Chipotle is a delicious, and very lucrative, fast-casual restaurant chain and entrepreneurial success story. But did you know that it was started as something as a feeder business by founder Steve Ells to fund a fine-dining restaurant? That it pioneered the use of humanely raised meat in a national chain? And that its growth was partially funded by McDonald's? Read on for more about this entrepreneurial success story.
The Background: Chipotle was founded by the young Steve Ells in 1993. Ells came to cooking during college, and ultimately studied at the Culinary Institute of America. After cooking school, Ells worked the line at the renowned Stars restaurant in San Francisco, being immersed in both cutting-edge, seasonal produce-driven "California cuisine" that ruled fine dining at that time and also the popular (and dirt cheap) taquerías that lined Mission Street and served up bulging burritos to hungry young people.
Initially, Ells wanted to start a fast-casual restaurant that mimicked those popular Mexican restaurants to fund his later foray into fine dining. He borrowed money from his father and opened the first Chipotle in Denver. The business was so successful that the young entrepreneur kept building it.
Apply it to your own business: Most businesses require some sort of initial capital for things like inventory, marketing, physical facilities, incorporation expenses, etc. According to the U.S. Small Business Administration (SBA), "While poor management is cited most frequently as the reason businesses fail, inadequate or ill-timed financing is a close second." Sometimes it comes down to simple cash flow--many companies have closed their doors because they just couldn't make it another few months until the money came in." Read more about startup funding here.
The disruptive idea: Ells believed that Americans would pay more to see their food come together from whole, all-natural ingredients. Early on, Ells made the call that in his restaurants, customers would see workers chopping whole fajita meat and slicing the onions and peppers. No bags of frozen tater tots in this restaurant. Further, in 2000, the chain began an ambitious plan to source as much humanely-raised, antibiotic free meat as possible.
Critical turning point: Outside investment, including funding from McDonald's, allowed Chipotle to expand considerably from its original set of stores. In 2006, Chipotle issued an IPO.
Apply it to your own business idea: Potential investors who read your business plan will want to know how you plan to grow your business once it is off the ground. This entails more than just demonstrating how your revenue will grow. The growth strategy section of your business plan is about proving to others that you have a plan for bringing your product to new customers and new markets, and perhaps even introducing new products. More about planning a growth strategy.
Looking toward the future: Chipotle is famous for its marketing (or lack of overt marketing) to the millennial generation. Sensing that is a generation that is less than trusting of traditional advertising, Chipotle has endeavored to make their outreach more integrated into the lives of those experiencing it. In keeping with that ethos, Chipotle's latest advertising gambit is a slickly produced animated video that shows a scarecrow who, turned off by big agriculture, seeks a return to his agricultural roots. While the spot has attracted plenty of attention already, the jury's still out on how well its working among its intended audience.
Apply it to your own business idea: Social networks are transforming the way customers interact with brands. Master that shift and your business will profit. Take a look at some of the ins and outs of the social networks, and how you can use them to drive your marketing goals.
Want more food business success stories? Read this profile of Ben & Jerry's.