The Chipotle Model

Let me commend to your attention the business model developed by the chain of Mexican restaurants called Chipotle, if you have not already considered the brilliant simplicity of it for yourself. Of course, not every great business concept results in a successful company; many beautiful ideas are destroyed before they ever get off the ground by bad planning, incompetent management, poor economic conditions, bad timing, and simple human greed and stupidity, but this one has been remarkably successful so far. I think it’s worth taking a closer look at how they do things.

For those of you not familiar with the chain, it’s a high-volume, medium-to-low price restaurant intended to be a step above fast-food Mexican chains like Taco Bell or Del Taco. You can visit their website here, if you’d like to take a look at their menu, locations, or restaurant designs. They go in for simple furnishings and decorations, a sort of post-industrial look in corrugated iron and concrete, no attempt to suppress the ambient noise, Mexican popular music (usually just barely audible over the din of ambient noise), and so on. There’s generally as much seating, indoor and outdoor, as they can manage, and it’s almost never enough to handle the volume that a Chipotle generates.

What makes these operations unique in my experience is the simplicity of the menu. They offer six basic products: a burrito, soft tacos, crunchy tacos, a burrito bowl (the contents of a burrito in a bowl, for a low carbohydrate option), a taco salad, and a fajita-style burrito (just like a regular burrito but with the addition of grilled vegetables). The customer can choose one of five fillings for any of these products: chicken, steak, the broiled pork dish called carnitas, the Mexican-style shredded and braised beef dish called barbacoa, and grilled onions and peppers (for the vegetarian customer). In addition, the customer can choose one of four types of fresh salsa, and can elect to have cheese, sour cream, guacamole or lettuce added to their meal as they see fit.

Sounds simple enough, right? Except that if you multiply six products by five fillings by four salsas you have 120 menu choices; the four optional menu choices add 16 (2x2x2x2) additional possibilities, for a total of 1,920 menu items. This does not even consider “special” items, like a quesadilla (with or without any of the meat fillings) or nachos (ditto), which don’t appear on the menu boards but are available if you ask for them. With all of the various options included the Chipotle menu offers well over 2,000 possible meals, but the restaurant only needs to cook the 5 fillings and the beans and rice, and mix up additional salsa and/or guacamole if they run out during the day. All of the various combinations are assembled on the production line right in front of you once you place your order. As a side effect, it takes almost no time to get your food.

The resulting efficiency allows a Chipotle to generate a preposterous number of meals in a relatively small retail space, while at the same time using a better quality of food ingredients for a relatively small mark-up over the competition. The upshot is that while a meal at Chipotle may cost $7 compared to $5 for its Taco Bell equivalent (a 40% markup – but only $2 in absolute terms, which isn’t really significant), it’s much better food, including all natural ingredients, beef and pork without steroids, cheese and sour cream without growth hormones, tender chicken, steak that actually tastes like high-quality steak (because it is), and so on. Most people have no problem paying the extra couple of dollars for the superior food, and in fact, many people who would never consider eating Taco Bell or Del Taco food will happily eat at Chipotle. The chain has grown explosively over the past few years, as a result, and may be coming to a strip mall near you soon…

Now I’m not suggesting that every type of business could be operated this way; the Chipotle model is brilliant in its simplicity and remarkable in its operational success, but not every company would be able to duplicate this sort of thinking. Still, it might be worth your time to consider how 6 basic products turn into 2,000 plus menu choices, and think about how your business could multiply its impact in this fashion…