I walked into Chipotle just the other week, looking for something really quick to eat but hoping to also get a comfortable chair to rest for 15 minutes. I’ve actually never stepped foot into a Chipotle before this moment. I expected that it would give me something quick to fill my stomach before I made it to my next meeting.
I was met with a pleasant surprise the minute I entered. I sensed something different. This was not the fast-food place I expected. It had this really comfortable atmosphere: clean, inviting, well decorated with comfortable seating. It seemed more upscale than what I was used to for any fast meal.
Then I turned to the counter where I noticed the fresh ingredients and the staff assembling everything before my eyes. When I looked at the prices, written with “artful-precision” on the chalkboard above, it occurred to me that these prices were not that far off than what I’d pay normally at the nearest McDonald’s.
I pleasantly enjoyed my Burrito bowl, seated at the beautiful harvest table, and to decided to spend some additional time taking in the unexpected but relaxing atmosphere.
The Chipotle Effect
Paul Barron, is a restaurant and media expert, CEO of @Foodable Web TV, Founder of FastCasual.com and Author of the well-renowned book: “Chipotle Effect” He writes about how it all started for Chipotle:
Launched by Steve Ells in a space near the University of Denver in 1993, the restaurant grew quickly, open-ing its second location in 1995 and continuing its expansion first with a loan from Ells’s father and later with a $1.8 million Small Business Administration loan. Ells, who had no business back- ground, had clearly tapped into an unmet need among diners for healthful, fresh Mexican cuisine, and the Chipotle brand began to take shape: sustainably sourced ingredients, a simple menu, and impeccable quality.
It helped that McDonald’s took interest and was a major investor. That helped spur the growth of 500 company-owned restaurants by 2005.
Paul talks about the number of players in the business that had similar offerings as Chipotle, but none were able to truly capitalize on the unmet need like Steve Els. As well, in an economy where disposable income was low and people were highly price-sensitive, it was risky to launch this concept while competing head to head with the fast food giants. Clearly, there had to be some enormous hesitancy whether or not this would fly.
In 2001, Chipotle released its mission statement called Food with Integrity which drew awareness for the Company’s efforts to use “naturally raised meat, organic produce and dairy without added hormones”.
Healthy is “IN”
While Chipotle was early to the game, it could not have possibly banked on the prominent demand for healthy and fresh food that exists today. Here are some recent stats:
- Millennials are considered the most ethnically diverse in US history. As strong consumers within the QSR space, “19 percent are Latino, 13 percent are black, four percent are Asian.” As well, “one in five have an immigrant parent and one in 10 have a parent who is not a U.S. citizen”. it’s clear this generation is driving the foundation for more ethnically-diverse cooking.
- According to this survey, the authenticity is demanded among Ethnic food fans. In fact: “Ethnic food fans also placed importance on all-natural (49%), premium/gourmet or artisanal (49%) and reduced fat (48%).”
- The aging boomers are more prone to heart disease and diabetes. While Millennials have an enormous impact on the evolution of the QSR, we must also realize the “Boomer population will control just over half the dollars spent on grocery foods in 2015 ($706 million each year)”. A survey among those 65+ was conducted in the US and Canada. Some findings indicate:
nutrition and healthy eating habits are top priorities for the Boomers, who are more concerned than any other age group about nutrition when planning a meal. 72% of Canadians age 65+ regard nutrition as important as taste.
In the United States seven out of ten Boomers seek more fiber, 60% try to consume less fat and cholesterol, and 40% aim to eat fewer fried foods.”
The Brand is Everything
Unlike many restaurant chains, absolute control of the brand is unlikely in a franchised model. All of Chipotle’s restaurants are company-owned, rather than franchised. This may mean much higher overhead for Chipotle but it also means they control the brand and the customer experience. This, I believe, has been pivotal to the company’s success thus far.
This also means that, in an evolving space where consumers scrutinize brands more openly and hold them to a higher bar of accountability, Chipotle can have greater control over its message and the relationship with the customer and its naysayers.
In a recent article, Chipotle Gets Dinged by Social Consumers: Pricing Points Impact Social Guest Satisfaction, this article suggests that the rise of social media has also warranted the development of a Restaurant Social Media Index, which tracks, compiles and analyzes social media “restaurant consumers” for the industry.
It’s here that its Social Guest Satisfaction Score (SGS) dropped from 87.6 to 59.3. Faced with rising costs of beef and dairy, Chipotle has had to increases their price to the customer – the first time in three years. Earlier reports suggest, that this had minimal impact on the customer, it’s clear that the “value for value” expectation is coming to the forefront. Experts contend that as these costs hit the broader market, the “knee-jerk” reaction from consumers may be just that.
Chipotle, in my opinion, is well primed to respond to consumer dissatisfaction. After all, its rise in a nascent market amidst low demand, high price sensitivity and a volatile economy, have not kept this restaurant warrior down.
As healthy lifestyles and sustainability continue to matter for the majority of North Americans, the Chipotle Effect will continue to set the standard for the next decade.