Chipotle, the popular Mexican restaurant chain, is a great example of effective alignment between business model and operating model. “It works because of our system,” says the founder Steve Ells , and I think he is absolutely right. We can see the alignment reflected in the way the company designs and manages each of its stores, as well as in the strategic decisions that they took for the restaurant chain as a whole.
As the company website stated , Chipotle is in “the business of good food”, with the emphasis on “good”. Their core business model relies on the creation of an enhanced fast food experience in all of their stores. Chipotle combines elements of fine dining with the convenience of quick-service restaurants, creating value for the customers by offering quality food, clean dining environment and efficient service. Such hybrid dining experience, as FastCompany magazines calls “Fast Casual” , really resonates with middle class consumers and made the Chipotle brand stand out from the competition.
Chipotle’s business philosophy is reflected in many features of the restaurant’s operating model, both on the “fast” and the “high quality” perspectives, and a lot of those features run against conventional wisdom in the fast food industry.
- Chipotle stores maintain high throughput rate. Data shows the most popular stores turn over 300 customers per hour and an average store made $2.5 million revenue in 2014 with each bill averaging $10 dollars (that is, 250K customers turned over) . In order to achieve high efficiencies, the ordering system in the stores is arranged like assembly lines. From start to end, customers construct their perfect burritos with the help from multiple servers, each taking ownership of only a small portion of the work. Such division of labor streamlines the process and reduces the variability in throughput speed without sacrifice the flexibility for the customers to make choices on what goes into the meal. This setup is very consistent across all Chipotle stores, so customers can expect the same level of service anywhere in the country.
- Chipotle only sources high quality ingredients and prepares its food fresh (the stores have no freezers), because the company believes consumers can taste the difference . This decision is reflected in the premium pricing. They also only sell full price items and rarely run promotions, which is a very uncommon strategy given competitors such as Taco Bell famously offer “value menus” that have items priced around one dollar . Both of those decisions set apart Chipotle from similar fast food restaurants, and created the image of a higher-end, healthier food chain, making customers willing to pay a premium for the better quality food.
- Chipotle’s menu remains very simple and focused. Despite the recommendations from McDonald, which was once one of Chipotle’s big shareholder, Chipotle refused to serve “low risk high profit items”, such as coffee and cookies , because they do not fit with their signature dining experience.
- While fast food industry is notoriously for paying low wages, Chipotle pays its employees well. What comes with this policy is a rigid performance review system. Low performers are dismissed regularly. The result of this policy is reflected on the high customer and employee approval rate. Chipotle constantly placed among the tops on the ACSI Limited-Service Restaurant Ratings , which measures customer satisfaction among mainstream US fast food restaurants.
The list goes on. Each of the operating feature contribute to the business model (“Fast Casual”) and the business model leverages the operating features (e.g. fast moving line, high quality food) to further drive the brand. The performance impact is huge – Chipotle has expended quickly to now with over 1,700 locations and 45,000 employees , and frequently ranked the best chain Mexican restaurant in the country.
 David A. Kaplan, “Chipotle’s Growth Machine”, Fortune, http://fortune.com/2011/09/12/chipotles-growth-machine/
 “About Us”, Chipotle.com, http://www.chipotle.com
 Denise Yohn, “How Chipotle Change American Fast Food Forever,” Fast Company, http://www.fastcompany.com/3027647/lessons-learned/how-chipotle-changed-american-fast-food-forever
 “Why Chipotle Mexican Grill Stores are Way More Profitable than McDonald’s”, The Motley Fool, http://www.fool.com/investing/general/2015/04/15/why-chipotle-mexican-grill-stores-are-more-than-50.aspx
 Ashlee Kieler, “Chick-fil-A, Chipotle Lead In Customer Satisfaction Survey, McDonald’s Brings Up The Rear… Again,” Consumerist.com, http://consumerist.com/2015/06/30/chick-fil-a-chipotle-lead-in-customer-satisfaction-survey-mcdonalds-brings-up-the-rear-again
 Jessica Shambora, “Chipotle: Rise of a fast-food empire”, CNNMoney.com, http://archive.fortune.com/2010/10/06/smallbusiness/chipotle_started.fortune/index.htm