Lessons for Chipotle
In many ways, the burrito roller is already following in the footsteps of the coffee giant. Chipotle Mexican Grill, Inc. (NYSE:CMG)’s recent decision to expand its Sofritas offering shows that management is not afraid to shake up its menu and stay ahead of the competition by offering a tofu-based meal that provides an option for vegetarians. As Chipotle matures, it will hopefully take similar steps to keep its menu fresh, and offer customers some variety. In the way that Starbucks has branched out with Teavana and Evolution Fresh, Chipotle has made a similar effort by opening its ShopHouse Southeast Asian Kitchen. While ShopHouse is just in its infancy, with its third and four locations set to open this month, it gives Chipotle another way to assert its dominance of the high-quality fast-casual segment, the way Starbucks has become synonymous with high-end coffee.
Starbucks’ success abroad also looks promising for Chipotle, which has just begun to open stores in Europe. Though the majority of its sales still come from the US, the coffee chain now operates in 60 countries, and has seen incredible in growth in Asia of late. The popularity of other fast food chains abroad such as McDonald’s Corporation (NYSE:MCD), KFC, and Subway also bodes well for Chipotle’s international expansion plans.
Foolish bottom line
The coffee market, of course, has several key differences from the burrito market, and Chipotle cannot emulate Starbucks in every way. Coffee is a much stickier product than burritos, meaning Starbucks customers visit its stores more frequently, because coffee tends to be consumed daily, or even multiple times a day. Similarly, coffee lends itself more to consumer products, and co-branding and licensing opportunities, as the product is simply more flexible and adaptable by its nature.
Above all, however, Starbucks serves as a model of how to create a stellar food-service brand with multiple growing revenue streams. Chipotle would be mindful to follow its lead as a symbol of high quality, which means continuing to raise its “Food with Integrity” standards as they are an important differentiator from its competitors. Chipotle will also need to keep innovating both in new products as well as other areas like payment options, and continue to take advantage of market opportunities as they arise.
As Starbucks has shown, establishing brand dominance enables enormous growth opportunities. Even after two decades of expansion, the company has no plans to slow down. It expects to open 1,400 new stores in its next fiscal year, and grow earnings 18% to 22%. With only 1,500 stores currently, Chipotle looks minuscule by comparison. Its investors can only hope that, in 20 years, the burrito chain is boasting numbers like Starbucks’ today.
The article What Chipotle Can Learn From Starbucks originally appeared on Fool.com and is written by Jeremy Bowman.
Fool contributor Jeremy Bowman owns shares of Chipotle Mexican Grill (NYSE:CMG). The Motley Fool recommends Chipotle Mexican Grill, McDonald’s, and Starbucks. The Motley Fool owns shares of Chipotle Mexican Grill, McDonald’s, and Starbucks.
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