1. Introduction "When I created Chipotle in 1993, I had a very simple idea: Offer a simple menu of great food prepared fresh each day, using many of the same cooking techniques as gourmet restaurants. Then serve the food quickly, in a cool atmosphere. It was food that I wanted, and thought others would like too. We've never strayed from that original idea. The critics raved and customers began lining up at my tiny burrito joint. Since then, we've opened a few more." --Steve Ells, founder and CEO

1.1 Company History:

Chipotle Mexican Grill, Inc. is one of the leading fast-casual Mexican restaurant chains, with approximately 400 outlets in about 20 states, mainly in the West and Midwest. Known for its fresh, gourmet, and increasingly organic ingredients, Chipotle (pronounced chi-POAT-lay) offers a fairly simple menu of burritos, fajitas, and tacos featuring pork, shredded beef, chicken, steak, and vegetarian fillings. Customer checks average about $8.50. From a single location in Denver, Colorado, in 1993, the chain is now growing at the rate of 100 new restaurants per year thanks to the deep pockets of its parent, fast-food giant McDonald's Corporation. McDonald's first invested in the company in 1998, before taking majority control the following year, and it now holds a 90 percent stake. The vast majority of Chipotle restaurants are company-owned; fewer than ten are franchised. Annual revenues per unit are an estimated $1.2 million.

1.2 Early 1990s Brainchild of Steve Ells

Born on September 12, 1965, in Indianapolis, Steve Ells, the founder and CEO of Chipotle, developed a deep interest in cuisine, cooking, and restaurant eating at an early age.

Founder Steve Ells attended the Culinary Institute of America in Hyde Park, New York; afterward, he became a line cook for Jeremiah Tower at Stars in San Francisco, California.

In 1993, Ells took what he learned in San Francisco and opened the first Chipotle in Denver, Colorado, near the University of Denver campus using an $85,000 loan from his father, a former president of the pharmaceuticals firm Syntex Corporation, to invest an additional $85,000.

After working out the initial kinks, the first Chipotle became a huge hit. Ells's father got his investment back within a month or so. Over the next few years, more outlets were opened in the Denver metro area, funded by an additional $1.5 million investment by Ells's father and a $1.5 million private stock offering. The second store opened in February 1995, and then six more debuted during 1996.

1.3 Rapid Expansion Funded by Late 1990s McDonald’s Buyout

As six more Chipotle Mexican Grills opened in the Denver area during 1997, Ells and other company leaders were seeking more funding to accelerate the growth rate. Venture capital firms were more interested in the high-flying tech world at the time, so a member of the Chipotle board of directors sent an unsolicited business plan to fast-food leader McDonald's Corporation. The timing was perfect. Domestic sales were flattening at the burger giant, and executives were seeking a way to jump-start growth. In February 1998, McDonald's made its first-ever investment in a restaurant chain it did not itself develop, buying a minority stake in Chipotle. Chipotle continued to be run independently, headed by Ells as CEO, and neither its management structure nor its menu changed.

Following the McDonald's infusion, Chipotle began expanding outside of Colorado. Two units were opened in Kansas City (one in Kansas and one in Missouri) in 1998, and several new markets were entered in 1999: Chicago; Cleveland, Columbus, and Dayton, Ohio; Minneapolis-St. Paul; Phoenix; Dallas; and Washington, D.C. The restaurant count more than doubled in 1999, ending at 37. Revenues for the year totaled approximately $31 million, compared to $13 million for 1997.

