Case #5 - Chipotle
The Challenges of Integrity
Thomas J Roe III
Chipotle Mexican Grill is a Denver, Colorado based company that opened its first restaurant in 1993. It was an immediate success. As of September 30, 2013 the total number of restaurants is at 1, 539.
Its founder, Steve Ells, prided himself on having a simple menu of the very best ingredients. In examining their supply chain one can see that they have carefully chosen their suppliers. The beef, chicken and pork are responsibly raised in that they have never been given antibiotics or hormones and are fed a vegetarian diet. Ingredients that are grown come from local farmers that adhere to high quality standards.
One of the key issues facing the Chipotle Company is that it does not franchise its restaurants; they are all company-owned. This policy, in conjunction with its rapid growth, has left the firm with difficulties in raising money to finance new operations.
In August of this year Chipotle began considering the use of conventionally raised beef to keep up with the increasing burrito demand. In 2013, approximately 80 to 85% of the beef Chipotle sold at their more than 1500 locations was naturally raised. Compare this to almost 100% in 2012, and you can see their “food with integrity” pledge will be under scrutiny and possible attack.
Competition from the fast-food and fast-casual restaurant industry is persistent and aggressive. Established in 1998, Panera Bread is Chipotle's main challenger, with restaurants in 40 states, DC, and Canada. Another competitor is Qdoba Mexican Grill. They prepare traditional Mexican food similar to the method used by Chipotle, with approximately half the stores Chipotle operates; they are a strong challenger in the fast-casual food category. An additional player in the field is Pei Wei. As of 2010, Pei Wei locations number 168 in 22 states.
Chipotle has begun to consider using...