Chipotle Case Study

Chipotle Assignment and Discussion Questions

1. Using Porters five elements of a good strategy, explain Chipotles go to market strategy at the time of the case. Did it have a sustainable competitive advantage? How was it able to differentiate itself in such a crowded and highly competitive restaurant market? Why did other competitors have a hard time copying their strategy?
2. What are the main value drivers for Chipotle? What were the factors that allowed Chipotle to be such a successful investment over time? Please refer to its operating metrics, the income statement, balance sheet, and funds flow statement in your answer.
3. How did food safety issues emerge? Were these a function of its value chain or could they have been avoided? How did the company respond to the food safety issues and were the changes that were implemented have any impact on its value proposition/value chain?
4. Did the companys response to the food safety issues impact its long-term value drivers? Explain in detail and provide financial measures to support your views.
5. Why did Chipotle sell at such a high valuation through 2024? Provide financial measures to support your response. Did its valuation make sense?
6. What were the issues that caused Chipotle to experience a sharp slowdown in growth? What are the metrics that suggest Chipotles competitive advantage is facing pressure? Are these issues economic driven or are there other issues impacting them? Are these issues temporary that can be fixed or is Chipotles competitive advantage permanently impaired?
7. Explain the valuation of Chipotle versus McDonalds using 2025 estimates. Why do the two companies sell at such different valuation metrics? Do these multiples make sense? The valuation data for MCD is on the bottom of the CMG spreadsheet.
8. Based on the Excel spreadsheet through 2027, what are investors assuming regarding Chipotles performance to justify its present valuation versus the assumptions used in the model? Does this make sense strategically and financially?
9. Can sustainability be a differentiator in the marketplace today? (in class discussion only)