ANALYSIS] “naturally raised” standards (chipotle.com). Their sour cream comes from 100% “naturally raised” cows and their cheese is 65% produced from “pasture raised dairy (chipotle.com). Not only is Chipotle’s chicken “naturally raised” it also has no growth hormones, and uses anti-­‐biotic free chickens. Overall, Chipotle is working hard to make food that respects our environment and our animals, while maintaining the best quality and flavors for their customers. PEOPLE From the employees to the consumers to the surrounding schools and neighbors, everyone is important to Chipotle. Chipotle hires internationally to keep a diverse work atmosphere, but also to help people get a new start. Another goal at Chipotle is to bridge the bilingual gap. To do this, “there is a whole team dedicated to empowering, educating, and training employees to increase internal promotions, cultural sensitivity, and communication skills. Chipotle also provides continuing English language education to all employees who request it” (chipotle.com). The community building aspect of Chipotle makes each restaurant an active part of its surrounding neighborhood. For example, Chipotle held a team dinner for the varsity girls and boys Heritage Basketball teams right before State Tournament time at the Littleton, Colorado Chipotle restaurant-­‐ the slogan was “Powered by Chipotle.” Community outreach is displayed as a page on the website, which is headlined with the catchy slogan, “Can Burritos Make Good Neighbors?” (chipotle.com). By directly connecting with consumers, Chipotle is building brand loyalty on personal levels. ENVIRONMENT Three keystones of Chipotle’s commitment to sustainability are food that is organic, from family owned farms and local. Organic produce is not necessarily as “good looking” as chemically treated produce; however, Chipotle believes it is important to choose the right foods to be organic. For example, “40% of their beans are organically grown, which has a number of benefits including a reduction of more than 140,000 pounds of chemical pesticide since 2005” (chipotle.com). Seeking out family-­‐owned farms is important for Chipotle because they believe family-­‐owned farms put the most care into their land. This means, less [CHIPOTLE SITUATION ANALYSIS] 5 pesticides, more crop rotations and more sustainable methods. Chipotle also “likes to put a face to the name-­‐ and a face to the farm” (chipotle.com). When possible, Chipotle likes to use local produce-­‐ the less distance food travels, the better. “Chipotle has established a clear set of guidelines, outlining five categories of local suppliers. Local areas are defined as sourcing from farms within 350 miles from our participating restaurants. Farms are also evaluated on their adherence to our ‘Food With Integrity’ standards” (chipotle.com). TOTAL DINING EXPERIENCE Each Chipotle is carefully designed for the ultimate dining experience from the look of the building to the dining experience. From the outside, the architecture is made of plywood and metals. The look is “industrial” and “clean-­‐cut.” The architecture embodies one Chipotle’s principles sustainable architecture by using “green” restaurant techniques specific to different sites. For example, in Tulsa, Oklahoma the restaurant uses recycled drywall, low-­‐VOC paint and energy efficient appliances. Additionally, Chipotle has made arrangements to add solar panels to 75 of its restaurants. The unique dining experience that Chipotle advertises to its customers starts with their slogan “Food with Integrity This means that they serve the best sustainably raised food possible, while valuing taste, nutrition and price. The “line-­‐up” of the food is one of the aspects that make Chipotle a unique dinning fast-­‐food experience. Each ingredient is laid out in front of the customer so the process of combining ingredients is visible. The kitchen is open to the entire restaurant so that customers can smell, hear and see the cooking to involve all the sense. Chipotle also has an open kitchen that is directly behind the “line-­‐up”. The concept of the open kitchen allows the consumer to see the food being prepared and see the fresh ingredients going into the food, just another way Chipotle insured its customers they are receive the best quality food. The music played throughout each Chipotle is different. The music played is chosen based on the demographic where the Chipotle store is located. For example, in State College the music is more geared to please the 18-­‐24-­‐year-­‐old demographic. All of these “little” details that go into each Chipotle are what sets Chipotle apart every other fast-­‐casual type of restaurant. 