Chipotle Financial Analysis

Topics: Revenue, Generally Accepted Accounting Principles, Balance sheet Pages: 18 (7240 words) Published: July 21, 2012
Part 1: Company Information:
The company selected for our financial analysis project is Chipotle Mexican Grill. Chipotle (for short) is a company that is a major player in the fast food and restaurant industry. The name “chipotle” is derived from the Mexican Spanish name for a smoked, dried Jalapeno pepper. The restaurant sells large burritos and bowls in an assembly line production system where all the condiments are arranged and all the customer has to do is request what they want their burrito to consist of. This in turn lends itself to an air of individuality (creating multiple combinations and choices for the clientele). The Corporation trades under the ticker symbol CMG on the New York Stock Exchange. The most recent Fiscal Year End was December 31st 2011 and traditionally the end of the fiscal year/end of the fourth quarter is when Chipotle earns the greatest amount of revenue. The Company is headquartered in Denver, Colorado and was incorporated in Delaware in 1993. Chipotle’s major competitors include Cheese Cake Factory, Baja Sol, Boston Market and Qdoba to name a few. The company prides itself in the use of all natural ingredients as none of their condiments from the peppers to the meat are chemically engineered. In other words, a large percentage of the company’s food sources are raised naturally without fertilizers or “steroid feeds” that induce accelerated growth in the livestock. This is also evident in their mission statement aptly called FOOD WITH INTEGRITY. BRIEF COMPANY HISTORY

The company was founded in July of 1993 by current CEO Steve Ells. Mr. Ells graduated from Culinary Institute of America in Hyde Park, New York after which he spent two years as a line cook at Jeremiah Tower at Stars in San Francisco, California. Although Chipotle is a Delaware Corporation, the first Chipotle was founded in Denver, Colorado, in a former Madison Ice Cream Store near the University of Denver campus using a loan of $85,000 which he received from his father. Within a month of being in business, sales had sky rocketed to a thousand burritos per day (more than a 500% increase in the estimated figures needed to keep the company running). This led to some rapid expansion (funded by further loans from his father and SBA Loans) and by February of 1998, the company had 18 locations in the Denver area. In 1999, the first Chipotle restaurants outside of Colorado were opened in Columbus, Ohio and Minneapolis, Minnesota. In February of 1998, the fast food industry “big players” took notice and McDonald’s made an initial minority investment in the company. This also allowed the company to rapidly expand and increase its revenue from thirteen million dollars in 1997 to thirty-one million dollars by 1999. On January 2006, the Company made its initial public offering (IPO) after increasing the share price twice due to high pre-IPO demand. This led to having the best U.S based IPO in six years and the second best IPO for a restaurant after Boston Market. By October of 2006, McDonalds had fully divested from Chipotle which was part of a larger initiative on McDonald’s part to be fully divested from all its non-core business restaurants. McDonald invested a total of an approximate total amount of three hundred and sixty million dollars in Chipotle and walked away with approximately $1.5 billion. The food menu is pretty basic, which the company claims allows them to do things better than the competition as they have fewer things/issues to cope with. They also claim that with the different ingredients, there are over 65000 possible combinations of ingredients. The company has approximately 750,000 customers per day. As at the end of 2010, the company has a workforce of over 26,500 strong and also has 1050 locations spanning three countries (U.S.A, Canada and England). All locations are company owned as opposed to being franchised. Trends that affect Chipotle:

From the day a business endeavor is dreamt up and finally put on paper, it...
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