1.4 Early 2000s: Accelerating Growth, Shifting to Organic Ingredients Expansion accelerated in the early 2000s, with the store count reaching 100 by the end of 2000 and then 175 at year-end 2001. Food industry research and consulting firm Technomic estimated that overall revenues at Chipotle more than doubled in 2001, reaching $145 million. Continuing to upgrade his food ingredients, Ells switched from yellow corn to organic white corn, which did not have any genetically modified stock. He also began switching to organic beans. Starting with 2004, Chipotle increased its growth rate to 100 new units per year, aiming to hit the 500 restaurant mark by the end of 2005. The chain expanded into the Pacific Northwest by entering the Seattle and Portland, Oregon, markets and also moved into Florida, specifically Orlando and Tampa By late 2004, with the store count nearing 400, nothing appeared to be slowing Chipotle's remarkable growth. Ells had made only small changes to the still-simple menu in the 11-plus years he had been in business, and he continued to seek out new sources for organic ingredients.
2. Industry analysis
2.1 Company overview Chipotle Mexican Grill owns and operates more than 1050 quick-casual eateries popular for their burritos and other Mexican food items. Customers can build a 1-1/4 pound burrito from a lineup that includes chicken, steak, barbecue or free-range pork, as well as beans, rice, guacamole, and various other veggies and salsas. The company claims that with extras, its menu offers more than 65,000 choices. Chipotle restaurants also serve tacos, chips and salsa, beer, and margaritas. Operating throughout the US, many of the eateries are found in and around urban retail areas. Chipotle also has two locations in Toronto, Canada and one in London, England.
2.2 Top competitors
2.2.1. Panda Restaurant Group, Inc. Panda Restaurant Group is a leading quick-service restaurant operator with more than 1,300 Panda Express locations in more than 35 states and Puerto Rico. The chain offers Asian-themed food primarily in high-traffic locations, including malls, airports, and sporting arenas. The company also runs almost 30 mall-based Hibachi-San outlets that offer a quick-service Japanese grill menu. For patrons looking for full-service dining, Panda Restaurants has a handful of Panda Inn branded units in California. The company is owned by the family of co-chairman Andrew Cherng, who opened the first Panda Inn location in 1973.
2.2.2. Qdoba Restaurant Corporation The company operates Qdoba Mexican Grill, the #2 quick-casual Mexican chain behind market leader Chipotle Mexican Grill, with about 500 locations in 40 states. The eateries offer a selection of signature burritos, along with tacos, salads, nachos, and breakfast items. Patrons can also choose from nearly a dozen fresh salsas and sauces to complement their entrees. More than 150 of the restaurants are company-owned, while the rest are franchised. Qdoba is owned by hamburger chain operator Jack in the Box. To keep up with its competition, especially Chipotle Mexican Grill, and to draw more families, Qdoba introduced a kids' menu in December 2009.
2.2.3. Taco Bell Corp. A unit of fast-food behemoth YUM! Brands, Taco Bell is the #1 Mexican fast-food chain in the US, with more than 5,600 locations. The restaurants feature a wide range of Mexican-style menu items including tacos, burritos, gorditas, quesadillas, and nachos. Taco Bell units can be found operating as free-standing units and as quick-service kiosks in such places as shopping malls and airports. Taco Bell also has more than 250 international locations in 20 countries. More than 20% of the restaurants are company-operated. Parent YUM! Brands, the world's #1 fast-food company, also operates KFC and Pizza Hut.
2.3 Product/ service sold Today, there are approximately 300 Chipotles, in 20 states. In addition, they’ve taken this simple menu and received many accolades for their gourmet burritos and tacos. These awards include: Best Burrito, 2003 Readers’ Choice Sacramento Magazine, Top Bargain Meal, 2003 Readers’ Choice Denver’s Mile-High Magazine, Best Fast Food, Best of 2003 Austin Chronicle, and Best Dinner Under $10, 2003 Reader’s Choice The Pitch’s Best of Kansas City.4 These accolades have helped bring about Chipotle’s phenomenal growth with $230 million in sales in 2002, up 53.3% from 2001. And CMG’s recent financial data are listed as followe:
|Revenue |[pic]US$1.835 billion (2010) |
|Operating income |[pic]US$289.061 million (2010) |
|Net income |[pic]US$178.981 million (2010) |
|Total assets |[pic]US$1.121 billion (2010) |
|Total equity |[pic]US$810.873 million (2010) |

