Chipotle Mexican Grill (CMG, Financial), the fast casual chain, is attracting increasing number of Americans evident from its customer growth figures. In 2013 both Chipotle and fellow peer Panera Bread (PNRA, Financial) reported an average customer growth of 8%. In the last quarter Chipotle saw customer growth of 20% in the U.S., while McDonald’s (MCD, Financial) guest count tumbled 3.3%. The fast casual limited service restaurant is posing a threat to fast food chains and eating into their market share.
In fact, the growing popularity of Chipotle has gradually changed the perception of customers towards fast food chains like McDonald’s. As Chipotle offers healthier food options, health-conscious customers are preferring it over others. Let’s look into the secrets behind Chipotle’s success and the trouble it’s creating for McDonald’s and Burger King (BKW, Financial).
Source – Wikimedia Commons
The secret recipe of Chipotle
McDonald’s once used to have 90% stakes in Chipotle. However, it sold its stakes in order to concentrate on its own business. Today, Chipotle is the fastest growing fast casual chain, while McDonald’s is losing ground. Some of the tricks that have worked in favor of Chipotle include offering customization in menu, minimising waiting time, and keeping the number of items low in the menu list but effective. The company has been able to minimize customer wait times which is very crucial for plenty of visitors. It also reveals how quick and efficient Chipotle is in providing service. On the contrary, long waiting time is one of the biggest challenges McDonald’s is facing.
Also, though Chipotle is more expensive than McDonald’s, people are ready to spend the extra bit knowing the fact that it provides food that is high in quality and nutrition. Apart from this, it provides a great dining experience to the customers. Chipotle’s main strategy is to get itself positioned in between fast food restaurants and casual dining restaurants.
Typical fast food chains tend to cut down on their labor costs, which in turn reduces efficiency. On the contrary, Chipotle aims to pay more and automatically expects greater dedication and higher efficiency from its employees in return. If employees are paid higher wages, they tend to be more efficient which is exactly what Chipotle is doing. However, spending more on employees doesn’t mean Chipotle isn’t spending on ingredients. The burrito maker believes in delivering top notch service that includes efficient employee service, best quality ingredients and clean store environment – something that many fast food chains miss out.
How Chipotle poses a threat to McDonald’s
McDonald’s poor run in the U.S. market is mainly because of the success of Chipotle. The Big Mac maker has been involved in controversies related to supply of unhealthy food pumped up with antibiotics in China, and this has scarred the company’s global reputation. In a situation such as this, Chipotle claiming to sell organically grown healthy food is pulling customers away from McDonald’s.
Another point where Chipotle scores over McDonald’s is on menu. While the former has maintained the same menu ever since it entered service, McDonald’s has been expanding the menu, making it utterly confusing for customers. This move has backfired the company, giving an edge to Chipotle. Chipotle from the very beginning understood that it doesn’t need tons of items to grow its customer base.
The third blow that came from Chipotle was the amount of customization that it provides. Watching the success of its peer, now even McDonald’s is testing customization of its burgers. This shows how McDonald’s is slowly trying to change itself with changing consumer preferences. Undoubtedly, Chipotle has set a trend that even McDonald’s can’t resist incorporating.
