Chipotle is a fast food company established in 1993. The company has recorded a significant improvement over the last five years as a result of the accruing customer base in the United States. Fast casual chain of restaurants Chipotle specializes in fast food product such as burritos, salads, and tacos. The company makes use of a variety of ingredients purchased from carefully selected suppliers. Low-price fast food products integrated with great cooking methods used in high-end restaurants have been a critical tool for the success of Chipotle. This paper conducts a comprehensive situation analysis of the Chipotle case. It will consider the various day to day activities that revolve around the restaurant. Most importantly, the paper will look into the financial performance of Chipotle for the last five years. In addition to this, a concise analysis of the environmental, political, economic, technological, social, as well as legal factors will also be conducted. According to this study, it is evident that if any fast food company has to sustain immense profits amid high competition in fast food industry, it should be in a position to produce quality products, meet the consumers’ needs as well as consider the financial aspects of the consumers.
Section A: Company Analysis
Chipotle is a mix of big and small business operators that account for 52% and 48% respectively. Big business operators comprise between ten to 99 employees who participate in cooking and offering services to their customers. Respectively, less than nine people are employed in small stores considering the fact that few activities take place in these locations. Those who qualify for employment are young low-skilled employees who work for few hours in a day. Their payment is based on hours ($7.25 per hour). However, the company’s goal was to employ 42045 people as of the year 2014. Considering that only one store was established when it was founded in 1993, Chipotle has significantly grown over the years. Its development is evident from the vast number of stores recorded in 2014; being over 1500 stores (Brand, 2006).
The financial performance of Chipotle is determined by several factors that are pivotal to its overall success. According to recent statistics, the overall revenue that the company was able to realize in the last five years was $35.7 billion. It is an annual growth rate of 2.8% received from 28, 997 businesses. There was an expectation that the revenue would increase to about 19.4% in 2014. It would interpret to $ 3.7 billion increase in gross revenue. As of 2014, the company was able to realize a profit of $614.3 million (Fedenia & Hirschey, 2009). However, the profit will be determined by the reduced wages over the years. The wages, which are expected to increase to 2.6% ($ 11.1) over the years, stand at a slower rate than the revenue realized. It is, therefore, very clear that the industry is optimistic about even better financial performance in the coming years (Brennan, 2014b).
It should be also noted that financial performance is dependent on the geographical location of a chain restaurant and age of the population. Restaurants found in highly populated regions contribute to immense profits of the company. On the same, age bracket has come out to determine the amount of profit realized by the restaurants. It was found that individuals between 18 to 25 years spent 46.4% on their food budget dining; it amounted to $ 2, 351 per year. Those between 25 to 30 years consumed 44.8% of their budget on food dining (Samadi, 2010). This way, they were found to have spent $2,668 per year on the same. Individuals on the age bracket 35-50 spent $3,165 (42.3%) per year while those that were over 50 years spent 42.1 % ($ 2,991) of their budget on food dining per year (Samadi, 2010). With this information in mind, it is much easier for the company to know who are their loyal customers and, therefore, plan according to their needs.
Market Share and Orientation
Chipotle has not invested greatly on oversee markets. The company has concentrated on serving the local consumers located in various regions in the United States; New York, Washington DC, and Miami (Fedenia & Hirschey, 2009). However though, the company has been in a constant pursuit to gather market oversee while trying to compete with other already established companies such as Yum! Dunkin Donuts, and Mc Donald’s among others. It is for this reason that Chipotle has established restaurants in New England, Great Lakes, Mid Atlantic, South East, and South West (Brand, 2006). Motivated by the fact that most of the food products from Chipotle are based on the Mexican food supplements, this company aims at serving the growing population of Mexican families in the United States. Mexican population has been at a sharp increase; from 5% in the 1970s to 13% in 2014 reflecting 16% of the total US population (Brand, 2006). Thus, in the recent past, such food supplements have gained a substantial ground in various restaurants in the region leading to an increased demand of the same.
Major companies that regard to Chipotle include Chipotle Mexican Grill (10.3 %) and Taco Bell Corp (23.0%). Others comprise of 66.7% but find their root from Chipotle (Brand, 2006). These companies provide their clients with fast food items discussed earlier in this paper.
Section B: Environmental Analysis
The government determines the speed within which the distribution of stores takes place in the region. On several occasions, political factors have undermined the company’s ability to establish restaurants in some regions (Samadi, 2010). It is for the factors like; such regions do not provide sufficient safety for the wellbeing of customers. In line with that, poor infrastructures are also to be blamed. No matter how determined the company was to come up with stores in some regions, it has proved to be very difficult simply because the roads are in poor conditions making them very unfriendly for the transportation of products.
On the same, some of these areas have not been in a position to be installed with electricity. It will be close to impossible to establish such restaurants in areas without electricity since most of the food products require that they be kept in refrigerators. As already evident, the company has invested very little overseas. In this case, the government is to be blamed since it would have made it possible for companies to invest abroad by providing subsidies. That way, it is up to the government to reduce taxes and charges for business owners who want to carry out business in foreign countries (Brand, 2006).
