Internationalization PlanChipotle Mexican Grill

Brianna Aguiar and Shane Pacheco

0. Executive Summary

● Expand Chipotle Mexican Grill to Spaino CMG (or Chipotle) is a Mexican fast-food chain

restauranto No direct competition in Spain

● Move to major cities with young adultso Target market is college students o Direct subsidiaries should be opened by CMG corp

and they should lease space● Highly profitable venture as we will show

1. Company Analysis

1.1 Vision, Mission, Values & History1.2 Business Model and Value Curve

1.1 Vision, Mission & Values

● Visiono To do a few things but do them exceptionally well.

● Goalo To serve high-quality, delicious food quickly with an

experience that not only exceeds but redefines the fast-food experience.

● Missiono “Food with Integrity”.o Best ingredients raised with respect.

1.1 Continued...

● Valueso Animals & the

environmento Best possible ingredientso Maintaining a loyal

customer baseo Well-trained and capable

employees

1.1 Continued...

● History o Founded by Steve Ells in 1993.

Graduated from Culinary Institute for America. Worked in San Fran and learned about taquerias.

o Opened first Chipotle in Denver near University of Colorado.

o In 1998, McDonald’s invested in Chipotle. Expanded investment in 2001. Fully divested in 2006.

1.1 Continued...

● Currentlyo 1,600 restaurants throughout U.S., Canada, France,

and Germany.o Net income of $327.5 million.

● Expansion o Focus on single target market of millennials.o Reputation for freshness and healthy food, fast.o Small advertising budget: focused on word-of-mouth

in addition to social-media campaigns.

1.2 Business Model & Value Curve

1.2 Continued...

2. Target Market Analysis

2.1 Market Situation2.2 External Environment2.3 Industry Analysis2.4 Internal-External Analysis2.5 Justification of Globalization Opportunity2.6 Target Market and Customers

2.1 Market Situation in Spain

● Type of economyo Mixed-market of private and

public ownership.o 26.3% unemployment rate.o Public debt at 93.7% of GDP.

● Purchasing powero GDP(PPP) $1.389 trillion in

2013.o Per capita GDP at $30,100.

2.1 Continued...

● Consuming Tendencieso 47 million consumers with median age of 40.5 years

old.o 77% of population is urban.o 13% of total expenditure (largest block) allocated to

dining out with $61.8 billion spent in 2010.o Cultural dining habits.

● Important to note economic crisis and current recovery of EU.

2.2 External Environment

2.2 Continued...

● CAGE distanceo 6,151 between the U.S. and

Spain.o Focused mostly on language

barriers, geographic distance, and GDP differences.

o Note: Geographic distance of suppliers to restaurants has to be close, barriers not as much of an issue.

2.3 Industry Analysis

2.4 Internal-External Analysis

2.4 Competitor Analysis

● Main competitorso McDonald’so KFCo Domino’s Pizza

● Important to note:o No direct competition o There are no Mexican fast food chain restaurants in

Spain currentlyo Competitors are simply international fast food chains

2.4 Continued...

2.5 Justify the Globalization Opp

● First of its kind in Spain● Strong over competitors● Establish itself in the market before

competitors could come in● Easy to adapt to cultural habits of Spain● Fresh, delicious food● Opportunity for success

2.6 Target Market and Customer

● Target segmento People who like Mexican fast-food.o Virtually untapped in the Spanish market.

● Target groupo People who prefer eating food with natural/organic

ingredients. As well as fast-food goers.● Position

o A casual dining restaurant chain, serving Mexican cuisine, made using organic ingredients.

3. Internationalization Strategy

3.1 Entry Mode3.2 Pricing3.3 Marketing & Product adaptation

3.1 Entry Mode

● Franchisingo Each restaurant is currently corporately owned.o Chipotle has control of business, risks, and rewards.o Homogeneity across stores and guarantees of

similar practices.● Corporately owned

o Gives Chipotle connections to local/regional farms around each restaurant location.

o Entry mode is the most true to the Chipotle mission.

