Every company must balance the extent to which it wants to make improvements of any kind against the costs of doing so. For Chipotle, the fast-food chain that has largely been responsible for changing the way people imagine fast food, that balance is never more evident than in the kitchens.

Chipotle seeks to give consumers the sense that their meal is being made fresh, right before them. It allows people to customize exactly what goes into their burrito, on the fly, and it is happy to accommodate requests for extra lettuce or hot instead of mild salsa. In these promises, along with its assertion that its food is largely ethically sourced, Chipotle differs notably from its more traditional fast-food rivals.

In some cases, the perceptual distinctions it encourages are accurate, but to be able to control its costs, Chipotle also relies on some conventional approaches. Anyone can have more lettuce, for example, but asking for more beef, sour cream, or chicken—which are far more expensive items for Chipotle to source—will lead to an upcharge. On average, though the food is still affordable, meals cost consumers about twice what they would pay at McDonald’s, for example.

Furthermore, though some of the options available on the burrito line truly are freshly chopped and prepared, others are frozen and shipped in, then finished in the restaurant kitchens. Tomatoes offer an instructive example. In the past, Chipotle chopped not-quite-ripe tomatoes in a central location, bagged them, and shipped then all around the country. But they didn’t taste very good, so it tried moving the chopping step closer to the end customer, having prep cooks chop the tomatoes each morning. This option proved far too labor intensive, leading Chipotle to come up with a compromise option: Whole tomatoes enter a chopping machine that is on site in each restaurant. The result might not be as good a hand-chopped versions, but it is less expensive, and it is better than precut, bagged tomatoes.

Although it tried a similar approach to onions, the restaurant chain quickly learned that automated choppers did a poor job with the fragrant vegetables, producing overly watery samples that totally overpowered any other flavors in a dish. Thus, in each store around the country, about 10 employees arrive approximately four hours before they open, ready to dice onions, as well as cilantro, jalapeños, and salad lettuce.

The balance that Chipotle has found seems to be holding quite well. Its more than 1,800 storefronts enjoy continued growth, while traditional fast-food rivals are struggling with sinking sales and diminished popularity among consumers who demand fresher food options.

Discussion Questions:

1. What is Chipotle’s retail format?
2. What are its bases for sustainable competitive advantage?

 

Source: Sarah Nassauer, The Wall Street Journal, February 24, 2015