ABSTRACT

A SWOT analysis is to help develop a strong business

strategy by making sure youve considered all of your
businesss strengths and weaknesses, as well as the
opportunities and threats it faces in the marketplace.

Erik Rodriguez
Luis Castagneto
Nicole Halping
Katelyn Turk

SWOT ANALYSIS
Chipotle Mexican Grill, INC.

Intro Management/Organizational
Behavior

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SWOT Analysis: Chipotle Mexican Grill Inc.

Chipotle Mexican Grill is a multinational chain of restaurants operating in the U.S, Canada,
U.K, France, and Germany (Chipotle, 2014). Its main focus is tacos and burritos, and it is renowned
worldwide for its Mexican fast food prepared from purely natural ingredients. Chipotle (2014)
argues that it was founded in 1993 by Steve Ellis and operates close to 1600 branches located in
various locations globally. According to Steve Ellis, his main purpose was to demonstrate to the
consumers that food served fast did not have to be of fast food experience. The restaurant not only
uses organic ingredients but also makes its food with traditional and healthy cooking methods. In
fact, the restaurant ensures that it is aware of all the sources of its ingredients so as to reduce
environmental effects as well as social impacts to the communities that it serves (Chipotle, 2014).
In the financial year ending in 2013, the restaurant had over 45,000 employees and recorded an
income of $327.4 million. In the New York Stock Exchange, Chipotle Mexican Grill Inc. is traded
as CMG (Chipotle, 2014).

Strengths of Chipotle Mexican Grill Inc.

Chipotle is amongst the fastest growing fast restaurants in the whole world because it
capitalizes on its strengths to boost its performance and sales. These are factors within the
organization that give it a competitive edge against its rivals. These factors include; a substantial
brand equity that is well known all over the United States, United Kingdom, Canada France and
Germany thanks for operations that have lasted for over a decade (Naughton, 2014). As a result of
a substantial brand equity many customers in these regions quickly identify with it, are very loyal
and frequent the restaurants even in the events of intense competition and poor economic
conditions.

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Secondly, the restaurant has an excellent reputation amongst the customers for organic foods
which are considered healthy (Liebelson, 2013). In further support of this finding, Chipotle is also
known for being ethical as it educates its consumers on the ingredients making up their meals. The
company ensures that 40 percent of their beans and 80 percent of their cilantro are organically
grown, they believe in naturally raised pigs, factory farming, and a majority of their cheese and
sour cream they serve comes from pasture-raised cows (Chipotle, 2014). Being ethical is a strong
quality Chipotle holds, because it causes many investors to put their money into the business
leading to an expansion as investors only want to associate with reputable businesses. Given these
facts and with a growing trend amongst consumers for healthy foods, Chipotle can maximize its
sales.
Lastly, the restaurant has a top management comprised of high qualified and skilled
individuals such as the C.E.O and founder, Steve Ellis, who are capable of driving the business to
meeting its mission (Naughton, 2014). Chipotle is known for recruiting from within so as to retain
its best talent (Chipotle, 2014). When the company recruits from within, many resources that
would have been utilized in advertising, selecting and training the employees are saved. For
example, Eubanks (2011) presented a study done by Hire Minds that when Chipotle started
promoting from within, turnover for salaried managers declined from 52 percent to 35 percent. In
addition, new employees also disrupt some of the business major operations since adequate time
is required to train them adequately. When the services are disrupted, the restaurant loses business.
Hence, why most of the Chipotles managers are promoted within their crews.

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Weaknesses of Chipotle Mexican Grill Inc.

After releasing their first-quarter earnings, in April 2014 Chipotle announced their first
company-wide price increase in three years. Chipotle appeared to have a relatively good year
besides the increase in food costs, specifically their steak, cheese and avocados. According to the
International Business Times, steak prices rose 15 percent this year, the highest theyve been in 27
years. Reports show that cheese prices are expected to increase 10 percent by the end of the year.
Lastly, the drought in California has caused a shortage of avocados, thus making the prices for
avocados and guacamole rise. Because of these increases in food expenses, Chipotle will be raising
prices by about 30 percent (DeNinno, 2014). From this research, it seems clear that this is a
weakness for chipotle because their prices are relatively high as it is, so by raising prices from
things they cannot control- such as beef prices rising everywhere, the company can lose business.
Expenses have an enormous impact on the company. Chipotle recently released their
quarterly earnings which showed an increase in revenue and income since their quarterly statement
in 2013. Although their revenue and net income have shown an increase, their expenses have gone
up. Along with the increase in food costs, almost all the restaurant operating expenses increased,
such as labor costs and opening costs. Because of these increases, chipotles net income is 9.2
percent of their revenues as opposed to 10.5 percent of their revenues in 2013 (Chipotle, 2014)
According to their previous quarterly report from 2013, Chipotle had 16 locations outside of
the US as of December. Their most recent quarterly statement shows Chipotle opened 44 locations
this quarter. Entering the market in a different country can be tricky for most companies.
Unfortunately for chipotle they have already seen this from their sales in London. Three years after
opening, the sales in London are stilling lagging. Business Weeks article states that after a
recent survey, only 1 percent of people surveyed in London knew of Chipotle. For that reason,

