Module 1: introduction and getting to know the business Industry: Specialty eateries company: chipotle

1. Module 1: introduction and getting to know the businessIndustry: Specialty eateriescompany: chipotle Matt Ramirez Section 2

2. Industry Discussion: Specialty eateries

3. Specialty eateries • Focus on specialty items and serving a broad customer base • Have the option for customers to dine-in or take “on the go” • Usually focus on quality while maintaining efficiency and reasonable prices • Can be seen as “in the middle” between fast food and regular sit-down restaurants

4. Specialty eateries • Sales increased 13.1% in 2012 • High growth rate • Do not rely as much on traditional advertising as fast food companies do • Many specialty eateries are known as “fast-casual”: Chipotle, Einstein/Noah, Panera, etc.

5. Industry competition • Influenced by demographics, consumer taste, consumer base, and income level • Top 50 companies gain about 45% of the revenues • Competition among fast-casual/specialty eateries in addition to competition between specialty eateries and fast food • Success and growth will create new competition: diversification is key

6. Buyer power • Can look for substitutes and lowest costs • Declining coffee prices (i.e. Starbucks or Einsteins) • Future low cost of corn (affects meat prices)

7. Supplier power • Focus on quality diminishes supplier number and increases supplier power • Certain products are a necessity for buyers (i.e. meats, grain, coffee, etc.)

8. substitutes • Fast food restaurants: cheaper and quicker • Casual dining and sit-down restaurants: presumed higher quality and better experience • Other fast-casual or specialty eateries: better prices, type of food, quality • Depends on economic factors, GDP, disposable personal income, CPI, etc.

9. Threat of entry • Low barriers to entry, but high fixed costs and high competition • Franchising can help expansion of new competition • Bigger and more established franchises hold advantage • Newer, smaller companies can succeed through diversification, customer service, and high quality food

10. Company Discussion: chipotle

11. Chipotle background • Mexican grill that focuses on serving quality food while maintaining speed and efficiency • Found in 1993 by Steve Ells in Denver, Colorado • Considered a “fast-casual” restaurant: food that is served fast without the “fast food” methods or ambiance, allows customers to eat “on the go” or in a nicer restaurant environment • Not franchised, centrally-owned

12. Porter’s value chain model: inbound logistics • Establish and maintain relationships with top suppliers of ingredients in order to maintain quality (i.e. “responsibly raised” meat and other organic ingredients) • Quality assurance department monitors food safety and quality from suppliers • Formula, fixed, and forward pricing protocol for raw materials to establish quality control • Distribution centers purchase materials from suppliers who purchase from other approved suppliers

13. Porter’s value-chain model: operations • Training and risk management department implements standards for food preparation, safety, and restaurant cleanliness • Classic cooking methods (i.e. a restaurant and not fast-food) • Food is constantly prepared throughout the day (not at the beginning of the day) in order to maintain freshness and fulfill constant demand • Point of Sales System: records sales transactions, monitors employee hours, etc.

14. Porter’s value-chain model: outbound logistics • Heavy focus on hiring quality employees to deliver the finished goods/food to customers in a timely manner • Focus on the floor plan and serving line in order to increase efficiency and reduce waiting time • Orders are accepted through the internet or smart phone apps to let customers order food in advance and pick up later • “Front Line” focus- open kitchen design, customer interaction

15. Porter’s value-chain model: marketing & sales • “Food with Integrity”: high quality ingredients • Maintain reasonable prices to attract customers ($7-$9) • Methods: print, outdoor, online and social media, “Cultivate” festivals • Focus on differentiating Chipotle with “fast food” restaurants and align with like-minded organizations • Based more on experience, not necessarily advertising

16. Porter’s value-chain model: servicing • Maintain quality food and quality standards to keep customers coming back • The “Farm Team”: customer loyalty program focused on educating and rewarding customers for expanding this knowledge

17. Porter’s value-chain model: support activities • Human Resource Management: emphasize identifying, hiring, and developing top employees for restaurants and/or management positions (i.e. Restaurateurs), cross-training for increased efficiency • Product/Technology development: point-of-sales system to monitor and improve, focus on smaller menu with minor improvements • Procurement: strong vendor/supplier relationships for high quality and reasonable pricing • Infrastructure: management hierarchy and mentorship programs, contains all necessary entities for continuous operation

18. Swot analysis • Strengths: focus on quality and speed, not franchised, limited menu, strong supplier relationships • Weaknesses: focus on quality (more difficult to manage) • Opportunities: Take advantage of growing consumer consciousness, expanding “fast casual” restaurant market, continued expansion and growth • Threats: Rapid growth, food supply and costs subject to change, difficulty maintaining quality standard, competition from other fast-casual or fast food restaurants, ability to differentiate from fast food market

19. Sources • Chipotle (CMG) 2012 Y.E. 10-K • Standard & Poor’s Restaurant Industry Report • http://www.hoovers.com/industry-facts.specialty-eateries.1445.html#megamenu_0.html