Chipotle spices up fast-food formula

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Rave reviews from food critics are not what one would expect for a fast-food chain. Neither are massive burritos and margaritas. But Chipotle Mexican Grill defies convention not only in its concept, but also in its marketing strategy.

"Chipotle is something beyond fast-food Mexican in terms of decor, menu and alcoholic beverages," said Ron Paul, president of consultancy Technomic. "It uses a much more adult positioning."

BEYOND FAST-FOOD

The estimated $31 million chain combines fast-food-style service and casual-dining quality food at prices that fall between the two categories--all the more surprising since it is majority owned by quick-service giant McDonald's Corp.

The concept, now in 67 units in markets including Chicago, Dallas, Denver, Phoenix and Washington, was created by CEO Steve Ells, 33, a chef who trained at the Culinary Institute of America. Mr. Ells was inspired to create gourmet burritos while working at a five-star restaurant in San Francisco.

Patrons are in for a surprise when they pull up to the restaurants. From the outside, they seem like urbane casual-dining establishments. And while the menu contains burritos, tacos and guacamole, it's no Taco Bell. Everything is freshly made using gourmet-quality ingredients and spices; nothing is frozen or prefab.

Unlike other fast-feeders with massive media budgets, word-of-mouth is the core marketing strategy. "Once people taste our food, we have them," said Dan Fogarty, director of marketing. "We build word-of-mouth to get a buzz going." During the test of a Free Burrito Day over the Christmas holiday, he said a line of 2,700 people snaked around the corner of one store.

When Chipotle's stable of free-lancers does churn out ads, they tend to be simple, b&w executions focusing on the chain's signature oversized burrito above one-liners like "It'd be a delicacy if it weren't so damn big." Inline Media, Denver, handles media.

IT'S ABOUT SIZE

Surprisingly, size, rather than taste, dominates the core positioning, as reflected in taglines like: "Giant burritos. Drag one home tonight," and "Big honkin' burritos." The hallmarks of the chain's offerings: fresh, high-quality, healthy ingredients served quickly and at bargain prices, are never mentioned in ads (a burrito goes for anywhere from $4.55 to $4.95).

"We'd be redundant to tell them [that]," Mr. Ells said.

There are about 30 to 40 print executions used on a rotating basis, mostly on billboards and in the alternative press. Media expenditures vary by market, but the overall budget is $1.5 million to $2 million. Chipotle tries to correlate outdoor, transit and print. "The same old way of having one message pounded into [consumers'] heads doesn't seem to work well anymore," said Mr. Fogarty.

Another example of Chipotle's back-to-basics marketing is its name-recognition testing. Mr. Ells and his colleagues sometimes page each other in airports as "Mr. Chip Olte."

"It's really funny to see the looks on people's faces when they put it together," laughs Mr. Ells.

Two years ago McDonald's bought a majority interest in Chipotle. What Mr. Ells gets from the relationship is a powerful partner with a large pool of supplier resources. McDonald's gets a way to expand its customer base and dinner daypart without cannibalizing sales from existing stores.

MORE EXPANSION

What began as one restaurant in July 1993 has grown into about a dozen markets, and will soon expand into Houston, Los Angeles, San Francisco and other California cities. That should please the financial wizards at McDonald's, who are carefully counting the pinto beans as they add up. Chipotle doesn't release sales figures, but Mr. Fogarty said its same-store sales outpace the industry average by a long shot.

Chipotle's flagship Denver unit pulls in about $1 million in sales annually, which analysts said is about average.

"They're right at the top of our watch list," said Mr. Paul. With the powerful McDonald's machine backing them, Mr. Paul believes Chipotle could rise above the 1,000-unit level, a milestone few quick-service restaurants reach.

In other words, Chipotle could become one honkin' burrito chain.

Copyright April 2000, Crain Communications Inc.

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