Most of its meals (except the pork and beef) are prepared in the restaurant to keep food fresh. All these aspects connect with the socially-responsible consumer they are looking for.Ĭhipotle doesn’t use artificial flavors or fillers. Also, it doesn’t serve genetically modified food 6. It only selects from farmers who allow their pigs and cows to freely root and roam outdoors. The Operating Model has four main components: Source: Chipotle websiteġ) Sourcing from high quality suppliers that use human practicesĬhipotle carefully screens suppliers to select only those who use high standards of animal care and sustainable farming practices. Every decision in the supply chain and in the production process connects to the two components of the business model. The Operating Model of Chipotle perfectly connects with the value proposition of the business. THE OPERATING MODEL: “A consistent story across the value chain” The business model is efficiently delivered by a strong operating model.
This formula of fresh, tasty, and quick food delivered by a business that uses responsibly sourced ingredients is the core of the business model, which is the fascination of Millennials and health-oriented customers. This core proposition is still part of the business model of the restaurant. In fact, Chipotle initially targeted university students, who usually demand quick service and who usually hang out in a friendlier environment 5. Chipotle also offers the convenience of fast food but in a cleaner, catchy environment. This formula is behind the success of other companies such as Wholefoods.Ĭhipotle attracts health-conscious customers who want a quality dining experience. Millennials connect better with companies that have a social-oriented mission and a value proposition that goes beyond the product they buy. After some research, I came to the conclusion that the business model has the following two pillars, Source: Chipotle websiteĪccording to Euromonitor, Chipotle’s customers are young students and professionals who prefer companies that implement human practices, prepare food on-site with raw ingredients, and work with suppliers who use resources in a sustainable way 4. In its report of 2014, the CEO mentions that Chipotle target Millennials, who are increasingly more concerned about eating healthy food and supporting socially-responsible companies 3. THE BUSINESS MODEL: “I want fresh-food food… and fast!”Ĭhipotle positions itself as a fresh healthy option for young people. The operations of the business behind scenes clearly connect with that value proposition. Chipotle is a fast casual restaurant that offers “ food with integrity.” In simple words, the business appeals to customers who want healthy food with a quick service. It also outperformed the S&P 500 index 3.Īfter some research about the company, I came to the conclusion that although Chipotle doesn’t offer “real” Mexican food, it is a company that effectively connects its business and operating models to create value for its customers and stakeholders.
Chipotle easily outperformed the return of competitors such as Panera Bread (PNRA), McDonald’s (MCD), and Yum Brands (YUM) which operates KFC, Taco Bell, and Pizza Hot. If we had invested $1,000 in Chipotle in January 2009, we would have had $13,585 by November 2014. To provide a clear idea of the fantastic success of the business, we can see the performance of its stock price.
#Does chipotle deliver series#
Pathways to Just Digital Future Watch this tech inequality series featuring scholars, practitioners, & activists Source: Graph made by Market Realist 3 using Company Filings The following graph shows the growth of revenues and profitability over the past decade. In 2014, the company had revenues of $4,108.3 million and a net profit of $445.4 million (10.8% of sales) 4. Revenues of Chipotle have grown at 20% CAGR from 2006 to 2014. In 2006, Chipotle made its initial public offering (IPO), increasing its stock price exactly 100% in its first day as public company 2. McDonald’s was a major investor of Chipotle from 1998 to 2006, expanding the business from 16 to 500 restaurants over that period. Chipotle started in 1993 in Denver, Colorado, selling more than one thousand burritos in the first month 1. My frustration soon became curiosity when I knew more about the tremendous success of this business. While those meals certainly use ingredients of real Mexican food, they are not prepared in the way Mexicans eat. Yes, a “burrito” is not a Mexican meal but a Tex-Mex one. In Mexico City, my hometown, I have never eaten a burrito, a bowl with rice and guacamole, or a crispy corn taco. A friend told me that the restaurant had “real Mexican food,” which was not what I found there. The first time I visited Chipotle I was disappointed.
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