2.4 Consumer market data
Chipotle targets customers in urban areas who want quick food, but not fast food. These customers aren’t looking for the cheapest meal they can purchase, but an inexpensive one, that has a lot of value for the price. A younger, hipper clientele is targeted with the cool, modern décor of each restaurant, often located in trendy shopping centers. Fresh food and fresh atmosphere all help draw their targeted consumer.
3. Marketing and Sales Steve Ells, founder, chairman and co-CEO, started Chipotle with the idea that food served fast did not have to be a typical fast food experience. Today, Chipotle continues to offer a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in a distinctive atmosphere. Mark Crumpacker was appointed Chief Marketing Officer effective January 5, 2009. Ever since that, he had insisted unique marketing strategy to “sell the company”. One of the most important concepts they insist is “Food with Integrity”. Visiting Chipotle’s website is a pleasant trip. They stick out their organic food section and focused on animal, people and environment. These introductions have clear stories about how Chipotle grow their ingredients, process them, and made them into burritos as customers see. This sustainable development plan of growing their ingredients makes food fresh and safe. Also, it matches the most popular diet concept which is green food. Each ingredient is laid out in front of customers so they can choose the perfect combination to make perfect meal as they wish. Chipotle has a special program, which is invite guests to their restaurants and farms, to actually see how the ingredients grow. Attending this kind of trips makes customers get to know the brand and the healthy concept they insist more. Another character of their marketing strategy is that they invite guests to have the great experience of dinning. Chipotle carefully design each of their restaurants to create a unique dining experience fundamentally different than customers would get with traditional fast food. What interesting is that they carefully choose every song that played in their restaurant, so they can create a simple and pleasant environment for customers. Moreover, Chipotle designs a special “Chipotle Radio” online on their website, playing songs they select in the restaurants. With cute operation interface and elegant songs, customers will love every tiny detail of the restaurant experience. Apart from that, Chipotle loves to take part into organized all kinds of community activities, such as circuit race, fund raising, harvest festival, organic market, indoor mountain bike park, holiday event, and sports youth league sponsorship. They devote a lot into education public relation work such as kids training, class demonstrations, and suppliers for all kinds of dinners and parties for college students. Chipotle would like to think so, that each and every Chipotle restaurant is an active part of the neighborhood around it, because without a neighborhood, you couldn’t have a neighborhood burrito joint. They post every press release and reports about them on their websites to show people how friendly and popular they are. This kind of active public relation around the society improved their reputation and raise their fame as a fast food restaurant. Various ways of ordering is their marketing trump card. Customers can order online, by fax, by call, by special iphone application, and what’s more, by simple filling a form and get boxes of burritos if they want large sum for meetings or parties.
Multiple ways of marketing strategy make Chipotle successful, famous and popular among Americans. They proved that they are simple, fast, healthy, and delicious choice. Chipotle, the Mexican Grill.
4. Finance Analysis