According the case study, it has come to surface that the company will realize more profits if consumers are confident and optimistic about the economic growth. During the recession, the company has recorded marginal profits. It is for the same reason that Chipotle has struggled to keep the food prices as low as possible; consumers will flock in large numbers in the stores if the price of the products meets their level of income (Fedenia & Hirschey, 2009). Though the government is trying as much as possible to control and monitor the agricultural index so as agricultural products are not sold at a high price, the company has seen to perform very poorly when the price of milk, corns and avocado is high. In some cases, the restaurant has been forced to remove certain food items from the menu since they cannot afford to sell them to their consumers as a result of increased prices from the farms (Brand, 2006).
The level of unemployment is plummeting every day in the United States. Moreover, it is expected to reduce even more in the coming future. If these rates are perpetual, the company is up to a great success in the future. Individuals tend to consume more of the products when they have a constant source of income. That said, the economy of the country plays a pivotal role in the overall success of the businesses in that country (Fedenia & Hirschey, 2009). Well-established as well as growing economies will lead to growing companies.
Chipotle performance is in the hands of individuals who surround it. A good reputation is worth consideration. However, it will only be ensured if the company produces quality food products that serve the needs of its consumers. That way, the company will hold a good image to its existing and potential consumers. The manner in which employees are treated in the company is also another essential factor that ought to be considered. Employees are the flag bearers of the company; they are likely to spread good news about the company if they are treated in the most appropriate manner (Samadi, 2010). For instance, their rights and preferences should be respected.
Chipotle has embraced a corrective move towards technology. In fact, the company is determined to employ 996,657 people; about 20 people per restaurant who will address consumer needs online (Brand, 2006). Consumers can make orders online through the use of a wireless service made available by the company. The service has been connected to mobile devices such as smartphones and laptops. That way, one can request food product at whatever place of residence, and the product will be delivered within the shortest time possible (Samadi, 2010). Adopting such technological advancement is aimed at creating a platform through which the company can easily communicate with their consumers as well as reduce time delays exhibited in queues in the restaurants through the use of social networks such as twitter, Facebook and Instagram (Fedenia & Hirschey, 2009). The company is able to advertise its food products to potential clients through the networks.
Legal or/and Regulatory Factors
Smoking is highly banned in restaurants areas. Those who are found smoking are liable to legal actions for destabilizing the peace of non-smokers. The company is a subject to laws that relate to sale and preparation of food, especially regarding product safety and nutrition. It is a requirement that the restaurant will not prepare food items that undermine consumers’ health and safety (Brennan, 2014a). In addition to this, labor organizations expect that the company will honor the rights and safety of workers. Employees shall not be denied the right to better salaries and allowances. Lastly, franchising laws require that industries pay $500 before they are established (Fedenia & Hirschey, 2009). Also, it is a requirement that restaurants will come up with a trademark that is not similar to other companies.
Section C: Industrial Analysis
The company operates in the food industry that has been characterized by many restaurants all around the world. That is evidenced by reports released from Mexico and the United States. These restaurants have been involved in a variety of activities. Services are provided to customers inform of front-of- house services, cafeteria and buffets, full-service restaurants, waiting tables, and take outs. There are several food varieties that the restaurants have been in a position to offer to its consumers lately including fast food wholesaling, frozen food wholesaling, fish and seafood wholesaling, fruit and vegetables, beef and pork, and egg and poultry food products (Brand, 2006). The fact remains that the industry is characterized by increasing competition as restaurants try to remain at the top of the game. In the recent past, a vast population in America has gained a lot of interest in Mexican food, a favorable reason as to why Chipotle food items have consistently attracted many consumers across the region.
Financials and Growth
As already discussed earlier in the paper, Chipotle financial statements and growth are dependent on factors such as the country’s economy that determines the employment level and reducing wages (Brennan, 2014b). Despite the increased price in agricultural produce such as milk, avocado and corn, Chipotle Company overall profit has increased from 4.2% in 2009 to 5.4% in 2014. The revenue is expected to increase by $3.7 billion from $37.5 billion in the next financial year (Samadi, 2010). On the same, wages are expected to be lower than the revenue in the coming years.
Chipotle growth is marked on the increased number of restaurants from the time it was established in 1993 to 2014. The number of restaurants has grown from small business restaurants to big ones (Brennan, 2014a). On the same, a vast population has secured employment with the company as chefs, waiters, or carriers. Projects are underway to make the company a leading fast food chain in the region and abroad.
Economy growth is a major concern. The company will be assured of great success if the economy of the country continues to grow. Competition from other already established fast food companies such as Yum! Mc Donald and others poses a great threat to Chipotle. Therefore, in order to keep in touch with its clients, it is not exceptional that the company will offer good services and high quality goods to its consumers (Brennan, 2014a). Another issue of concern for the company is growing health consciousness. Individuals tend to shun the consumption of certain food items arguing that they are not safe for their health (Brennan, 2014b). This way, the company has to produce those food items that are considered safe for human consumption.
In a nutshell, Chipotle Company is assured of a great future considering that United States is doing everything in its power to ensure a significant economic growth. Now that Chipotle has invested in the production of healthy food items, its growth is also ensured since most people are becoming health-conscious about the food they consume. In the event whereby, the company will continue embracing technological advancements in the sale of products and advertising the same. High profits will be realized since many people spend most of their time online. Lastly, it is important that the company will abide to the legal requirements that guide its establishment. It will eliminate factors that might undermine its performance as well as the wellbeing of its employees.