6 [CHIPOTLE SITUATION ANALYSIS] You can even take the Chipotle atmosphere home with you and listen to “Chipotle Radio” on their website once again engaging with their customers far beyond the walls of the restaurant. Competitive Analysis Chipotle is a fast-­‐casual restaurant meaning that they provide prompt service like fast food restaurants and casual in the concept of a finer dining experience. When consumers think of Chipotle they also think of Qdoba Mexican Grill, Moe’s Southwest Grill, Baja Fresh, etc. Competition includes national and regional quick-­‐service, fast-­‐casual, and casual dining experience restaurants. Competitors compete based on quality, taste, service speed, price and value, location, customer service, and name recognition (Annual Report). Looking in the area of dining experience we compared Chipotle to Panera Bread, Qdoba and Noodles and Company. While Panera Bread and Noodles and Company are fast-­‐casual restaurants as well, at Chipotle and Qdoba utilize the concept of the open kitchen where you watch your meal being prepared and constructed quickly in front of you then sit with your meal already in hand. Panera and Noodles are quite similar in the sense of food and dining concept as Chipotle is to Qdoba. No matter where you go across the country all of these restaurants are consistently the same in the essence of food and look. Panera and Noodles are similar in that their dining experience is a more elegant contemporary feel. Chipotle and Qdoba are more of a sheek industrial feel. One of the things Chipotle does that the other companies don’t is promote their environmentally friendly structure and materials. High quality food and casual dining experience relates these four restaurants even though they serve different kinds of food. They all promote fresh quality foods and ingredients. Panera Bread is known for their freshly cooked bread and serves things like sandwiches, [CHIPOTLE SITUATION ANALYSIS] 7 Panini’s, soups, salads, and more. Noodles and Company is known for their noodles, pastas, salads, soups, and sandwiches. Qdoba and Chipotle are both popular for their burritos and other Mexican cuisines like quesadillas, bowls, tacos, and salads. Prices are quite similar throughout the four brands. Meals usually range between $7-­‐$12. What sets Chipotle apart is stressed organic and fresh ingredients. While other restaurants depend on their “dining experience” to set them apart, Chipotle uses its earth friendly ingredients and open dining experience. There is a bit more range in Panera and Noodles when it comes to food. While Chipotle and Qdoba are strictly Mexican food, Noodles offers dishes from Asia, the Mediterranean, and the Americas. Chipotle only offers four distinct meals, however, that is somewhat of an advantage because consumers will be able to choose what they want and get it quicker. Consumers come into Chipotle looking for exactly what they have to offer in their product. All three brands have done a good job distinguishing their look and representation of food products. According to the Simmons Report for adults in 2009, those who like the trend towards healthier fast food are more likely to go to Panera Bread. According to the same Simmons report, those who look for organic or natural food when shopping are more likely to eat at Chipotle than Panera Bread and Qdoba. Those who are more likely to purchase a product from a company that is environmentally friendly are more likely to go to Chipotle than they are to Panera and Qdoba as well. Chipotle offers environmentally friendly and reusable materials. For example, their bags are brown paper with have become a well-­‐known look for Chipotle. Everyone recognized the brown Chipotle bags. Chipotle has more of an advantage for those consumers who are looking 8 [CHIPOTLE SITUATION ANALYSIS] for natural, healthier meals and for those who are environmentally conscious. Chipotle emphasizes their use of fresh, high-­‐quality raw ingredients, classic cooking methods and a distinctive interior design (Annual Report). Chipotle has done a great job with giving their restaurants a “natural flow” layout. (Annual Report). Efficient serving line and service speed is important to Chipotle. Consumers will most likely get their food quicker and freshly prepared in Chipotle than the other three restaurants. All four restaurants have unique and well-­‐designed websites. They