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international business can be a weakness for the company. Chipotle will need to increase their
marketing in order for their name to be recognized internationally (Wong, 2013).

Opportunities of Chipotle Mexican Grill Inc.

Chipotles approach on marketing is different; more abstract and out of the box. A 2014
article by Tuttle reported that Chipotles marketing is by giving out an exclusive free burrito
daily cards to celebrities or high-profiled individuals so they can Tweet, post Facebook messages
and / or mention in interviews how much they like Chipotle. Another marketing strategy that
Chipotle uses is by sending a message about their food indirectly. Tuttle argues that their newest
marketing strategy was making the Hulu show, Farmed and Dangerous stating facts about
processed foods and factory farms. In fact, Chipotles chief marketing executive Mark Crumpacker
stated: The more people know about how food is raised, the more likely they will be to choose
food made from better ingredientslike the food we serve at Chipotle.(Time, 2014)
Chipotle has become a start for a healthy eating fast food joint. With the growing trend of
health-conscious eating, theyve started their own festival called, Cultivate Festival. Cultivate
festival is free admission and about the food, ideas and music (Chipotle Cultivate, 2014). As told
by Scott Davis: The festivals are a terrific way to underscore Chipotles identity by hooking
people up with local foods, flavors and beer makers, all under the big tent of the Chipotle brand.
(Forbes, 2014). Davis (2014) also indicated that these festivals bring in between 25,000 to 40,000
people all branded to bring awareness to eating healthy. Another new alternative to Chipotles being
a healthy choice is their new menu item Sofrita. A Sofrita is an organic tofu from Hodo Soy
(Chipotle, 2014). Thus, not only brings in those who are vegetarian but also gives customers a new
twist

to

healthy

eating.

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In addition, a Journal by Ed Sealover stated: The Denver-based chain plans to open 165 to
180 restaurants in 2013, including four in foreign countries (Bizjournals, 2013). These four
foreign countries are Canada, Germany, France and England. As a result, Sealover (2013) argues
that their revenue has increased in the past year to about 20.3 percent. As discussed in a previous
paragraph, the 2013 article by Wong notes that when Chipotle started locations in London, it was
not a hit but Chipotles spokesman Chris Arnold stated it was due to low-brand awareness. Chris
Arnold (2013) also noted that it gave them time to build up the crew and new areas to improve the
brand awareness. In conclusion, there are many emerging economies worldwide other than the
regions Chipotle is currently operating, in which the restaurant can capitalize on to expand its
operations and revenue.

Threats of Chipotle Mexican Grill Inc.

Chipotle has gained a reputation and popularity throughout the recent years. Just like any
other common business, Chipotle struggles with competitors within its fast casual food industry.
Some of Chipotles competitors are not in the style of food, but do offer customers the concept of
fresh food. These competitors will have the same prices relatively as Chipotle. There are also fast
food Mexican restaurants that provide customers with cheaper prices and the same style of food.
Customers also have the option of choosing a traditional Mom and Pop Mexican restaurants. These
sorts of restaurants also compete with Chipotles prices and quality of food. Therefore, this intense
competition causes a challenging choice for consumers to choose where to eat.
Each food industry company creates their own food sourcing plan. Chipotle tends to have
a fresh food concept, by not including freezers, can openers, microwaves in their restaurants. For
this reason, Chipotle has sourced their food from local farms that are at least 350 miles from a

