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CHIPOTLE
(S.W.O.T. Analysis)
By: Dillon Neufeld and Olivia Liando
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Strengths
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Well-recognized brand in US, UK,
and Canada
Positive brand image with loyal
customers
High quality of food with naturally
raised meats and organic ingredients
All locations are owned by the
company so no franchises and strong
internal structure such as management
or quality
Online order and delivery
Impactful, cheap ads
Weaknesses
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Opportunities
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Offer a more open variety of food
options
Enter international Markets
Provide more public marketing
Invest in other food establishments
Threats
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Competitors
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Baja Fresh
Moe’s Southwest Grill
Qdoba Mexican Grill
Condensed Growth
Similar Products as Competitors
Limited Resources due to Natural and
Organic Ingredients
Limited Menu
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Competition
Indirect competition from outside
segment
Direct competition from within
segment
Supply Chain
Potential volatility due to limited
number of acceptable suppliers
Potential to be forced to abandon
current suppliers and bruise reputation
or take a major hit to profitability
Workforce
Potential loss of profitability due to
increase in minimum wage
Economic Volatility
Smaller Competitors
California Tortilla
Panchero’s Mexican Grill
Rubio’s Coastal Grill
Cafe Rio
Costa Vida
Del Taco
Taco Time
Taco Bell
other fast food chains
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Introduction
Chipotle is claimed to be one of the fastest growing companies in the United States.
Despite the economy being a rollercoaster, Chipotle has continued to increase its growth. They
are adding new locations every year, their stocks are steady if not increasing, and their brand,
and the quality that comes with it, are consistent. For the most part Chipotle’s prices haven’t
increased very much from when they first started. They have also managed to keep most of their
customers while gaining more every year.
Lately, Chipotle has been more focused on its brand and the products they serve rather
than their customers. They have focused in their ads the fact that they have no additives or
preservatives, they are fresh and natural. This is great for the customers because the products
they are receiving are more beneficial but it also makes the price a little more than competitors.
Some customers are disgruntled though because Chipotle is making their events, their products,
their news, their ads, or whatever else they put out all about the company. When in the past, it
just be able great food with great service.
Strengths
Well-recognized Brand in US, UK, and Canada
Due to Chipotle’s many locations of around 1,800, they have a strong presence in their
communities. The news has many articles on Chipotle and their efforts of removing unnecessary
additives or GMOs. They was one of the first restaurants to publicize their ingredients and all
GMOs or additives in them. Youtube also has a lot of videos based on Chipotle and the
company, whether by Chipotle themselves or customers/employees of Chipotle.
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Without investments taken on them, Chipotle probably would’ve never have become
such an enormous chain; at least not as quickly. In 1998, Mcdonald's made an investments in the
company and by 2001, they were a major shareholder. When Chipotle was first started, it had 16
locations by 1998 but in the end of 2005, Chipotle had over 500 locations. Chipotle’s stocks have
grown in the markets as well. In 2005, the average stock was about $206 but for a stock now,
they’re averaging about $715.
Positive Brand Image with Loyal Customers
The customers Chipotle has are loyal to them. Even though the prices raises, they still
come year after year. For example with their ‘Boo-rito’, a few years ago if you dressed up on
Halloween, you would receive a free burrito. Now with their ‘Boo-rito’, you need to have an
‘unnecessary additive’ to your costume and your burrito will be about $3. About a million
customers last year participated in this event.
In about a decade, Chipotle has nearly octupled their assets within the company. Meaning that
not only do the customers they have are staying but they are gaining more and more customers
every year. Their assets are not the only thing steadily increasing; Chipotle’s revenue has went
up by about ten-fold in the same decade. As mentioned before, McDonald’s was a major
shareholder of Chipotle. To break away from ‘non-core business restaurants’ and keep its own
values, Chipotle divested from Mcdonald’s in 2006.
High Quality of Food
Chipotle in its process of “Food with Integrity” has published a list of the ingredients
they use and the places they receive them from. Chipotle knows they spend more on the products
that are naturally raised and organic but they ‘wouldn’t have it any other way’. They source from
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small farms rather than factory farms who add hormones and cruelty to the everyday lives of the
animals.
Chipotle also prides in the fact that they cook their ingredients right in the kitchen. They
prep and cook their products with care. They also try to reduce waste as much as possible.