all have done well representing their brand’s look, feel, products and goals through their sites. They are all equal in the way that they offer the same kind of information and signature styles. Panera, Noodles, and Chipotle have applications for phones, iPads/nooks, etc. Below is what their applications include: (Phone) Applications: Locations Menu Pre-­‐Orders Chipotle ✓ ✓ ✓ Noodles & Company ✓ ✓ ✓ Panera Bread ✓ Qdoba Noodles and Chipotle both offer the same amount of services through their applications. This allows their customers who are even more in a hurry or want food more promptly to pre-­‐order and pick up right away. They are easy to navigate through and both of them show nutritional facts. Chipotle’s application is a little easier to navigate through and also includes information [CHIPOTLE SITUATION ANALYSIS] 9 about their brand. Notice that Qdoba doesn’t even have an application and as a primary competitor Chipotle has a bit more of an advantage here. MARKET ANALYSIS As stated before, Chipotle was privately owned until 1998 when McDonald’s took over the company. Until 2006, McDonald’s owned Chipotle and its “B” stocks, however, McDonald’s sold their stocks and that’s when Chipotle went public. Since January 27, 2006, Chipotle has been on the New York Stock Exchange. Like every company there is ups and downs, however, lucky for Chipotle they have been seeing a lot of ups. In the past quarter Chipotle increased revenue by 25.8% totally $640.6 million from the opening of 32 new locations one of which is in Toronto, Canada. Within the same stores of the previous year there was 12.7% in sales. These numbers are extremely impressive because with today’s economy people have less disposable income to just “waste” on going out for a meal. The co-­‐CEO of Chipotle, Monty Moran, said that their success is due to "Our strong people culture continues to drive our success in attracting loyal customers and delivering exceptional results. Our restaurant teams are ambitious, passionate, and dedicated to delivering the best dining experience possible. Our efforts to hire and develop top performing crews will continue to lead to stronger future leaders running our restaurants, and ensure our customers will enjoy the best customer service possible." This year Chipotle was ranked 7th among the top 100 fast-­‐casual restaurants, beating out its competition by miles. It was also ranked among the top 100 fastest growing companies in the world according to CNN Money who said “Recession didn't curb appetite for this company's burritos. Chipotle raised prices and opened 121 locations last year.” 10 [CHIPOTLE SITUATION ANALYSIS] One of the most fascinating things about Chipotle is that while is expands throughout the world, none of the restaurants are franchised. With over 1,200 stores, none are franchised. While its competitors have almost half the number of franchises as stores. It is believed that this why they have such high customer satisfaction because CMG has control over every store and can assure its customers freshness and the best ingredients. Another interesting thing is that Chipotle delivers its food based on zones. They have created zone systems so that the food doesn’t have to travel far because they believe that this also assures freshness and the best quality. In the graph above you can see how much better Chipotle is doing in comparison to other restaurant chains and companies. (Annual Report) ADVERTISING/PROMOTION "We are changing the way people think about and eat fast food," said Steve Ells, founder, chairman and co-­‐CEO of Chipotle. Chipotle has always relied on radio ads, billboards and grass [CHIPOTLE SITUATION ANALYSIS] 1
1 root marketing as their methods of advertisements. Chipotle likes to engage their consumers and they do that through promotional give away’s on holidays, new store opening, etc. They hold free burrito days, and incorporate many beneficial promotions and reward programs into their brand. In an innovating two-­‐minute spot, Chipotle has launched their first national TV advertisement in the company’s 18-­‐year history. Chipotle emphasizes the importance of developing a sustainable food system. Chipotle released their ‘Back to the Future” Advertisement, featuring Willie Nelson covering Coldplay’s “The Scientist.” This tells a story of one farmer’s journey from a huge industrialized farming compound to one with more-­‐sustainable and human practices. The on screen Ad featured animated scenes of penned-­‐up farm animals getting injected with