Devils Advocate: Chipotle Essay

Chipotle has come a long way since the 1993 inception of its 1-unit feat in Denver now spanning into a 1,458-unit operation serving more than(prenominal) than 900,000 customers per day in over 43 states. Gamble However, they seaportt been the only devalued-casual restaurants to be conquestful. In 2012, 8 of the 10 quick growing restaurant chains were classified as fast-casual restaurantsMoes souwest Grill, Qdoba Mexican Grill, and Chipotle all among these leaders. A strength that is unique to Chipotle is their commitment to regimen with Integrity. The transition to using organically grown local assert and naturally raised meats has proven profitable in todays health craze, which has consumers smelling for healthier, MSG-free products. This benefit helps distinguish themselves from their competition. Chipotle verbalisms competition from every armorial bearing when it comes to quick serve restaurants. Two restaurants in particular, Five Guys Burgers and Fries and open up Johns, be opening cutting locations faster than Chipotle. Shaw A curse of refreshful entry comes into play with Noodles and Company, who hasten become an immediate check by adding pasta to the array of fast casual options, taking the burgers and sandwiches industries by surprise.While none of these companies have quite lived up to the potential that Chipotle has created for themselves, they ar quickly carving out chunks of mart sh are something that Chipotle should keep a close eye on. Chipotles recently introduced catering program is withal an exciting growth opportunity. Paneras current catering service is estimated to baffle up to 8% of their sales. Although in its first quarter it comprised of less(prenominal) than 1% of total sales for Chipotle, management is expecting to generate as much, if non more, profit as the competition as customer awareness continues to increase. wetback Bell, one of Chipotles closest competitors, has introduced a Cantina Bell menu that cons ists of upgraded products wish new-made ingredients that is set just below the price of quasi(prenominal) Chipotle products.This, combined with their portal of the Doritos-based product Doritos Locos Tacos, has allowed Taco Bell to regain ground previously lost, proving they are once again asignificant threat of substitution to Chipotle. Unfortunately, Chipotle is heavily dependent on local farmers for the organic supplies required for their product. Because the supplier function is so high, some Chipotle restaurants in a few markets reverted to the use of conventionally raised beef in early 2012. Due to these rising market prices, Chipotles costs for food, beverages, and packing rose from 30.6% of revenues in 2010 to 32.6% in 2012.Gamble Chipotles Return on Equity is well above the average of 12-15%, sitting at 20.6% in 2011 and 22.3% in 2012. on that point has also been an increase of .08% betwixt the two years, which proves stockholders investments are continuing to grow. Their Return on Assets measures the return on total monetary investment in the enterprise, with a higher amount and upward trend signifying growth. In 2011 it was 42.9% and grew to 50.9% in 2012, showing a .19% increase. The operate profit margin (or ROS) shows the percentage of revenues available to cover operating expenses and provide a profit. Just like the ROA, higher is better and trend should be upward. In 2011 Chipotle sat at 15.4%, and grew to 16.7% in 2012. When looking at liquid ratios, the current ratio shows the firms ability to dedicate current liabilities using assets that can be converted to cash in the near term. Ratios should definitely be higher than 1.0. Chipotle has do grand in this aspect, reaching 3.183 in 2011. Unfortunately they fell to 2.925 in 2012, which is still well above the average, but is a decrease from 2011. A higher working capital is beneficial so that the company has more internal funds available. In 2011, Chipotle had $343,739, which inc reased .05% to $359, 749 in 2012. These ratios are an classic financial aspect to look at because it determines the ability to invest in market expansion activities, research and development activities, and improvements on features and performance of Chipotles products.One key strategic issue that Chipotle faces is their lack of presence internationally. There are a significant amount of expansion opportunities for them to consider. With just 14 locations in the four countries they currently reside in, there is plenty of agency to introduce their product worldwide. Yum Brands, which includes one of Chipotles closest competitors (Taco Bell), have 39,000 locations locate outside the United States. Shaw Needless to say, opening a handful of analyze locations internationally could provide a plethora of new locations for Chipotle to introduce their product. other surprising key strategic issuethat they face is global clime change. They identified global weather patterns as business endangerments in its yearbook filing last month. If prices of their raw ingredients increase, there is talk that they might temporarily suspend some menu items such as guacamole and some of their salsas. Although Chris Arnold, vox for Chipotle, stated the information was nothing more than a routine risk factor disclosure Vasel, it is nonetheless something Chipotle impart have to come up with a creative solution for. Lastly, Chipotles recent partnership with Slow provender regular army in support of school gardens across the U.S. could prove extremely beneficial to Chipotle in the future.Not only does this further promote Chipotles dedication to sustainability, there is also a marketing angle to the partnership. The more the children know about where food comes from and how its prepared, the more health intended they become. With this knowledge in mind, where do you cipher they will go for fast food? Chipotle. This is an all around great marketing move on behalf of Chipotle . In conclusion, it would seem beneficial for Chipotle to take a closer look at introducing current, as well as unique and innovative products to new markets. There are plenty of expansion opportunities worldwide for them to build upon the 14 they currently have in business. This would also be an opportunity to receive market share away from Taco Bell and other rivals who have already expanded internationally.It would also be beneficial to create new product lines to compensate for the global climate change challenges they may face in the near future. By creating new foods and dishes to serve different markets, they will be able to acquire suppliers in the local area, and possibly institute some of these innovative ideas back stateside. Their partnership with Slow forage USA could also open doors for them to do similar partnerships internationally creating a great way for younger generations to grow accustomed to Chipotles practices.QuestionsSources say they have had success on c ollege campuses in the pastdo you think Winona would provide an appropriate demographic/geographic presence for success? Havent expanded internationally quite yet, if they did where do you think they would have the most success? Sources also say that their guacamole and some salsas are at risk to global climate change and might be dropped from the menu, how would you recommend combating this? Consideringtheir partnership with Slow Food USA, do you think applying similar practices will help introduce their product internationally?CitationsChipotle and Slow Food USA Launch New Partnership Supporting School Gardens. MarketWatch. N.p., 8 Oct. 2014. Web. 08 Oct. 2014. Gamble, John, and Arthur A. Thompson. Essentials of Strategic Management The Quest for Competitive Advantage. Boston McGraw-Hill Irwin, 2009. Print. Shaw, Brian. 4 ship canal for Chipotle to Continue Its Strong Growth. (CMG). N.p., 12 Jan. 2012. Web. 04 Oct. 2014. Vasel, Kathryn B. Chipotle Guacamole at Risk From Global c lime Change. Fox Business. N.p., 5 Mar. 2014. Web. 03 Oct. 2014.