Chipotle Business Model and SWOT Analysis – How Does Chipotle Make Money?

Overview

Since it was founded in 1993, Chipotle has grown to become a well-known name in the fast-casual restaurant industry. As a result, shareholders have noticed a significant increase in revenue after announcing.

While the majority of Chipotle’s establishments are in the US market, the company does have a few outposts in other countries, such as France, UK, Canada, and so on.

Company Profile

Company Name Chipotle Mexican Grill, Inc.
Website https://www.chipotle.com/
Founded 1993
Founder Steve Ells
Key People Brian Niccol – CEO / President, Scott Boatwright  – Chief Restaurant Officer, Jack Hartung – Chief Financial Officer, Tabassum Zalotrawala – Chief Development Officer, Chris Brandt – Chief Marketing Officer, Marissa Andrada – Chief People Officer, Curt Garner –  Chief Technology Officer, Laurie Schalow – Chief Corporate Reputation Officer, Roger Theodoredis – Chief Legal Officer
Headquarter Newport Beach, California, U.S.
Company Revenue $5.98 Billion
Key Competitors Rubio’s Coastal Grill, Taco Bell, Baja Fresh, Freebirds, Qdoba Mexican Grill,

What is Chipotle? A Brief History

Tex-Mex (a.k.a Mexican American) food is the specialty of Chipotle, where over a million people a day enjoy it.

In 1993, the invention of Chipotle Mexican Grill was created by Steve Ells, and currently, this famous restaurant’s headquarter is situated in Dever, Colorado.

Chipotle comes from the smokey and roasted jalapeo chilli pepper, the original word from the Nahuatl, the group that most commonly speaks the American language in Mexico.

The company’s creator, Steve Ells, immediately achieved burrito-targeted success, securing investors (such as McDonald’s) and opening 500 locations around the nation by 2005.

Following a 2006 separation from McDonald’s, this GMO-free restaurant decided to go public in June 2015, rising from a moderate $22 IPO price to a whopping $742.

How Does Chipotle Work and What Does it Offer?

So how exactly does Chipotle work?

One of the most critical aspects of Chipotle’s business model is the assembly method. Customers purchase and allow them to see and participate in preparing their meals.

The ingredients are gathered together in one place and spread out so that they can be assembled fast, and the servers can swiftly refine their talents.

Because customers can see what’s going on in the assembly process, they can provide more precise instructions and prevent errors and rework from slowing down production.

What does Chipotle offer to its consumers?

Source: Today

There are burrito bowls, burritos, salads, tacos on the Chipotle menu, and various other Mexican food items.

The company offers a primary menu with a variety of organic options that may be tailored to suit the customer’s preferences.

E-commerce is another way it’s incorporating new technologies. Customers have taken to the brand because of its savvy marketing strategies and different menu.

Chipotle Business Model

“Food with integrity” is the business’s marketing campaign, emphasizing the importance of acquiring ingredients from suppliers with an excellent ethical consciousness.

The company’s image is also directly linked to its ability to provide fresh and high-quality meals.

This leading fast food pioneered delicious food qualities in the global fast-food eateries by incorporating high-quality organic ingredients, traditional cooking methods, and unique interior design.

Chipotle has also made significant progress in incorporating digital technology that enables consumers to purchase virtually and get their pick-up at the store, an essential growth element as e-commerce revenues climb throughout retail generally.

Chipotle Unique Selling Propositions

Suppliers might expect higher prices from Chipotle because of the company’s purchasing power and to guarantee that the raw ingredients match the company’s high requirements.

The company has boosted localized sources (products obtained within 350 miles of the recipient shop) and continues to concentrate on “Food with Integrity.”

This means that this brand’s locations are not franchised. Therefore, to guarantee that their integrity-food value is achieved in all of the company’s stores, more substantial supervision over processes and entity culture is necessary.

Chipotle’s 13th anniversary and the inauguration of its 2000th location demonstrate the company’s capacity to guide the fast-food market, satisfying investors and customers who want a quick lunch following their business model to strengthen and uplift one another.

How Does Chipotle Make Money?

Chipotle’s revenue y-o-y growth rate is 7% in 2020, reaching $5.9 billion, up from $5.6 billion in its previous year.

The boost in revenue includes over the double increase to $64 million in revenue from the delivery service, which sales in 2019 were just $25 million. Furthermore, internet ordering climbed by 174.1 percent.