Chipotle’s founder and Co-CEO, Steve Ells, is a trained chef who succeeded in bringing fresh
thinking to the fast food industry. He passed down his beliefs and quality ideas down throughout
the chains. He has even personally trained a few of the cooks Chipotle holds now.
All locations are owned by the company
Having ownership of all 1,800ish locations makes Chipotle an internally and externally
strong company. Since there are no franchises, Chipotle has strong ownership of all the
restaurants. Their management is all on the same page, their quality is benchmarked, and their
employees, along with the atmosphere, is consistent. The people in higher management have
certain skills and strategic plans for company growth that they’ve only kept developing over
time. No franchises means the standards and quality is easily maintained in each location.
Employees within Chipotle come in thousands-fold but are all in a certain mold the company has
created to give a great experience to customers. The employees are also given a decent wage that
include benefits. Chipotle has the lowest turnover rate with employees so despite the mold
Chipotle has created for their employees, their employees are happy to work there.
Online order and delivery
The world of technology has taken over our world today. Online ordering gives an
advantage to Chipotle over the competitors. Despite the fact that Qdoba and Baja Fresh offer
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online ordering as well, Moe’s Southwest Mexican Grill is trailing the pack. Chipotle was the
first to offer this service and is leading the group with adding deliveries to this service.
Impactful, cheap ads
In advertising its products, Chipotle has shunned ad agencies. They have decided to make
all their ads in-house. They are unique and simple. The ads are hardly seen as much as other fast
food chains such as McDonald’s or Carl’s Jr. but they are very effective. Chipotle decides to
show that they are investing in small farms and communities. They are using natural, organic
ingredients and they strive to prolong the life of their livestock and land. The ads they use are not
only effective but cheaper than most. Due to the choice of creating in-house, Chipotle saves
millions every year. For example in 2013, McDonald’s spent over $988 million while Chipotle
spent $9.7 million.
Weaknesses
Condensed Growth
Chipotle has many franchises throughout the country and parts of Canada and Europe,
around 1,800 locations. Although they have the most locations throughout the United States,
their competitors are able to not only grow as quick but possibly even quicker in countries
Chipotle isn’t. Baja Fresh only has 256 locations but they also serve in the Dubai and Singapore
regions. Moe’s Southwest Grill has 600 and counting locations but also locations in Turkey and
Russia. Qdoba Mexican Grill is around 650 locations but are setting up franchises throughout
Canada.
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Chipotle opened its first location outside the United States in 2008, fifteen years after
they first started as a company in 1993. Moe’s Southwest Grill started in 2000 and was able to
open locations outside the United States in 2011, only eleven years after springing up. The other
competitors are not far behind. Fifteen years from when they first started as well (1995), Qdoba
sprang up a location outside the United States in 2012. Baja Fresh set up outside locations
starting in 2010, only twenty years after opening its doors in 1990.
Similar Products as Competitors
Chipotle, Baja Fresh, Moe’s Southwest Grill, and Qdoba Mexican Grill all vow to serve
fresh, natural, and handmade products. Qdoba Mexican Grill “says no to dull and bland food by
Liberating the Flavor”. Baja Fresh “invites you to Live Well and Eat Fresh”. Moe’s Southwest
Grill serves “Honestly Awesome Food”. And Chipotle? Well Chipotle is “committed to
Cultivating a Better World and Food with Integrity”. What makes them stand out from their
competitors?
Small farms who hold the same values and stand with Chipotle in their beliefs is where
they try to buy their products. Vegetables come from local farmers who only grow in healthy soil
and strive to prolong the life of their land. The meat comes from livestock where antibiotics or
hormones aren’t added and the animals have wide outdoors and deeply bedded barns to roam or
be free. Ultimately, Chipotle looks at the bigger picture. Chipotle realizes that everything is
connected and they strive to be better every day; keeping in mind, those they work with and what
they serve.
Chipotle’s competitors see the bigger picture as well. Moe’s Southwest Grill takes pride
that they serve authentic food. Their steak is grass fed, their chicken is all-natural, their tofu is
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organic, and their ingredients are hand-crafted daily. Baja Fresh shows passion as they serve allfresh, traditional Mexican. They believe in a philosophy of “Live Well” so their ingredients are
not pre-packaged or tin-canned and they make contributions to the communities around them.
