business news in context, analysis with attitude

Good piece in the Wall Street Journal about Chipotle Mexican Grill, which it reports “has arguably become the country's most successful fast-food chain in recent years by rejecting almost every major technique on which the industry was built. Not only does it not show the product (on billboards, where the burritos always appear wrapped), it doesn't advertise on television. It doesn't franchise. It has some of the highest ingredient costs in the industry. And its executives aren't especially concerned that customers wait as long as 10 minutes in lines that routinely stretch out the door.”

One of the ways in which Chipotle has distinguished itself has been by trying to define itself as sort pf the Whole Foods of the fast food business, with high-quality and natural/organic ingredients whenever possible; it also works hard to keep its products affordable, so it is still seen as a reasonable alternative to burgers and fries.

“Chipotle's shares have more than doubled in the past year, making it the best-performing publicly held U.S. restaurant chain,” the Journal writes. “And while traditional fast-food chains are posting same-store-sales growth in the low single digits, Chipotle has increased its same-store sales at a double-digit rate each year for almost a decade.”

KC's View:
Ultimately, the thing that makes Chipotle work so well, I think, is the fact that its food tastes good – not like the lowest common denominator products that are typical of most fast feeders. People respond to the quality of the product, because most people are aspirational – they may want fast food because it suits their schedules, but given a choice, most people will go for the better tasting product that is made from better quality ingredients.

It ain’t brain surgery. And yet, too many food companies continue to reach for the lowest common denominator because they believe it adds up to higher sales. And, because it is easier.