Chipotle: Creating Value

Industry Profile: Mexican Restaurants US

Summary/Industry: 

Recent history has shown that Americans love Mexican food, otherwise known as Tex-Mex foods. According to USA Today, Tex-Mex gained popularity in the 1940’s and gained widespread popularity in the 1970’s. By looking at the known, corporate Tex-Mex chains, one can see evidence of this recent trend. Taco Bell, ranked sixth amongst Tex-Mex chain restaurants according to USA Today, boasts widespread popularity yet it was not established until March 21, 1962. The industry is often referred to as the “Tex-Mex food” industry because it gained popularity in the southwest region of the United States, particularly in towns that harboured an unusually high concentration of Mexican-Americans. Texas, of course, is an example of this southwestern demographic. The ingredients of Tex-Mex typically consist of tortillas, rice, beef, beans, chicken, pork, sauce, and cheese. 

Competition:

As opposed to fifty years ago, the market of Mexican restaurants in the United States is now highly competitive. Almost all of the top competitors are within thirty years old, thus indicating a recent boom in the industry. In fact, of the top five Tex-Mex chains in the country according to USA Today, the oldest is ‘On the Border,’ which was established in Dallas, 1982, being just thirty eight years of age. On the Border is ranked fifth on the list as opposed to Chipotle, being on the very top. To garner some perspective, one may note that there are roughly 150 On the Border locations as opposed to the 2,622 that Chipotle currently holds. This speaks to the large gap between the top competitor and the rest of the field. However, it may be worth mentioning that these two restaurants operate much differently. On the Border is known as a place one goes to sit down and order a meal, whereas Chipotle is often seen as a ‘fast food’ type place one can go to order, pick up, and leave all within a matter of minutes. Outside of the industry, McDonald’s can be seen as a competitor of Chipotle, being a massive fast food corporation. In fact, McDonald’s became a major shareholder of Chipotle in 1998, but decided to liquidate these shares in 2006. During this period, Chipotle expanded roughly 500 locations, but of course this does not compare to the 2,622 Chipotle holds today. 

Financial:

The financial situation of the Tex-Mex industry is generally favorable, which can explain why more and more competitors have been given birth in recent decades. The product is generally easy and cheap to produce, and can be sold at many quantities in a short period of time. Even if the margin between production cost and consumption cost is miniscule, the large amounts of units sold can add up to large revenue, especially if a company holds over 2,500 locations like Chipotle does. 

Attractiveness of the Industry:

The Tex-Mex industry has been a relatively popular trend. The trend has attracted more and more corporations to enter the market as competitors. However, one could also argue that the market has now become stagnant. As mentioned earlier, of the top five Tex-Mex chains on the USA Today rankings, On the Border is the oldest at thirty eight years. However, equally important is the fact that none of the top five are under twenty years of age. Evidently, the time to enter the market was between 1980 and 2000, and 2021 may be a decade or two too late. 

Company Profile: Chipotle

Summary:

Chipotle Mexican Grill Inc. specializes in the production of casual, Mexican fast food in thousands of locations throughout the United States. The company was founded in Denver, Colorado on July 13, 1993. 

Firm Value: 

Firm value can be defined as the outcomes of any given firm. There are many factors that go into the determination of a firm’s value, and those factors differ based on the given firm or industry. These factors can identify what a firm is worth in a numerical value, or in other words, what one would need to pay in order to take full control. At the moment, Chipotle is worth $1,355.11 per share. 

Customer Value: 

Customer value can be defined as the difference between customer benefits and customer costs. In other words, the greater this difference, the more likely one will decide to use a firm as a provider. This type of value is generated through marketing program goals and various exchanges. 

Societal Value:

There are many factors that go into societal value that can include global impact, social responsibility, etc. Chipotle, through the ‘Scarecrow’ marketing campaign, is attempting to enhance its societal value by advertising a more healthy product in comparison to its competitors. 

Works Cited

“CMG.” CNNMoney, Cable News Network, money.cnn.com/quote/profile/profile.html?symb=CMG. 

Neudorf, Samantha. “America's 15 Best Tex-Mex Chain Restaurants.” USA Today, Gannett Satellite Information Network, 4 Jan. 2014, www.usatoday.com/story/travel/destinations/2014/01/04/best-tex-mex-mexican-restaurants-food/4308625/.