BU481 Lecture Notes - Lecture 8: Net Income, Taco Bell, Fast Casual Restaurant
BU481
Chipotle Case
Industry
• 3 segments:
o Full service: $200B largest cheque size slow growth
o Fast casual: $25B $7-10/meal 11% growth, small but growing
o Quick service: $170B lowest cheque size slower growth
• To succeed in fast casual, you need a strong brand, quality, convenience, low operating costs,
strong supplier relationships (consistency), ideal locations (high thruput, and accommodate
supplier access, availability), menu differentiation
• Competition:
o Qdoba: op. cost: 85% revenue: $600M (2.17B for Jack in the Box)
o Yum Brand (Taco Bell & Cantina Bell): op. cost: 85% $12.6B Yum 1.3B profit
o Chipotle: op. cost: 75% $12.2B
• Value prop = quality, healthy, local, transparency, customizable, fresh
• Core activities = supply chain management, (non-) marketing, restaurant operations, supply
chain management and relationships
• Product-market focus: urban, North American, health-oriented,
• Goals: maintain profit margins given rising input costs, maintain growth, expand (store growth
=> revenue growth)
• Net income is growing, margins are stable, revenue is increasing, ROA = 15.1% 16%, ROE = 21%,
22%
• Fresh food is harder
Strategy-Management Preferences
• Chipotle’s Maageet preferees eigh greatest
• Very set in his ways and keeps things consistent
• Regularly gaining profits (operating margins around 20%)
• They are’t deployig their ash or issuig diideds
• ROA, ROE, & ROS are falling due to management preferences
Chipotle Management Preferences
Competition
• Chipotle is high quality and high price, top left corner
CMG: What Happened
• Some marketing introduced later
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