Qdoba Mexican Grill offers a fresh variety of ingredients and flavors every day at every location.
Limited Resources
Despite Chipotle’s push for “Food with Integrity”, the rest of the world is still in a
processed and unhealthy rut. Meaning the resources Chipotle wants are harder to come by and
are more expensive than what their competitors are receiving. Chipotle’s meats are ‘responsibly
raised’, their dairy is ‘pasture raised’, and their vegetables are ‘organic’. With factory farms
populating ¾ of the agricultural farms, they leave Chipotle with a fourth of small farms to choose
from that may or may not raise their livestock the way Chipotle believes they should be raised.
Also Chipotle strives to buy locally, and locally to them means within 350 miles of a certain
location. This cuts out half the farms in the United States.
One of Chipotle’s goals is to cut out GMOs completely from their products. They’ve
been making changes and strives to completing those goals but they aren’t quite there yet.
Without another stable alternative to wheat, which farmers feed livestock, they are continually
being fed GMO-filled wheat. Due to not wanting mold, yeast, or bacteria growing on certain
products, Chipotle still needs to add preservatives to any corn based items. To get where
Chipotle advertises where they want to be, they have to take the time and resources into finding
and creating new products.
Limited Menu
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With the restaurant being the Mexican grill that it is, there are only so many items
Chipotle can offer their customers. It’s competitors have this same dilemma but Chipotle needs
to distinguish their burritos or salads from the other burritos and salads. They also need to find a
way to have customers choose Chipotle Mexican food over other alternatives such as burgers or
sushi.
Opportunities
Better Variety of Food Options
While they have a very limited space to work with when it comes to the cuisine of choice,
there are still numerous options to choose from and incorporate to their menu. The newest
addition to the menu was a tofu option called sofritas, which lead to a larger clientele base in the
vegetarian and vegan choice eaters; growing in size daily. Chipotle’s CEO Steve Ells added that
“half of the people who are buying this item are regular meat eaters”. He hopes that this is the
start to a new eating trend. Chipotle’s competition offers a lot more variety when it comes to
food.
Presently, I would suggest to add dessert choices to their menus, despite Chipotle being
considered a fast casual, I feel that a dessert option would carry on very well within the
establishment. Their business model implies that everything is bought, cooked, and sold fresh.
Another suggestion for the menu would be to add some fish options such as a white fish or even
shrimp. Both of these suggestions would go great with the business model; for the speed at
which they need to be prepared and the culture that they want to continue building.
Enter International Markets
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Chipotle currently has roots planted in USA, Canada, and the UK. I believe that their
food type could merge into other cultures and markets as well. While I am suggesting that they
should start selling and franchising into international markets, I am also suggesting that they try
making other restaurants similar to Chipotle. Creating restaurants that provide options such as
Italian, Chinese, Mediterranean, Japanese, and even Southern. I believe that Chipotle has a rock
solid foundation and a sound business model that could merge into any cuisine.
Provide More Public Marketing
Chipotle takes a completely different approach when it comes to marketing because they
aren’t always introducing a new choice food to consumers monthly for a limited time. CEO
Steve Ells stated, “The majority of our marketing is done through the experience created here.”
While this is something proud to stand behind they are missing out on a lot of potential
customers who are ready to consume on the chipotle experience. They have been recently
marketing on YouTube commercials under the label, “Process, not processed.” It showcases the
process of how they make items within their menu such as salsas and guacamole. I would
strongly suggest that they continue to do more of this. For example, I never knew about Chipotle
until they adopted this style of marketing.
Invest in Other Food Establishments
I believe that through Chipotle’s style of marketing, passion for ingredients, and
dedication to the food; they could create a new generation of food establishments. Chipotle has
set world records in sales, stock markets, and ingredients, I don’t see why they couldn’t adopt an
established fast food chain and change it for the better. This would not only be a good investment
for the company, but also one for the future of food.
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Threats
Competition
Part of Chipotle's success has been its very specialized service model. Chipotle sits
between the model set by fast food establishments and traditional sit down restaurants. This
unique position offers several key advantages but also brings many key disadvantages. One of
these disadvantages is that it has to compete with fast food and traditional restaurants. You don’t
often find yourself choosing between a McDonald's or Applebee’s for a meal but you could
potentially be choosing between McDonald's and Chipotle or Applebee’s and Chipotle. While
this allows your potential customer base to be larger at any given time, it also means you have to
find ways to compete with many more businesses than you would if you were more specialized.