There is an impressive surge in food delivery income of $39 million in 2020, primarily increased due to the economic effect of the 2020 pandemics. But since 2019, total revenue has gained $360 million overall. So it was still an excellent performance even if we exclude this balance.

A Consolidated Income Statement of Chipotle For Year Ended 2020

Differences in income between 2020 and 2019 (in thousands)

Incomes 2020 Balances 2019 Balances % Differences
F&B income $5,920,545      $5,561,036 6.46%
Delivery service income $64,809 $25,333 155.8%  
Total Incomes $5,984,634 $5,586,369 7.1%

Chipotle’s market dominance, substantial brand value, and capacity to customize steady repeat sales are all factors that have contributed to its rapid expansion over the last several years.

Chipotle SWOT Analysis 2022

Chipotle Mexican Grill’s SWOT analysis focuses on the firm’s competitiveness, which has enabled it to become a dominant player in the fast-casual restaurant business.

Strengths

  • Using Traditional Cooking Methods to Produce Delectable Meals: In addition to tacos, burritos, salad, and burrito bowls, Chipotle is well-known for serving its patrons a basic but filling, regular menu.
  • Quality Food at Affordable Prices: Freshly-raw ingredients and “Food with Integrity” are trademarks of Chipotle. They have a menu that costs between $1.40 and $8.00. It serves high-quality meals while keeping the amount paid low for its consumers.
  • Restaurant Chains with a Wide Distribution Network: The company expects to have 2,724 restaurants open throughout the globe by 2020, with the majority of them situated in the United States and 40 others in the United Kingdom, Canada, Germany, and France.
  • Keeping in Strong Communication with Good Suppliers: The company places a significant priority on purchasing genuine-quality materials, which are essential to ensuring the restaurants’ safe operation and excellence. It is made feasible by the tight ties with their trusted suppliers.
  • User-Friendly on Digital Devices: The company is quite digitally savvy. They have even launched an app to assist consumers in bypassing longer waiting lines between lunch and evening rush hours, which can be particularly frustrating. From $5.6 billion to $5.98 billion, The company’s sales in 2020 were boosted by 7.1 percent due to the company’s successful implementation of e-commerce. As of 2020, digital sales accounted for 46.2% of the company’s overall revenue.

Weaknesses

  • Reliance on a smaller base of suppliers: Several vendors provide Chipotle with their most essential ingredients, including beef, chicken, and pork. Even though the company’s integrity is its priority once talking about quality, it has been the subject of serious scandals, just like the E.Coli epidemic in 2015.
  • Available For Only A Few Meal Options: This brand menu is restricted to burritos and tacos, so there isn’t much to choose from. Consequently, their clients switch to Panera Bread and other rivals to satisfy their needs.
  • Overdependence on the United States Market: There are 2,724 Chipotle locations in all. The majority of establishments are situated in the United States, with about 40 locations beyond the country. When a firm faces difficulty in the market, its bottom line might suffer greatly.

Opportunities

  • Global Market Development: People who live outside of the United States can get this Mexcian fast food at a few of its restaurants. There were almost 2,500 Chipotle restaurants in the United States as of December 2018. There were only 37 in the global market at the same time. As a result, the company should take advantage of this chance to extend its worldwide brand.
  • Convert Orders Digitally: The epidemic has expedited the trend of digital commerce. The company’s digital sales increased by 174%  in 2020, a record-breaking year for the company. A substantial chunk of potential still exists for the company’s online orders to be expanded.
  • Chipotlane Drive-Through Service: Drive-thru service, Chipotlane, is being expanded by this brand, which will make it more convenient for consumers and improve sales.
  • After opening its strategic alliance with Uber Eats, Doordash, and Grubhub and implementing an effective e-commerce strategy, the online selling performance of the company has increased dramatically by 174% y-o-y in 2020.
  • Promote Healthier Alternatives: The number of people concerned about their health is steadily rising. Diners who want to improve their health and well-being will be able to get their hands on “Lifestyle Bowls” from the company starting in January 2020, which include choices like keto and paleo.

Threats

  • Facing Legal Action: Reputational damage may result from Chipotle’s erroneous assertion that its food is low in calories.
  • Recruitment and Retention Issues: Employment is experiencing difficulties because of the rising demand for eating out and the general growth of the economy. As a consequence, the company went on an all-day recruiting campaign to fill open positions.
  • Issues in Supply Chain: More than a thousand Chipotle ran into problems obtaining pork because of the restrictions placed on the care and handling of animals.