Case 10 Chipotle Mexican Grill in 2012: Can It Hit a Second Home Run? (see Exhibit 1), due to cost savings realized from to be building more lower-cost A Model restaurants and the C-123 cated growing use of its new simpler restaurant design. Chi- COMPETITION ctive Botle anticipated that average development costs for had new restaurants to be opened in 2012 would be similar Chipotle competed with national and regional fast- To 2011. In 2012, senior Chipotle executives expected casual, quick-service, and casual dining restaurant res- 1. In That the company's annual cash flows from opera- chains, as well as locally owned restaurants and food service establishments. The number, size, and strength for lions , together with current cash on hand, would be adequate to meet ongoing capital expenditures, work- of competitors varied by region, local market area, and sing a particular restaurant's location within a given com- cor- ing capital requirements, and other cash needs for the munity. Competition among the various types of res- it 4 foreseeable future. taurants and food service establishments was based otle on such factors as type of food served, menu selection including the availability of low-calorie and nutri- on- The ShopHouse Test Concept om The Shop House Southeast Asia Kitchen format being tional items), food quality and taste, speed of service, price and value, dining ambience, name recognition 011 tested grew out of Steve Ells's belief that the funda- and reputation, convenience of location, and cus- mental principles on which Chipotle Mexican Grill tomer service. restaurants were based-finding the very best sus- Myriad dining establishments specialize in ably raised ingredients, prepared and cooked Mexican food. The leading fast-food chain in the using classical methods in front of the customer, Mexican-style food category was Taco Bell. Chipo- and served in an interactive format by special people tle's two biggest competitors in the fast-casual seg dedicated to providing a great dining experience- ment were Moe's Southwest Grill and Qdoba Mexican could be adapted to other cuisines. To test the Chi- Grill. Two smaller chains, Baja Fresh and California potle model with different ingredients and a different Tortilla, were also competitors in a small number of style of food, the company opened its first Shop- geographic locations. House Southeast Asian Kitchen on Dupont Circle in Washington, D.C., in September 2011. ShopHouse Taco Bell served a focused menu consisting of rice bowls, Going into 2012, Taco Bell had 1,201 company- noodle bowls, and banh mi sandwiches, made with owned and 4,029 franchised restaurant locations in a choice of grilled steak, grilled chicken satay, pork the United States, plus another 3 company-owned and chicken meatballs, or organic tofu. In addition to and 237 franchised international locations. Since a choice of meats or tofu, the rice and noodle bowls 2005, the total number of Taco Bell restaurants, both included choices of four fresh vegetables, a sauce (red domestically and internationally, had declined by or green curry or tamarind vinaigrette), and a garnish about 200 units, due to more closings of underper- and topping (including chili-jam marmalade, roast forming locations than openings of new Taco Bell corn with scallions, Chinese broccoli, pickled vegeta- units. Same-store sales at company-owned Taco Bell bles, and assorted aromatic herbs). Customers could restaurants in the United States declined by 2 per- have their dishes made anywhere from mega-spicy to cent in 2011, and 74 Taco Bell locations were refran- chised in 2011. In December, parent company Yum! mild. The flavors were a blend of Thai, Vietnamese, Brands announced that it would reduce company and Malaysian. ownership of Taco Bell locations from 23 percent As was the case at Chipotle, customers moved of total locations to about 16 percent over the next along a cafeteria-style line, with servers behind the two years. Yum! Brands also owned Pizza Hut, and counter customizing each order; there was room KFC (Kentucky Fried Chicken); the company sold its for seating or customers could have orders readied A&W All American and Long John Silver's brands in for take-out. The interior of the Dulles Circle Shop- December 2011. House resembled Chipotle interiors-sparse and a In 2010, Taco Bell had U.S. sales of $6.9 billion bit industrial, with an attention to such environment at combined company-owned and franchised Taco taly green detail as high-efficiency lighting. Much Bell locations, compared with $6.8 billion in 2009 and of the dining area was constructed with recycled $6.7 billion in 2008. Average sales at Taco Bell restau- materials, including d ing dark maple treated to look rants were $1.28 million in 2011, versus averages of like teak.