4.1. Share Conversion Prior to this offering, Chipotle had three classes of preferred stock outstanding, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock. In accordance with the terms of certificate of incorporation, immediately prior to the consummation of this offering, shares of outstanding preferred stock and shares of outstanding common stock will be converted automatically and without any action on the part of the holder of those shares into shares of class B common stock. In addition, prior to the consummation of this offering, Chipotle will increase total authorized number of shares of capital stock, make certain changes to charter documents and affect the share split and Share Conversion. After giving effect to the share split and Share Conversion, Chipotle authorized capital stock will consist of shares of class A common stock, shares of class B common stock and shares of preferred stock, of which shares of class A common stock and shares of class B common stock are expected to be outstanding (excluding shares to be issued upon exercise of outstanding options and assuming that the underwriters do not exercise their option to purchase additional shares), and no shares of preferred stock are expected to be outstanding. If the underwriters exercise their option in full, Chipotle expect shares of class A common stock to be outstanding. In this offering, Chipotle will sell class A common stock, which has fewer votes per share than class B common stock.
4.2. Common Stock The certificate of incorporation authorizes the issuance of an aggregate of shares of common stock consisting of shares of class A common stock and shares of class B common stock. Upon consummation of this offering, of those authorized shares of common stock, it will be validly issued, fully paid and no assessable. At September 30, 2005, there were 43 holders of record of common stock, who collectively held about 58,832,266 shares of common stock.
4.3 Voting Rights Except as provided by statute or the certificate of incorporation, holders of the common stock have the sole right and power to vote on all matters on which a vote of Chipotle's shareholders is to be taken. The holders of class A common stock and class B common stock generally have identical rights, except that holders of class A common stock are entitled to one vote per share while holders of class B common stock are entitled to votes per share on all matters to be voted on by shareholders. The holders of common stock are entitled, by a plurality of the votes cast by the holders of class A common stock and class B common stock present in person or represented by proxy, voting together as a single voting group at a meeting at which a quorum is present, to nominate and thereafter elect and remove directors to and from the board of directors. With certain exceptions, other matters to be voted on by shareholders must be approved by a majority of the votes cast on the matter by the holders of class A common stock and class B common stock present in person or represented by proxy, voting together as a single voting group at a meeting at which a quorum is present, subject to any voting rights granted to holders of any outstanding shares of preferred stock. Approval of an amendment of our certificate of incorporation, a merger, a share exchange, a sale of all our property or dissolution must be approved by of all votes entitled to be cast by the holders of class A common stock and class B common stock, voting together as a single group.
4.4 Dividends Holders of class A common stock and class B common stock will share equally on a per share basis in any dividend declared by our board of directors, subject to any preferential rights of holders of any outstanding shares of preferred stock. Dividends payable in shares of common stock may be paid only as follows: shares of class A common stock may be paid only to holders of class A common stock, and shares of class B common stock may be paid only to holders of class B common stock; and the number of shares so paid will be payable at the same rate per share so as to retain the relative proportion of outstanding shares of class A common stock and class B common stock.
4.5 Stock Performance
Stock Performance
CMG (Common Stock)
|Exchange |NYSE (Dollar) |
|Price |$257.96 |
|Change (%) |1.22 (0.48%) |
|Volume |1,011,804 |
|52 Week Low |$112.53 |
|Market Cap |$8,006,562,480 |
|Rolling EPS |5.64 |
|PE Ratio |45.7376 |
|Shares |31,038,000 |
|Data as of 03/28/11 4:03 p.m. |

