“Chipotle Mexican Grill is a chain of restaurants in the United States, United Kingdom, Canada, Germany, and France that specializes in the burrito and taco-based dishes. As of September 30th, 2017 there are 2,408 restaurants which include both company-owned locations as well as those run by franchisees. The Mexican Grill is part of the fast-casual dining segment; similar to Panera Bread and Noodles & Company, the restaurant serves as a counter-service establishment where people order food at a front register and then dine in. In March 2017, Chipotle announced that it would close around 65 -70 restaurants, with the majority being closed by May 31st .In September 2018, Chipotle announced a new CEO. Let’s go over Chipotle’s Porter’s Five Forces Model Analysis.
Chipotle Competitive Rivalry:
In December 2017, Chiptole announced that it will be adding queso to its menu. The Mexican Grill had resisted calls for the creation of an item with so-called “cheese food,” but has finally yielded to market pressure. It is widely expected that Chipotle will face competition from other chains, such as Taco Bell and Moe’s Southwest Grill, which both offer queso on their menus. Additionally, fast-casual restaurants are seen as one of the most competitive markets in the entire restaurant industry. Chipotle has faced problems before in its previous attempts to expand into new markets, and it will need to be careful when trying to move into these areas.
Chipotle Bargaining Power of Suppliers:
The Mexican Grill’s menu consists of nine main ingredients, including beef, pork, chicken, tofu (known as sofritas), steak tomatillo green chili salsa (known as tomatillo red chili salsa), barbacoa, cilantro-lime white rice, black beans, romaine lettuce, and cheese. The company sources its ingredients from a network of around 20,000 suppliers. Chipotle’s relationship with these suppliers is strong for the most part; however, outbreaks like E. coli or norovirus can cause some suppliers to be more reluctant to work with Chipotle in the future. The Mexican Grill will need to maintain positive relationships with these suppliers if it wishes to continue to serve high-quality food.
Chipotle Bargaining Power of Buyers:
There are many factors that affect Chipotle’s ability to influence the bargaining power of its buyers. As a fast-casual restaurant, the Mexican Grill competes in an industry where customers tend to be more price-sensitive. This is in direct contrast with fine-dining establishments. Additionally, the restaurant industry has seen a shift towards customers who want to spend less money on dining out, which puts Chipotle at an even greater disadvantage.
Chipotle Threat of New Entrants:
The majority of Chipotle’s suppliers are already part of a larger group, which means that it is unlikely that the Mexican Grill will face any significant new entrants into this market. Furthermore, the barriers to entry for fast-casual chains are high; companies like Panera Bread and Noodles & Company have had success in this area and Chipotle will be hoping to follow suit. However, there is a significant chance that other companies could enter the market and sell similar products to Chipotle’s customers at lower prices.
Chipotle Threat of Substitutes:
Since it competes in the fast-casual restaurant segment, Chipotle will face a number of substitutes as it expands its operations. Some of the most prominent substitutes include Subway and Taco Bell, which both offer Mexican-themed menus. These two chains specialize in speedy service and value for money, something that Chipotle has struggled with during its recent history.
Chipotle Porters Five Forces Conclusion:
“Chipotle’s value chain is complicated by the fact that most of its suppliers are part of larger groups. This means that they will likely be difficult to influence. However, it does have strong bargaining power with its buyers because fast-casual restaurants depend on their relationships with suppliers in order to deliver high-quality food.