Case
Supplementary Resources
Abstract
Founded by Steve Ells in 1993, Chipotle Mexican Grill quickly became one of the fastest growing restaurant chains in US history. People loved Chipotle because of the tasty and healthy food as well as its edgy, trendy, cool brand image. Chipotle established itself as a successful company practicing “conscious capitalism” by serving “food with integrity” – its supply chain and corporate culture were closely integrated from the time that ingredients were farmed, raised, harvested, and shipped to stores to the time the final product was placed on a customer’s serving tray.
By 2014, the fast-casual food market in the US became increasingly competitive and crowded with many new entrants, especially traditional fast food players who were attracted by the double-digit revenue growth. Being a public listed company, Chipotle had to meet Wall Street’s high expectations of growth and earnings. Living up to analysts’ expectations was becoming increasingly difficult for Chipotle.
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved
Resources
Exhibit 1: Change in Customer Traffic
Heading of the bar graph reads “Change in customer traffic.” Years are plotted along the x-axis from 2009 to 2013 with a gap of 1 year. Percentage of customer traffic is plotted along the y-axis scaled from −4% to 10% with a gap of 2%. A table below the graph in the image with appropriate values is as follows:
Years | 2009 | 2010 | 2011 | 2012 | 2013 |
Fast Casual | 4% | 6% | 6% | 9% | 8% |
QSR | −3% | −1% | 0% | 1% | 0% |
http://seekingalpha.com/article/2031641-chipotle-mexican-grill-explosive-growth-is-expected-to-continue
Exhibit 2: Survey US Participants Identified Their Favorite Cuisine as Follows:
American | 31% |
Italian | 23% |
Mexican | 16% |
Chinese | 14% |
Japanese | 5% |
Middle-Eastern | 3% |
Indian | 2% |
http://www.rkma.com/bentley/rfb14/
Exhibit 3: Fast Casual Industry Segment Perception Map
Logos of various food brands are classified in a 2x2 matrix. The matrix in the image with the logos is tabulated as follows:
Healthy Natural Perceptions/Price | Unhealthy | Healthy |
Low | Taco John’s Taco Bell Hungry Man | Trader Joe’s |
High | Panda ElPollo Loco Chilis Olive Garden Pancheros Qdoba Mexican Grill Five Guys Burgers and Fries Baja Fresh Mexican Grill | Moe’s Southwest grill Fiesta Chipotle Mexican Grill Panera Breads Whole Foods |
An illustration of food truck labeled “FOOD TRUCKS” is on the line seperating the high and low priced unhealthy foods.
Exhibit 4: Fast Food Restaurant Market Leaders
Market Leaders (July 2013) | ||
Annual Sales (USD) | Market Leader | |
Bakery Café | 3.7 billion | Panera Bread |
Mexican | 2.7 billion | Chipotle Mexican Grill |
Asian/noodle | 1.8 billion | Panda Express |
Sandwich | 1.3 billion | Jimmy John’s Gourmet Sandwich |
Better burger | 1.1 billion | Five Guys Burgers and Fries |
Chicken | 979 million | Zaxby’s |
Pizza | 157 million | Donatos Pizza |
http://www.rkma.com/bentley/rfb14/
Exhibit 5: Revenue and Operating Market
Heading of the image reads “Revenue & Operating Margin.” Years are plotted along the x-axis from 2004 to 2013 with a gap of 1 year. Operating margin percentages are plotted along the right side of the y-axis scaled from 0% to 18% with a gap of 2%. Revenue (in million USD) is plotted along the left side of the y-axis, scaled from 0 to 3500 with a gap of 500. Approximate values from the graph are tabulated below:
Years | Operating Margin (%) | Revenue (in million USD) |
2004 | 1.5 | 490 |
2005 | 5 | 610 |
2006 | 6.7 | 790 |
2007 | 10 | 1100 |
2008 | 9.5 | 1250 |
2009 | 13.7 | 1500 |
2010 | 15.8 | 1850 |
2011 | 15.6 | 2250 |
2012 | 16.4 | 2600 |
2013 | 16.6 | 3150 |
Source: Analysis from Chipotle Annual Report.
Exhibit 6: Historical Stock Performance for CMG
Two rectangular boxes on the top left corner of the image read “Panera Bread Co (Image: A circle with cross mark sign),” and “Yum! Brands Inc. (Image: A circle with cross mark sign).” Years are plotted along the x-axis from 2009 to 2014 with a gap of 1 year. A line graph with three curves is on top and a vertical bar graph is below the curves in the plot area of the graph. Percentage values are plotted along the y-axis scaled from −200% to +600% with a gap of 200%. An overall percentage value is in the x-axis above each the year. Approximate values from the graph are tabulated below:
Years | Stock performance of brands (%) | Overall percentages (%) | ||
Panera Bread Co | Yum! Brands Inc. | Chipotle Mexican Grill Inc | ||
2009 | 0 | 0 | 0 | +17.77 |
2010 | 0 | +50 | +51 | +141.22 |
2011 | +70 | +100 | +200 | +58.82 |
2012 | +95 | +190 | +380 | −11.12 |
2013 | +110 | +220 | +300 | +77.00 |
2014 | +145 | +240 | +610 |
Source: Yahoo Finance.
