Alex Markels a writer for US News & World Report made the following observations regarding the success of Chipotle Mexican Grill, a high volume fast casual concept.
A Tested Recipe: Five Ingredients
Five lessons for start-ups from Chipotle Mexican Grill
By Alex Markels
Posted January 9, 2008
It’s the food, stupid. Its hip surroundings and green ethic notwithstanding, Chipotle succeeds because its food tastes better than the competition’s. Customers pay an average of about $9 for the privilege.
Keep it simple! With just three menu items, Chipotle takes advantage of a straightforward production process that keeps costs low.
Fast is still important. As good as Chipotle’s burritos taste, customers won’t line up for them if the line doesn’t move quickly. And now they can preorder their food online.
There’s always room for improvement. Chipotle upgrades ingredients and processes. Example: ceo Steve Ells found that salsa tastes better when onions are cut by hand instead of by machine.
Embrace your “enemy.” Ells shrugged off investment bankers and venture capitalists in favor of McDonald’s to grow the business. The chain helped with purchasing and distribution, too.
I’d have to disagree with Mr. Markels first point. While Chipotle does offer better ingredients than Taco Bell and some other fast food, it can’t touch the quality of food put out by authentic Mexican fast food restaurants. I don’t taste the real chiles in the meat (though they’re certainly there in the sauces), and there are some authentic Mexican seasonings I don’t taste in the meat such as cinnamon. I still think their food is good, but I would put them barely in the top 50% of what’s available in my area and many others that I’ve been to as far as food quality goes. They only rank just above the other fast food chains, but below the fast food independents. I will say that their sauces suit my personal taste though.
I would replace “It’s the food, stupid” with two other reasons for success. “It’s the marketing” and “It’s the business model”. Chipotle’s concept design as a “fast casual” themed restaurant instead of “fast food” made it a market leader (once McDonalds gave them the money to go national). They gave customers a better atmosphere to eat Mexican fast food, and they were the first in the market, something that is very important to be a market leader. At the time, this gave them a unique selling proposition, something else extremely important to success.
They are also “masters of the promotion”, and find ingenious ways to attract people to their restaurant on less than well known “holidays” such as Tax Day, April 15th, where many Chipotles handed out mock tax forms called the “BurritoEZ”, which customers could fill out for a free burrito.
The “green” building practice is also a function of marketing, as well as their emphasis on the integrity of their purchasing practices, which get’s promoted in their stores.
Their business model is another huge reason for their success. The single most important aspect of achieving an incredible growth rate is having a business model that offers an incredible return on investment. Partnering with a company with “unlimited” resources like McDonalds doesn’t hurt either, but that partnership wouldn’t have happened if Chiptle didn’t already have a business model that made it a great investment, in a segment (Mexican) that was growing fiercely. Another good example of a company whose marketing and business model overshadow the food they are so proud of is Subway. When you can return an investors total investment in 2 to 3 years, you are going to have a lot more investors interested in opening your concept. In Chipotle’s case, instead of franchising, they attracted McDonalds as a business partner, whose capital grew them from 14 stores to 500 stores. The food didn’t facilitate that, there’s plenty of better fast Mexican food out there. Neither did demand for their product, they were a very small chain when McDonalds got involved. Brilliant marketing and an attractive business model is what made them in my opinion.
I think you miss my point, Mr. O’Dell.
When I wrote that Chipolte’s “food tastes better than the competition’s,” I wasn’t comparing it with small independents, but rather with big chains like Baja Fresh and Qdoba, which are its major competition. Chipotle’s dramatic expansion has not been in San Francisco’s Mission District or New York City’s East Village, but rather in shopping malls and near college campuses, where they frankly don’t compete with mom-and-pops. Indeed, the company’s biggest success has come in places like Minneapolis, which is largely terra incognita for the burrito.
I don’t doubt that you can find an “authentic” burrito that tastes better, but I seriously doubt it will be spiced with cinnamon, which is not typically used in meat dishes, especially the sort of grilled steak, chicken or pork that Chipotle sells. (You’re thinking of mole sauces, Mexican Chocolate and other desserts.)
If you bothered to read my entire story, (http://www.usnews.com/articles/business/best-in-business/2008/01/09/chipotles-secret-salsa.html) , rather than just the short sidebar, you’d have seen me go into great detail about the company’s business model, which is based on the idea of a simple menu, fresh, high-quality ingredients and fast throughput by a loyal, full-time workforce. The result: an average annual store volume of about $1.7 million, about 50% higher than the competition.
I don’t have a problem with your article Mr. Markel, which I did read by the way and liked very much, just your recipe for success and the first of the “5 lessons”.
See, there is this perpetuation of an idea within startup restaurants that food alone will make a restaurant successful. “If I build it, they will come” is a phrase that has crossed the lips of many doomed would-be restaurant tycoons in training out there. With a total of 60 percent of restaurant failing within the first 3 years, and high as 80 percent within independent restaurants, they don’t need to have their head filled with, “It’s the food, stupid”, as it most certainly isn’t the food that is going to make them successful, it’s their ability to communicate with their target market, and if they are looking to take that next step into multiple units, it’s going to take a very strong business model. As far as the food goes, you can have completely average food, and still have a successful concept. Take for example McDonalds and Applebees, where they word “fresh” is like garlic to a vampire, yet they are each the most successful concepts in their sectors. Though I’m sure Steve Els would take issue with my saying that food quality isn’t what makes Chipotle successful, I still stand by my opinion.
As far as cinnamon and meat go, I have many Mexican counterparts that would take issue with you saying cinnamon is not used as a component for meat dishes outside of mole and desserts. I didn’t learn my Mexican cooking from chain restaurants, I learned it from employees from Mexico, who contend that it is the pinch of cinnamon in their burrito and taco meat, along with the clove, fresh thyme, oregano, and reconstituted dehydrated chile peppers (instead of powder) that make their carne asada, ground taco meat, chicken and pork better than Chipotle’s.
You may not think Chipotle’s are competing with independent restaurants, but there isn’t a chain restaurant in existance that isn’t. The truth is that there are many more independent restaurants than chains, and anywhere you put a Chipotle, there are going to be independent restaurants, and considering the mass migration of Mexican nationals to the U.S., it’s pretty likely there is an authentic Mexican restaurant pretty close, even a fast food one, in a shopping mall or near a college campus.
Great, fast, Mexican food is readily available now in many, many communities, and there are a lot more independent Mexican fast food restaurants than there are Chipotles. It’s great for Chipotle that their business model and marketing make the difference between the independents and them, but don’t credit the food. We don’t need future restaurateurs betting their life savings that their food is better than everyone else’s, because great food is not one of the “5 lessons” to have a successful restaurant. By claiming their restaurant has great food, and providing great food to their customers, a restaurant has only met the minimum expectations of their market, not given them a reason to visit them instead of their competition. For that, you need smart marketing.
This is why restaurant reporting should be left to restaurant people and not freelance writers who do “research” and then write from some perceived expert status.