3.1 Continued...

● Leasing of propertyo Close to universities to reach target market.o Spain is urban-centralized, major city centers and malls

usually have most millennials (target market).o Foreign Direct investment (FDI) for added corporate

control.● Exporting & Joint ventures

o Too costly to export meat and other ingredients abroad.o Joint ventures run the risk of having partners not

interested in our mission of ‘Food with Integrity’.

3.2 Pricing

● Dependent upon the price of raw materialso Buying directly from farms from Spaino Agricultural product price is relatively median here,

so about the average or a bit above the average of the American pricing

● Important to note that we are environmentally friendly and use specialized farms, so product can be more expensive

3.2 Continued...

● Average cost of burrito: 6-8€● Meal deal options:

o Chips and salsao Drinko Total cost average: 9-9.50€

● Extras:o Guacamoleo Cost average: 1€

3.3 Marketing & Product Adaptation

● Marketingo Limitedo Based on word-of-moutho Concert and community

campaignso Spots based on mission

● Product Adaptationo Stick with missiono Perhaps Spanish based extras

4. Operations

4.1 Logistics4.2 Payments4.3 Organization4.4 Human Resources4.5 Financing

4.1 Logistics

● Distribution o Location of restaurants = Madrid,

Barcelona, Bilbao, Seville (cities w/ unis and young adults)

o Leasing space ● Procurement

o Set up ties with local farms o Ship containers, uniforms o Partnership with Coca-Cola in Spain

4.1 Continued...

● Employmento No outsourcing of jobs

from Americao Spanish employees to

increase connection with Spain

o “Chipotle University” to train employees

4.2 Payments

● Accepts credit cards

● App allows you to pay online

● Moving into Apple Pay for future

4.3 Organization

● Each branch has own connections with local farms and outside companies

● Special hierarchy:U.S.

corporate

In-house salary managers

Hourly managers

Line-workers, cooks, etc...

4.4 Human Resources

● Well-trained, helpful employees.

● In-house promotionso 86% of salaried managerso 96% of hourly managers

● Pay and promotion tied to how well you work with others, not sell.

4.5 Financing

● Publicly-traded company.● Finance our new branches off of our

investments.

5. Economic Analysis

5.1 Hypothesis5.2 Relevant Information5.3 Results

5.1 HypothesisWe hypothesize that our Spanish Chipotle branches will be as successful as all of our other branches throughout the world. Because we will be the first

fast-food Mexican restaurant chain in the country, we hope we will have leverage and gain our profits by being unique in the country and by having

no direct competitors. We will discuss more of this in our projections.

5.2 Relevant Information

● Sales Projection and Growth o Revenue first quarter = $1.09

billiono Up 20.4% from a yearo Growth driven by new

restaurantso Expect the same from our

Spanish branches

5.2 Continued...● Expected Market Shares

o 100% Mexican fast-food restaurant chain

o 30-40% international casual fast-food dining

● Expected Costso $850,000 for a new brancho $34,000/month for materialso With profits of $101,000/month, pay off resturants

within 12 months

5.2 Continued...

● Investmentso Already publicly-traded

companyo Hope to increase

Spanish investments by showing how we will better the communities of Spain

5.3 Results

● Cash Flowo Both operating

and investment activities are important for Chipotle’s cash flow so must attract investors and sell well

5.3 Continued...

● Economic Evaluationo Terminal Value

$5.79 billion at a 10% growth rateo Net Present Value

645.27 million at 10% growth rate from 2014-2023

o Internal Rate of Return 71.5% for new branches (extremely high)

6. ConclusionExpanding Chipotle to Spain would be a highly profitable venture for the

Chipotle Mexican Grill corporation. Entering into a virtually untapped market with a very specialized and popular product could only equal success for the

company. The expected returns and benefits are extremely positive, and highly outweigh any risks or costs. We believe that, for Chipotle to continue to grow, the only way that they have left it in the international sphere. Spain is great

expansion option for that growth continuation. Additionally, Chipotle will be able to spread its “Food with Integrity” mission and become a huge member of the Spanish community, known for its commitment to the Spanish people and the

environment. We hope that this report showcases all of this and we cannot emphasize the profitability of this venture enough.