Why is Chipotle so successful and popular? (CMG, MCD)

chili (CMG) is a Mexican barbecue restaurant with limited menus and a high degree of customization. The restaurant first opened in 1993 and currently has more than 1,700 stores in the United States and abroad. McDonald’s (MCD) owned a controlling stake in the restaurant in the early 2000s, but divested after Chipotle’s initial public offering in 2006.Since the IPO, Chipotle’s stock has risen from $42 to over $650 and is still considered Long-term investment opportunities.

“Honesty Food”

Chipotle’s motto “Honesty Food” is inspired by founder Steve Ells’ knowledge of American food production. Ells began to focus on providing ethically and naturally produced food, which Chipotle claims has resulted in meat that is more delicious than other restaurants. In 2013, Chipotle established a Non-GMO The policy of its ingredients.

The consumer agreed.Although rising food costs caused Chipotle to increase prices in 2014, same-store sales increased 16.8%, The store profit margin rose to 27.2%, and net income increased by 36%. Chipotle opened 192 new stores in 2014 and hopes to open another 200 in 2015.

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why? As books and documentaries exposing the negative aspects of the fast food industry became popular, Chipotle’s sales and profits increased.Consumers who want healthy food will not be at McDonald’s and Wendy’s (WEN), but looking for naturally grown or organically produced food. (For more information, see: Satisfy your appetite for Chipotle stock with options.)

Small menu, big choice

One of the keys to Chipotle’s success is its small menu. The smaller menu has three benefits. First of all, because Chipotle only stores fresh ingredients, the food is always likely to deteriorate. The small menu reduces the amount of ingredients needed on hand, thereby reducing the possibility of waste.

Secondly, the small menu means quick service. In other fast food restaurants, the kitchen may be overwhelmed by orders and errors may occur. In Chipotle, mistakes are almost impossible: order a soft taco, choose the filling and pay. If an employee forgets to add beans, consumers will notice and can point out the omission. It is simple and fast, and consumers love it.

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Finally, the small menu also means that customers know exactly what to sell every time they visit a restaurant. Chipotle does not need to develop new products or produce flashy advertisements to let consumers know about its products, and consumers will not be disappointed by the disappearance of products after a trial or promotion period.

You might think that small menus are not good: Why do consumers want their choices to be limited? Chipotle has thought of this, and its policy is to make anything consumers want as long as there is material. This policy led to the creation of Quesarito, Chipotle Nachos and more secret menu items.

Enterprise Owned

Since Chipotle has no franchise rights, the company is able to maintain strict control over all aspects of its operations. Although Chipotle can grow faster through franchising, it may lose control of suppliers, tastes and culture.

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It’s no secret that franchisees sometimes cheat by buying raw materials from cheaper suppliers or trying to cut employment costs. This makes it difficult to hire good workers. By owning all Chipotle stores, the company can ensure that the design, taste, and price of different locations are exactly the same, which is more consistent than restaurants operated by franchisees.

Bottom line

Steve Els admitted that he did everything wrong when opening Chipotle: his design was minimal, his food was too expensive, and his portion was too big. Twenty years later, the company’s market value was 20.33 billion U.S. dollars, and its 2014 revenue was 4.11 billion U.S. dollars. Through the “mistakes” of the fast food industry and the “mistakes” of the sit-in restaurant, Chipotle has become a hybrid restaurant offering fast and delicious food at a discounted price.

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