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local Chipotle restaurant. However, recently Chipotle has suffered from volatility from its raw
material. Sometimes these local farmers and its agriculture will struggle with global warming
causing for some shortages of certain products. On March of this year, some of Chipotles
agriculture suppliers in California have suffered high temperatures causing for a shortage of
avocado growth. According to Brackett Chipotle says it may stop selling guacamole, at least
temporarily as the Mexican menu fast-food chain grapples with an avocado shortage it blames
partly on climate change (Brackett , 2014). In 2006, Chipotle was not committed to signing the
Fair Food agreement with Floridian farmers. Later on 2012, Chipotle agreed to sign this agreement.
Hatfield mentions that this act will consider the following: Not only does it provide a wage
increase (the famous penny-a-pound) but it also includes a code of conduct that allows workers a
voice in matters concerning health and safety, worker-to-worker trainings around the protections
included under the code, a complaint resolution procedure that protects workers from retaliation
and a third-party audit system to ensure compliance from growers (Hatfield, 2012). Climate
changes and an increase of raw materials, services will affect Chipotles products by increasing
their food prices in order to gain a moderate profit. Therefore, these two reasons are considered to
be severe threats for their business.
Patient Protection and Affordable Care Act came into act right before tax season of this year.
This law has encouraged several companies to provide medical insurance for its employees.
Chipotle has taken in consideration that it will likely provide coverage to hourly employees, but
also acknowledged that this coverage could cost it a bundle (Maze, 2013). Since Chipotle will
have to provide medical insurance to its employees, it will cause costs to drive upwards. In
addition, Chipotle has a history of hiring illegal immigrants, paying them a low wage. Chipotle
fired about 450 Minnesota workers who couldnt confirm the validity of their work documents

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(Berfield, 2012).Chipotle will start to verify their prospective employees for a U.S. citizen or
resident status with Homeland Security making this E-verify program as an expense. Once
Chipotle has their legal employees they will have to pay them regular wages. Consequently, these
actions will affect Chipotles profit by increasing their expenses. Once Chipotle have their legal
employees they will have to pay them regular wages. Consequently, these actions will affect
Chipotles profit by increasing their expenses.

Conclusion

In conclusion, Chipotle Mexican Grill is amongst the fastest growing restaurant chains in the whole
world. Even though it was founded only in 1993, it has grown and expanded its operations even
out of America and plan on opening 185 restaurants this year (Chipotle, 2014). The restaurant
needs to capitalize on its strengths and opportunities on the market so as to boost its sales by
lowering expenses and using some of that money toward marketing, the possibilities for Chipotle
will grow exponentially. On the other hand, it needs to minimize the adverse effects of its
weaknesses and threats so as to retain its profitability.

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References

Brackett, E. (2014, March 6). Holy guacamole! Chipotle may stop selling it? Retrieved July 5,
2014,

from

http://www.usatoday.com/story/money/business/2014/03/05/chipotle-

guacamole-climate-change/6088865/
Berfield, S. (2012, May 24). Chipotle's Undocumented-Worker Problem Resurges. Retrieved
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13,

2014,

from

http://www.businessweek.com/articles/2012-05-24/chipotles-

undocumented-worker-problem-isnt-over
Chipotle Cultivate. (2014) What is cultivate festival? Retrieved from http://chipotlecultivate.com/
Chipotle. (2014). Chipotle Story. Retrieved July 9, 2014, from http://www.chipotle.com/enus/chipotle_story/where_did_we_come_from/where_did_we_come_from.aspx
DeNinna Nadine. (2014, April 18). Chipotle Price Increase 2014: Beef, Avocado Price to Blame
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Davis, S. (2014, June 6). Beyond the Burrito: Chipotle's Next Big Move. Forbes. Retrieved July 8,
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chipotles-next-big-move/
Hatfield, L. (2012, October 9). Leslie Hatfield: Now With More Integrity: Chipotle Gets With the
Fair Food Program. Retrieved July 13, 2014, from http://www.huffingtonpost.com/lesliehatfield/now-with-more-integrity-c_b_1942984.html

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Liebelson, D. (2013). Behind the Burrito: 5 Things Chipotle's Ads Don't Tell You. Retrieved July
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Maze, J. (2013, January). What Do Restaurant Chains Think Of Obamacare? Retrieved July 13,
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Naughton, R. (2014). Chipotle chain to use local produce and train future farmers. Retrieved July
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Sealover, E. (2013, February 5). Chipotle rolls out expansion, marketing plans for 2013. Widgets
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Tuttle, B. (2014, February 18). Chipotles Farmed and Dangerous: Entertainment or Marketing
Propaganda? Business Money Chipotles Farmed and Dangerous Entertainment or
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Propaganda

Comments.

Retrieved

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5,

2014,

from

http://business.time.com/2014/02/18/chipotles-farmed-and-dangerous-entertainment-ormarketing-propaganda/
VEGANS AND CARNIVORES UNITE.. (n.d.). Chipotle: Sofritas. Retrieved July 11, 2014, from
http://www.chipotle.com/en-US/html/sofritas.html
Wong, V. (2013, February 26). Why Chipotle Sales Lag in London. Bloomberg Business Week.
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