Chipotle and the Fast Casual Revolution

How a Mexican restaurant chain is taking on the entire fast food industry…

The fast casual craze is a relatively new phenomenon. As consumers are demanding higher standards for food quality and freshness in their ingredients, the fast food channel (McDonald’s, Taco Bell etc.) has experienced only slight growth while fast casual (Chipotle, Shake Shack etc.) has grown over 550% since 1999. Since its inception in 1993, Chipotle has served as the trailblazer in this space with many competitors trying to replicate the business and operating model that seem to be in perfect alignment with one another.

Fast Casual


Business Model         

Chipotle’s founder, Steve Ells, sought to revolutionize the fast food dining experience by offering its customers an extremely unique value proposition.


Food With Integrity: Unlike its lower quality competitors, Chipotle only serves its customers the freshest and highest quality ingredients. It creates value to its consumers because they trust the ingredients in their meal have never been frozen along the delivery process and its employees have spent several hours preparing and chopping that day to ensure maximum freshness. The company is able to capture value by charging its consumers a slight premium to the average price point in a fast food joint.


A Few Things, Thousands of Ways: Chipotle has a very short list of ingredients (~20) that it offers its consumers. As a consumer, the buying process is extremely simplified as you are only given the option to buy “burritos, burrito bowls, tacos and salads” with the opportunity for variation with meat preference and toppings.


Food Served Fast… So That Customers Can Enjoy It Slowly: In addition to offering high-quality food in a simplified ordering experience, the customers gain much of their value from the speed in which they are served. In the busiest locations, Chipotle can serve upwards of 300 customers in one hour. Like most fast casual restaurants, Chipotle has a more upscale dining ambiance with fine wood and metal as opposed to fast food’s “Formica counters and fluorescent lighting”. While the environment is extremely inviting to the customers who want to dine at the restaurant, the speedy service caters to the majority of Chipotle customers who want to grab and go.


Operating Model

Close Relationships with Suppliers: With a limited number of ingredients, Chipotle can afford to source its ingredients from a short-list of suppliers. Each supplier is heavily inspected by the company to ensure high-quality food product and best farming practices. The suppliers must align with the overall mission of the company or lose the business of their largest customer. Unlike most fast food joints, Chipotle is at great risk of severe spoilage costs because their ingredients are never frozen. Having such a dedicated group of suppliers allows Chipotle to receive fresh delivery of ingredients every morning and minimize their inventory in the restaurant.

Culture of Top Performers: Just as Chipotle is willing to pay a slight premium for its high-quality ingredients, the company also believes in hiring and developing the best talent at a premium salary. Each employee must understand and buy-in to the vision of the company and provide best-in-class customer service to add even further to the dining experience. With over 98% of hourly management being promoted from within Chipotle, the company has successfully aligned the incentive structure with the overall strategy of the business.

Chipotle has a new menu item, tofu sofritas, for all of the vegetarian and vegan customers. (Michael Shaw/Emerald)

The Four Pillars of Throughput: As mentioned above, the main objective of the Chipotle staff is to serve its customers as quickly as possible. To minimize this wait time, Chipotle has perfected its assembly line service in what it calls “the four pillars of throughput.” The first set of tasks in the assembly line is called the “mise en place”. It is their job to create the actual food from ingredients (meats, guacamole etc.) to end product (burrito, bowls, salads etc.). The “mise en place” only functions at maximum capacity if the dedicated “linebacker” constantly stocks the ingredients to prevent bottlenecks. Next, they have a dedicated expeditor who is in charge of managing drink and chip orders before reaching the final employee in the process: the cashier. While each employee is cross-trained to serve all different steps in the assembly line, Chipotle encourages its managers to put their “aces in their places” to maximize production. With the assembly line, each customer can experience a cycle time of under one minute as long as there is not a line.



In conclusion, Chipotle will continue to outpace its competitors as long as it can continue to align its business and operating model. As new players continue to enter this attractive space of fast casual, Chipotle must differentiate itself by delivering on its value proposition of high-quality food served quickly in an upscale environment.


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Student comments on Chipotle and the Fast Casual Revolution

  1. Very interesting article. Even though Chipotle is like the primary food source of the entire NY finance industry, I hadn’t fully appreciated the differentiation of its operating model and that’s why it’s been able to dominate the category. For example, you usually get 40+ people lining up for lunch, but the line goes by relatively quickly and you can get out of there in <10 minutes…which points to the short cycle time you mentioned. They also recently instituted a "to-go" option where you can actually order online and pick up your burrito at the to-go window. I also didn't realize that the food is never frozen, which is probably why it tastes better. I wonder if Qdoba or fast casual restaurants for other cuisines operate a similar model.

    The company hasn't really had to drive continuous innovation yet, but at some point it may have to, if people get tired of eating the same thing. In the end, it's all just rice, beans, beef, cheese and guac and it goes to the same place. It will be interesting to see how Chipotle manages that, and how it fits into the "few things thousands of ways" philosophy.

    In terms of the supplier base, ironically they had two hiccups recently (the lack of pork awhile ago, and now with all the Boston College kids that got poisoned). With the pork situation, I wonder if people actually tasted difference between the naturally-fed pork and the other type of pork, and whether that points to the level of (or lack of) consumer value that all-natural ingredients create, per the company's business model.

  2. Hi David,

    Very interesting read, but I believe you are aware of the recent E. coli outbreak in Chipotle’s restaurants. The whole scenario kind of gives an ironic take on the core value of ‘food with integrity’ for Chipotle. The stock price fell over 25% in the past two months. The situation is alarming as the incident highlights a weakness in the operating model. As I understand, Chipotle only procures fresh ingredients to support its business model of ‘food with integrity’. But unfortunately, this model requires Chipotle to deal with an extensive number of suppliers which has caused a major relapse in quality control. It would be interesting to see how the company revamps the supply chain to overcome the current hurdle. Chipotle cannot afford to go back on fresh ingredients, so I feel the likeliest solution would either focus on extensive quality checks or supplier management.

  3. To agassin’s comment, I don’t necessarily see the variance in order size as a weakness. While there are some hacks, like the 50/50 meat strategy, which are probably process flaws, Chipotle actually universally allows you to ask for extra quantities of almost any ingredient (with meat being an exception) at no additional cost. I think this is an extension of Chipotle’s “A Few Things, Thousands of Ways” strategy that David mentioned, which caters to individual customer preferences. I think it provides a refreshing contrast to the one-size-fits-all model you see at a lot of conventional fast food restaurants.

    I eat at Chipotle a few times per week because it’s by far the best place I’ve found that balances generous portion sizes with a moderately healthy nutritional profile and reasonable price. I choose it over Felipe’s every time solely because I can engineer a massive order. I’ll acknowledge I’m on the higher end of the spectrum in terms of how much I eat, however.

    For those of you who want to optimize* orders at Chipotle, this is a good read:

    *Optimize to be the most full…

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