Industry Analysis Chipotle

Topics: Fast food, Burger King, Chipotle Mexican Grill Pages: 5 (1962 words) Published: March 25, 2012
Industry Analysis
Overview of the Quick Service Industry
The fast food, or quick service restaurant industry (QSR), represents approximately 200,000 restaurants and $155 billion in sales in the U.S. alone, they are one of the largest segments of the food industry (Hoovers, 2011). This segment of the restaurant industry is “highly competitive and fragmented… number, size and strength of competitors vary by region, market and even restaurant. All of these restaurants compete based on a number of factors, including taste, quality, speed of service, price and value, name recognition, restaurant location, customer service and the ambience and condition of each restaurant” (Chipotle, 2010). The QSR industry is seeing growth due to the fact that today’s society is more strapped for time than ever. According to the American Sociological Review, “more than 50% of American families are dual earner household…multitasking allows parents to accomplish more within a limited amount of time” (Offer & Schneider, 2011). However, with both heads of the house working part-time or full time jobs people have less time to prepare meals and QSRs offer another way for these families to multitask and save time. In 2011 the QRS industry saw stock values beat the overall restaurant market. Bloomberg U.S. Quick-Service Restaurant Index, gained 13.5 percent while the full service restaurant index dropped by 1 percent (Wolf, 2012). Competitive Analysis

Force| Strategic Impact|
Entry| Low|
Rivalry| High|
Substitutions| High|
Power of Buyers| High|
Power of Suppliers| Moderate|

New Entrant Threat
While entry into the quick service industry has low barriers (Cambrian Group, 2011) it is highly competitive and has high saturation. Only 40-50% of new entrants will survive their first year and see profits (Paiz et. al., 2011 p.4). While many of players in the QSR industry are franchises, approximately 300,000 (Franchise Direct), Chipotle operates differently. All of their locations are company owned and have relatively low start up costs (“Chipotle Mexican Grill”, 2007). Due to this Chipotle is able to grow their bottom line much quicker than new entrants into the same markets. While others may see low success rate in the first year due to start up costs, Chipotle is able to effectively generate profit and growth quickly. Rivalry

In the sub-category for quick service Mexican restaurants, Chipotle competes with Qdoba, Moe’s Southwest Grill, Baja Fresh, Taco Bell and El Pollo Loco. Mexican quick service accounts for $5 billion of the $20 billion market (Cambrian Group, 2011). At the end of 2010 Taco Bell held the largest market share among Mexican QSRs with 52% of the market and 5,635 locations in the U.S. and 262 locations in 21 foreign countries (Yum! Brands, 2011). Qdoba in contrast holds locations in 42 states for a total of 583 locations (Jack in the Box, 2011). Threat of Substitutions

Chipotle faces 6 major substitutes, McDonald’s, Yum! Brands, Wendy’s/Arby’s Group, Burger King, Jack in the Box (owner of Qdoba), and Doctor’s Associates Inc. (owner of Subway) which occupy 35.5% of the market (Paiz et. al., 2011, p.6). These QSRs offer dine-in, carry-out and delivery services and have been in the market longer than Chipotle (Chipotle, 2010). In addition to this they use a much broader marketing plan which includes, print, radio, and television advertisements which Chipotle does not; relying mainly on radio and billboards (“Burrito Buzz”, 2007). Chipotle actually “spends less in a year on advertising than McDonald's Corp. spends in 48 hours” relying mainly on word of mouth (“Burrito Buzz”, 2007). Many of these substitutes have diversified their menus. While Chipotle’s menu is standard in all of their locations others in the industry now offer menu items that focus on consumer preferences. Low carbohydrates, low calorie, and low fat options are showing up more often on menus. Many also emphasize...
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