antibiotics, processed, boxed, and transported to the big city. This farmer contemplates the worst until he has an epiphany, and the fences flip into open pastures where the farm animals are able to roam free and everyone is happy. Closing scene is of a satisfied farmer loading products into a Chipotle truck. (Foxnews.com) It was released online via YouTube in August 2011 and aired in some 5,700-­‐movie theaters nationwide. The commercial was officially debuted at the February 2012 Grammys and received incredibly positive feedback, through social media. Chipotle gained wide exposure from showing this commercial at the Grammy Awards because it resonated well with the artistic audience. The commercial conveys an impression on people, which showcases the values that Chipotle incorporates into their brand, their premium quality ingredients, customer satisfaction and overall reputation. Chipotle has made an intensive effort in recent years to take advertising in-­‐house. CMO Mark Crumpacker has said that traditional advertising has become less important for the company. They have incorporated social media into their objective as well. (Adage.com) We believe this is because of Chipotle’s target audience, 22-­‐34-­‐years-­‐old who are the most active demographic on social media platforms. Chipotle is hitting its target on where they spend the most amount of time. The long lasting “Food With Integrity” campaign has been Chipotles signature stance. 12 [CHIPOTLE SITUATION ANALYSIS] They have benefited from increased consumer concern regarding where the food originates. This chain has given a visual of how much fresher Chipotles food is in comparison to other traditional fast food, and same-­‐store sales as well as net income have drastically increased. This year marks the second annual “Cultivate Festival”, a festival hosted by Chipotle that brings together farmers, chefs, thought leaders, artists, musicians and anyone else who wants to attend. The mission of the festival is to engage people who want more sustainable, wholesome and delicious food. This year the festival will take place in Denver, Colorado, as well as, Chicago, Illinois. In addition to hosting a music event, the music continues on the website where there is a link to listen to “Chipotle Radio” to get a feel for Chipotle’s total dining experience even when eating a burrito bowl at home. Chipotle is expanding their advertising strategies and therefore, is reaping positive feedback regarding this new exposure. SOCIAL MEDIA CAMPAIGNS Chipotle wants people to think differently about food-­‐ specifically, they want people to know where their food comes from. Chipotle utilizes social media to target their main consumer group, people ages 18-­‐24 who are most likely using social media. Chipotle mostly uses grassroots campaigns, while maintaining a Facebook page, Twitter, YouTube and Foursquare with over 1.7 social media fans (mashable.com). The Facebook page has numbers of 1,891,460 “likes”, 4,126 “talking about this” and 1,124,211 “were here.” “In a 2011 Nation’s Restaurant News study, it was found that Chipotle responds to 83% of Facebook posts — more than any other quick-­‐service restaurant” (mashable.com). Their twitter handle is @ChipotleTweets and they have 106,380 tweets, 253 following and 120,000 followers. Chipotle tweets every 2-­‐5 days and updates Facebook every day; “about 90% of the company’s activity on Twitter is responding to customers through @-­‐mentions” (mashable.com). Chipotle is also on Foursquare with 79,705 total likes and uses the slogan, “Check-­‐in, and Chow-­‐down.” In an interview with Joe Stupp, Chipotle’s new media manager, it was found that Chipotle engages in a one-­‐to-­‐one engagement model for social media platforms. In a report done by Expion, a social media-­‐marketing firm, it was found that Chipotle Mexican Grill [CHIPOTLE SITUATION ANALYSIS] 1
3 responded to comments on its Facebook wall in an average time of 1 hour and 37 minutes, which qualified as the fourth-­‐fastest time in the quick-­‐service and fast-­‐casual group. Explained in the chart below, "Chipotle led all fast-­‐casual and quick-­‐service chains in response rate, answering 83 percent of all questions, criticisms and commendations that fans left on the wall” (mashable.com). This means that Chipotle is well aware of how to communicate to their customers. Social media is the best way for Chipotle to gain loyalty from customers by forming personal relationships with people. "We love to have conversations," says Stupp (mashable.com).