This also means that you have to find ways to distinguish yourself from competitors that might
have advantages over you, sometimes, advantages you will never be able to compete with.
McDonald's will always be cheaper and faster than you and traditional restaurants will always be
able to cater to more specific desires such as good food.
Competition from outside Chipotle’s niche is tough but they also face very strong
competition within their market segment. The fast casual segment has become a major force in
the food industry and Chipotle faces tough competition from many national and regional
competitors. National chains such as Costa Vida or Five Guys and regional chains like Café Rio
offer very stiff competition within the segment and have very specialized brands that allow them
to compete very well against Chipotle.
Supply Chain
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Chipotle has built a large part of its reputation on its environment friendly and health
conscious focus when sourcing its supplies and ingredients. This limits the pool of suppliers
available to them and makes them extremely vulnerable to not only volatility, due to weather,
disease, and other factors within the supplier's operations but also changes within the supplier's
operations themselves. This became apparent last January when Chipotle had to remove a menu
item for many of its restaurants due to a concern about animal treatment at one of its suppliers.
Cost of ingredients is also a major concern for chipotle, due to the high standards they
request from their suppliers. Cost increases could be a major concern for Chipotle if the right set
of factors hit their suppliers and force them to raise prices. This could force Chipotle into a catch
22 situation. They could raise prices to cope with the increase of costs and hope it doesn’t drive
many customers away. They could also start sourcing their ingredients from suppliers who are
less discerning about how and what they produce.
Employee Wages
There has been a lot of talk recently about raising the minimum wage and this would
have a major impact on Chipotle's production costs. Currently most of Chipotle’s line employees
make much less than the $15-an-hour wage that some current presidential candidates and some
cities are proposing. This would have a large impact on their ability to stay competitive because
it would force them into the price range of sit-down restaurants.
Economic Instability
Chipotle could face threats from the economy whether it is weak or strong. The threats a
weak economy might bring to Chipotle include lack of discretionary income for potential
customers to spend on food. This would have a major impact on Chipotle’s bottom line. Even
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though Chipotle, along with the rest of the fast casual dining sector, weathered the recession
extremely well; it doesn’t mean they are immune to economic instability. A strong economy also
poses threats to Chipotle, during the recession a lot of customers lacked enough money to eat out
at a traditional restaurant but Chipotle’s low costs paired with good food quality made them an
extremely desirable substitute. With the economy strengthening, people might take their extra
money, that they would have spent at Chipotle during the recession, and go to a traditional sitdown restaurant.
Strategic Analysis
Chipotle has a majority of strengths and a few opportunities they can seize to make into
strengths. If they strengthen their strengths, the threats can be eliminated. They also have threats
that could become weaknesses or weaknesses that could become threats.
There is not only the threat of competition but a weakness of similar products and a
limited menu that Chipotle needs to take the opportunity of adding a different variety or entering
a different market to use that as a strength. The potential loss of profitability in threats will
hopefully be counter-acted by the fact that Chipotle has a positive image in its brand and with its
customers, also that it is well-recognized so the profits will still be there for the company even
after any raisings.
Having “Food with Integrity” is both a strength and a weakness because Chipotle’s
customers enjoy their products and they have a little edge over the competition but the market in
which they receive those products are expensive and limited.
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The strengths of having cheap yet effective advertising could pair up with the opportunity
of providing more marketing for the company. They know that what they have works and they
have the money to do more from the millions they save every year. The fact that Chipotle is a
well-recognized brand if they took the opportunity of entering international markets or investing
in other food establishments, they would probably succeed and thrive in those branches as well.
Recommendations
The path Chipotle should take is the riskier one. They should invest in adding desserts or
new main entrees such as enchiladas or quesadillas. They should try international markets such
as setting up more locations and providing products originated from the area. They should invest
or open different establishments. Chipotle has the money due to popularity and steady/increasing
growth in sales and stocks. Expanding Chipotle in the markets and, hypothetically, what they are
will not only will give them an edge over the competitors but help them to continue its growth.