uploads///Labor Expense

Why Is Chipotle Different from Other Restaurants?



Different menu strategy

Chipotle Mexican Grill (CMG) hardly ever changes its menu or introduces new products. This is unlike other chains such as Wendy’s (WEN), Taco Bell under the umbrella of Yum! Brands (YUM), and McDonald’s (MCD).

This is an important strategy from an operations standpoint. Employees don’t have to learn to prepare new items on the menu, which can slow them down and affect throughput. Then it all comes down to how quickly Chipotle employees can serve a long line of customers.

The Consumer Discretionary Select Sector SPDR Fund (XLY) holds 1% of Chipotle.

Article continues below advertisement

Tuition reimbursement plus vacation for all equals a stronger work force

In June 2015, Chipotle Mexican Grill announced it will reimburse tuition fees and give paid vacation time and leave pay to all its employees, including part-timers, beginning July 1, 2015. According to Nation’s Restaurant News, the reimbursement amount will be limited to $5,250 per calendar year.

Currently, Chipotle’s labor costs account for 22% of revenue. The new reimbursement initiative will add to this cost, but in return, the company expects to have higher employee retention. High school and college students are Chipotle’s target employee demographic, according to JD Cummings, Chipotle’s national recruiting consultant.

The initiative will provide a career path to Chipotle employees along with an opportunity to grow in the company. This gives employees a reason to stick with Chipotle for a longer time. According to the National Restaurant Association, the restaurant and accommodation industry has an employee turnover rate of 66.3%.

A unique business model

ShopHouse Southeast Asian Kitchen is built on Chipotle’s scalable business model, which can be used to replicate any food category. Chipotle is also trying out pizza through its Pizzeria Locale restaurants.


More From Market Realist