Exhibit 7: Financial Data
Item 6. Selected Financial Data
Our selected consolidated financial data shown below should be read together with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and respective notes included in Item 8, “Financial Statements and Supplementary Data.” The data shown below are not necessarily indicative of results to be expected for any future period (in thousands, except per share data).
| For the years ended December 31 | ||||
2013 | 2012 | 2011 | 2010 | 2009 | |
Statement of Income: | |||||
Revenue | $3,214,591 | $2,731,224 | $2,269,548 | $1,835,922 | $1,518,417 |
Food, beverage and packaging costs | 1,073,514 | 891,003 | 738,720 | 561,107 | 466,027 |
Labor costs | 739,800 | 641,836 | 543,119 | 453,573 | 385,072 |
Occupancy costs | 199,107 | 171,435 | 147,274 | 128,933 | 114,218 |
Other operating costs | 347,401 | 286,610 | 251,208 | 202,904 | 174,581 |
General and administrative expenses | 203,733 | 183,409 | 149,426 | 118,590 | 99,149 |
Depreciation and amortization | 96,054 | 84,130 | 74,938 | 68,921 | 61,308 |
Pre-opening costs | 15,511 | 11,909 | 8,495 | 7,767 | 8,401 |
Loss on disposal of assets | 6,751 | 5,027 | 5,806 | 6,296 | 5,956 |
Total operating expenses | 2,681,871 | 2,275,359 | 1,918,986 | 1,548,091 | 1,314,712 |
Income from operations | 532,720 | 455,865 | 350,562 | 287,831 | 203,705 |
Interest and other income (expense), net | 1,751 | 1,820 | (857) | 1,230 | 520 |
Income before income taxes | 534,471 | 457,685 | 349,705 | 289,061 | 204,225 |
Provision for income taxes | (207,033) | (179,685) | (134,760) | (110,080) | (77,380) |
Net income | $327,438 | $278,000 | $214,945 | $178,981 | $126,845 |
Earnings per share | |||||
Basic | $10.58 | $8.82 | $6.89 | $5.73 | $3.99 |
Diluted | $10.47 | $8.75 | $6.76 | $5.64 | $3.95 |
Weighted average common shares outstanding | |||||
Basic | 30,957 | 31,513 | 31,217 | 31,234 | 31,766 |
Diluted | 31,281 | 31,783 | 31,775 | 31,735 | 32,102 |
As of December 31 | |||||
2013 | 2012 | 2011 | 2010 | 2009 | |
Balance Sheet Data: | |||||
Total current assets | $666,307 | $546,607 | $501,192 | $406,221 | $297,454 |
Total assets | $2,009,280 | $1,668,667 | $1,425,308 | $1,121,605 | $961,505 |
Total current liabilities | $199,228 | $186,852 | $157,453 | $123,054 | $102,153 |
Total liabilities | $470,992 | $422,741 | $381,082 | $310,732 | $258,044 |
Total shareholders’ equity | $1,538,288 | $1,245,926 | $1,044,226 | $810,873 | $703,461 |
Income Statement (Common Size) | Industry (Large Cap) | Chipotle |
Net Sales | 100.00% | 100.00% |
Gross Margin | 63.70% | 26.59% |
Operating Income | 3.40% | 16.63% |
Net Income | 1.50% | 10.19% |
Balance Sheet (Common Size) | ||
Cash | 10.20% | 28.78% |
Accounts Receivable | 5.40% | 1.38% |
Inventory | 2.50% | 0.65% |
Total Current Assets | 23.70% | 33.16% |
Property, Plant & Equipment | 50.40% | 47.94% |
Other Non-Current Assets | 25.90% | 17.81% |
Total Assets | 100.00% | 100.00% |
Accounts Payable | 4.80% | 2.94% |
Total Current Liabilities | 15.40% | 9.92% |
Total Long Term Liabilities | 34.40% | 13.53% |
Financial Ratios | ||
Quick Ratio | 1.05 | 3.04 |
Current Ratio | 1.54 | 3.34 |
Inventory Turnover | ×26.65 | ×195.51 |
Reference: Morning Star Inc. and Hoovers Online.
Exhibit 8: CMG Growth Comparison
Various growth parameters are plotted along the x-axis and the percentage of growth is plotted along the y-axis scaled from −5.00% to 25.00% with a gap of 5.00%. Values from the graph are tabulated below:
Growth parameters | CMG (%) | Industry (%) | S&P 500 (%) |
Revenue growth | 24.41 | 4.30 | 1.79 |
Gross profit growth | 22.34 | 5 | 1.94 |
Op. profit growth | 13 | 1.82 | 0.52 |
Net income growth | 8.47 | -2.53 | −2.53 |
EPS growth | 7.76 | -2.03 | −2.14 |
Source: CSI Market.
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved