
Chipotle has grown drastically over the past 12 years growing from several stores to 1,900. It has managed to sustain this rapid growth by differentiating itself from other fast food chains. These differentiation factors include Chipotle’s effective operations management and value proposition to customers.
With its core value of, “Food With Integrity” it utilizes locally growth organic vegetables and responsibly raised meats. This differentiation factor alongside consumer trends of willing to pay more for healthier foods, Chipotle is able to charge a premium with average bills being ten dollars an order (Gagliardi, 2015).
Further with Chipotle’s effective operations management of focusing on standardization rather than customization and focusing on corporate expansion verses franchise expansion, it has allowed them to retain high profitability than competitors.
Standardization Vs Customization:
Chipotle offers a limited menu of food items and also utilizes a highly efficient assembly line. This standardization of limited items for Chipotle allows them to lower food waste and reduce food inventory resulting in costs savings (Li, 2015). Further, the assembly line allows workers to specialize in one step of the food preparation process providing them a comparative advantage in food preparation. This in addition to Chipotle retaining only the most efficient workers has resulted an increase of inventory turnover allowing them to serve over 300 customers per hour and attaining $2.5 million dollars in revenue per store (Li, 2015).
Corporate Vs Franchise:
Every individual Chipotle is company owned, in contrast to many fast food companies that utilize the franchise model. This decision has led to slower company growth but has resulted in higher cash flows by allowing Chipotle to retain the entire retail level profitability rather than just collect franchise fees.
Given Chipotle’s key strengths of utilizing its, “Food With Integrity” value proposition and focusing on a corporate model compared to a franchise model, it has managed to increase its top line and bottom line profitability compared to its competitors. This increase in profitability compared to competitors is further magnified by cost savings resulting from a standardized operation model. These factors have indicated that greater profit margins can be achieved in the fast food industry and led me to believe that this type of corporate model will be a new era in the fast food industry.
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References for Articles and Images Used:
Gagliardi, Nancy. “Consumers Want Healthy Foods–And Will Pay More For Them.” Forbes. Forbes Magazine, 18 Feb. 2015. Web. 02 Oct. 2016.http://www.forbes.com/sites/nancygagliardi/2015/02/18/consumers-want-healthy-foods-and-will-pay-more-for-them/#105032cb144f.
Li, Sam. “Chipotle: It’s Not the Burrito – It’s the Operating Model.” Technology and Operations Management. Open Knowledge, 9 Dec. 2015. Web. 02 Oct. 2016.https://rctom.hbs.org/submission/chipotle-its-not-the-burrito-its-the-operating-model/.
Roemmele, Brian. “What Are the Keys to Chipotle’s Success?” Quora. N.p., 20 Aug. 2011. Web. 02 Oct. 2016. https://www.quora.com/What-are-the-keys-to-Chipotles-success.
Zheng, Micheal. “Chipotle Nation.” Technology and Operations Management. Open Knowledge, 18 Nov. 2015. Web. 02 Oct. 2016. https://rctom.hbs.org/submission/chipotle-nation/.
https://www.google.ca/search?q=chipotle+image&espv=2&biw=1018&bih=773&source=lnms&tbm=isch&sa=X&ved=0ahUKEwjHr7yW573PAhUN4GMKHclxB2UQ_AUIBigB#tbm=isch&q=chipotle+image+many+pixels&imgrc=cDA3j7mNPhTBJM%3A.