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A Consistent Fast Casual Segment Leader
by Beverly Dykes
Denver, CO based Chipotle Mexican Grill Inc. has consistently ranked among the restaurant industries’ best performing companies. When it was founded in 1993, the goal was to provide tacqueria-inspired, affordably priced menu items, of a quality on par with fine dining, but delivered up fast, by friendly servers. The concept created a new category in the minds of consumers that did not fit the fast-food mold. The restaurants use of high quality ingredients, professional culinary techniques in the foods preparation, and distinctive interior ambience set the tone for what would evolve into the popularized category now recognized as “fast casual.”
Steve Ells, company Chairman and co-CEO, is the professionally educated and trained chef behind the Chipotle concept. His initial plan was that food served fast did not have to be a typical fast food experience. He opened the first Chipotle in 1993 at the site of a former Dolly Madison ice cream shop location. Second and third restaurants were opened in 1995, with five more to follow, targeting the Denver region in 1996. The first units to be located outside Colorado had their debut in 1999 in MN and OH. Another pivotal event occurred in 1999, when Steve Ells became informed about how most pork is raised in the U.S. -- the details of which led him to propose doing it a different way. In 2000 the company began a campaign to serve primarily naturally raised pork (a goal fully achieved in 2010, when 100% of Chipotle’s pork became officially procured from naturally farmed sources). In 2002, the chain began serving naturally raised chicken as well, influencing farms to meet the new higher standards the chain has implemented since. Also ahead of the rest of the industry, the company began using zero trans fat frying oil in 2004. In 2006 Chipotle became publicly traded (NYSE:CMG). As of 2007, over 60% of the company’s beef was naturally raised (now it is 100%). The restaurants also halted the use of cheese and sour cream containing rBGH as of 2007. The majority of Chipotle’s black beans are also certified organic. With the founder’s innovative food initiatives gaining increased publicity, Steve Ells would testify before Congress in 2009 to encourage eliminating the use of antibiotics in ranching.
In July of 2012, Chipotle Mexican Grill announced that it is on target to serve more than 10 million pounds of locally grown produce for the second year in a row. Believing that utilizing fresher and better tasting food components is key to changing the way people think about and consume fast food, the chain has been increasing its locally sourced produce supply since 2008, with a commitment to serving vegetables grown on farms within 350 miles of the restaurants where they are served. As the only national restaurant company committed to using locally grown ingredients, Chipotle has emerged as an industry leader in supporting local farms and more sustainable agriculture. Stated founder Steve Ells, “Finding local suppliers to meet our needs is challenging, but very much worth the effort. We think it’s important to serve great tasting food, made with ingredients from more sustainable sources in a way that is accessible to everyone, and locally grown produce is a big part of that.”
The company has sourced family-owned farms that provide bell peppers, red onions, jalapenos, cilantro, oregano, romaine lettuce, and (in FL and CA) tomatoes, lemons and avocados; ingredients which are utilized by the chain in its salsas, salads, fajitas and other offerings. In addition to striving to serve primarily organically grown beans, the company is also working with Food Alliance certified growers to source beans that use conservation tillage methods, which reduce soil erosion. The company also sources 100 percent of its meat from animals that are naturally raised (and free of antibiotics or added hormones), and increasing quantities of milk from pasture-raised dairy cattle (free of synthetic hormones) for its cheese and sour cream. In recent years Chipotle has continued its efforts to source more local and sustainable ingredients, such as the sunflower oil used for its chips and taco shells.
Besides its adherence to a philosophy of “Food With Integrity,” Chipotle’s offerings appeal to consumers seeking fulfilling dining options that taste great, have high nutritional value, and accommodate their food budget. Throughout its history, the chain has offered a focused menu of burritos, tacos, burrito bowls, chips and guac, and salads, while striving to have its restaurant environment perceived as fundamentally different from the industry’s fast food purveyors (with particular attention paid to evoking enticing sights, sounds and smells). The kitchen is open to the entire restaurant, and each ingredient laid out in front of customers, who can customize the combinations to suit their tastes. The chosen menu items are prepared according to their specifications and handed off to them without delay. For larger quantity needs, the restaurants can prepare Burritos by the Box, with select locations also featuring catering capabilities (mostly limited to Colorado).
One of the points of distinction that sets Chipotle apart from the competition is the culinary techniques used in preparing the food -- ie., the chicken is marinated overnight in a smoky, spicy chipotle pepper sauce, then grilled to impart a carmelized flavor; the steak is likewise marinated for hours in a similar adobo; the spicy shredded beef is slowly braised in a blend of spices until tender and moist; the pork used in the carnitas is seasoned and braised until tender; vegetables for fajitas are fresh sliced and sautéed in a touch of soybean oil with fresh chopped oregano until slightly crisp; the beans are seasoned with bacon and proprietary spices and slow cooked to achieve a smoky aroma and ideal tenderness; the cheese is freshly grated from blocks daily to ensure a moist, creamy texture; the guacamole features hand mashed avocados and is prepared in small batches.
Since having gone public in 2006, Chipotle Mexican Grill has been leading the growth of the fast-casual dining segment throughout the nation. The company’s second quarter financial results, released in July of 2012, disclosed revenue of $690.9 million, an increase of 20.9% over second quarter of 2011; comparable restaurant sales increased 8%; and net income was $81.7 million, an increase of 61.2% over second quarter of 2011. During the quarter, the chain added 55 new units, including the first restaurant in Paris, France, bringing the company‘s total restaurant count to 1,316. Remarked co-CEO Monty Moran, “While I’m pleased with the financial results in the quarter, I’m even more delighted that we are developing more restaurateurs than ever before, and our restaurant teams are the strongest they have ever been.”
The existing Chipotle location roster currently comprises over 1,300 locations around the world. Continually looking to expand its presence, management has anticipated opening 155-165 new restaurants in 2012, with another 150 to be added in 2013. Among the retailer’s location requirements would be urban and suburban locales characterized by strong residential and daytime populations. Excellent visibility and access, with proximity to residential, office, retail, university, recreation and hospital environments would be advantageous. Preference is for urban storefronts, shopping center end caps, pads and freestanding buildings. Size can range from 1,000 to 2,500 sq. ft. depending on the trade area characteristics. A minimum frontage of 25 feet is desired, as is patio seating. Zoning must allow for restaurant use with liquor license.
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