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From these figures, we can find that now the Chipotle has a trouble in finance. The company's inflow never changes, while its outflow improves. At the same time, Chipotle reduce its investing. What cause it happen? Chipotle, like many restaurants, has struggled during the recession as customers have decided to eat at home more regularly in an attempt to save money. The company is also dealing with lower productivity at newer stores and may have trouble raising prices. So, Chipotle need to pay more attention to its financial problem.

5. Setbacks and opportunities in Chipotle
5.1 Opportunities Chipotle is the dream and creation of Steve Ells. He is a graduate of the Culinary Institute of America and learned the philosophy and skills of classical French cooking .After graduation, Steve had no intention of opening a business. But instead moved to San Francisco, where he worked for the renowned Star Restaurant under the direction of Jeremiah Tower. In san Francisco, he found a big opportunities for the development of small restaurant especially for those can provide traditional Mexican food items. And he also found the fast food market was covered by traditional American fast food like KFC. He believes that with his knowledge of food he could make a superior product and capture the success of those small restaurants in a big way. The baby boomer generation and the rise of dual-income families means more people are dining out. There are 77 million Boomers in the US currently and they are getting older and wealthier. Americans can more readily afford to eat out, but they also more time constrained than ever .According to the Department of Labor, more than half of American families were dual earner households and US disposable personal income should continue to grow in the foreseeable future. With both parents holding full-time jobs, less time is left to prepare meals. Simply stated eating out is the most convenient solution and the industry can quickly ramp capacity to meet demand.
5.2 Setbacks Up to 25% of these openings will be what are called “A Model” restaurants, which Chipotle plans to put in well established markets with high levels of brand awareness. A model location will be built primarily in secondary trade areas which have attractive demographics but are typically characterized by lower occupancy costs. The company expects that A Model locations will be constructed for substantially lower investment costs and have lower operating expenses than its recent traditional restaurant openings. The economic environment has put pressure on the commercial real estate market and developers, reducing the number of new real estate developments available to the company, which have historically accounted for a majority of the Chipotle’s new restaurants.
6. Conclusion: Why the company can achieve its goals
6.1Organic, Naturally Raised Foods With an emphasis on great-tasting food, quality and simplicity, Steve entered the natural food niche in restaurant operations. The aim was to review each ingredient used in Chipotle and explore the possibility of incorporating as many organizer naturally raised foods as possible.
6.2 Whole Foods Effect The company is well positioned to capitalize on the “Whole Foods effect” and secular drive towards high quality ingredients. The company is ambitiously redefining the way America grows, serves and eats its food. Most of the food is made fresh daily.
6.3 Restaurant Environment The kitchen and food preparation areas are right in front of the customers and were designed to appeal to the senses. Customers observe freshness, cleanliness and variety at the same time they smell spices. Instead of settling for serapes on the wall, Steve asked sculptor friend Bruce Gueswel to design artwork appropriate to the environment. Chipotle is the only quick –service restaurant that commissions original art for each location.

6.4 Pricing Unlike most quick-service restaurant chains. Chipotle offers no coupons or specials. At Chipotle all food all the time is either full price or free. Price are comparatively reasonable but do vary by the marketplace Free burrito promotions have proven to be very popular and productive in new markets. From there, word-of-mouth supported by free publicity in newspapers and magazines serves as the principal means of promotion..
6.5 Loyalty Repeat visits by customers have proven to be very high within Chipotle restaurants. Chipotle’s loyalty does not only apply to its customers, but also to its employees. They hire talented people who value autonomy ,responsibility , hard work and having a little fun. They encourage people to grow as far as their ability to take them.
6.6 Social networking Steve Ells realized that a successful restaurant had to have a great atmosphere, a good product, effective marketing communications and talented people in addition to good food. Chipotle created an integrated marketing program that delivers superior value, building customer relationships and delight.
Reference
"Habrá producción récord de chile chipotle", ahoramismo, Chihuahua, Mexico, October 4, 2009.
Bayless, Rick; Deann Groen Bayless (1987). Authentic Mexican: Regional Cooking from the Heart of Mexico. New York: William Morrow and Company, Inc. pp. 332–334. ISBN 0-688-04394-1.
Dewitt, Dave; Chuck Evans (1997). The Pepper Pantry: Chipotles. Celestial Arts. pp. 96. ISBN 0-89087-828-5.
Glover, Katherine (2009-09-10). "Chipotle Agrees to Raise Tomato Wages (Finally)". BNET. Retrieved 2009-09-10.
Jones, Robin (2006-04-25). "Chipotle Mexican Grill in Cerritos". Daily News. Retrieved 2009-09-25. Harden, Mark (2009-09-14). "Denton man wins Chipotle ad contest". Dallas Business Journal. Retrieved 2009-09-30. Porter, Jim (2010-09-16). "Jim Porter: Chipotle Mexican Grill violates ADA law". Sierra Sun. Retrieved 2010-10-08. Li, Shan (2011-02-04). "Chipotle chain targeted for federal immigration audits". Los Angeles Times. Retrieved 2011-02-09. Jargon, Julie (2011-01-21). "Chipotle Faces Protesters After Firings Over Audit". The Wall Street Journal. Retrieved 2011-01-27.
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Figure 3: Chipotle Cash Flow

Figure 2: Chipotle Income Statement