The most innovative food brand of 2014 can teach other chains a thing or two about sustaining growth in an industry that is increasingly competitive. In a market seemingly untouched by the recent economic recovery, and often one characterized by fierce competition and lackluster returns, fast casual eatery Chipotle Mexican Grill is emerging as the year’s food brand powerhouse.
Fast casual restaurants are popular because they feature quality ingredients, prepare the food quickly, and serve it up in charming establishments oozing with ambience.
These restaurants appeal to today’s consumers who consider fresh, quality ingredients to be more healthful but are unable or too busy to replicate these meals at home. Fast casual restaurants are doing well as a whole but Chipotle has mastered the market.
Ignorance is Anything but Bliss.
Stocks of many fast casual restaurants, including Panera Bread, Noodles & Co. and Potbelly, have floundered recently, mainly because of unrealistically high expectations and incredibly fierce competition in the sector. Potbelly and Noodles, for example, saw stock prices tumble recently after the companies went IPO to offer shares to the public. When overzealous earning expectations met lukewarm sales, stock prices faltered.
Noodle’s price-to-earnings-ratio fell from 93% in October 2013 to 45 in August of 2014, according to CNBC. Potbelly fell from 87% in that same year. Year-to-date stock prices reflected these drops in earnings, with Potbelly shared plummeting by nearly half and Noodles stock prices dropping about 42%.
Chipotle Schools the Competition.
Despite losses weathered by individual companies, the fast casual sector is growing overall. While the sandwich segment and fast casual pizzas are doing well, the ethnic food category fuels much of the current growth of the fast casual sector. Chipotle Mexican Grill, in particular, has seen tremendous growth in 2014, with its stocks spiking 28% by August of that year.
Take a look at these 3 lessons to be learned from Chipotle’s success.
1. Raise prices only if you can offer customers something in return to justify the hike
Chipotle raised prices across its entire menu in the spring of 2014 for the first time in three years, citing rising food costs for high quality beef, cheese, and avocados. The company’s core demographic, young adults, showed that they were willing to pay more for healthy, high-quality ingredients and innovative foods.
2. Use Fresher Ingredients
Fast food companies are beginning to lose traction because many consumers now view fast food as unhealthy. Chipotle and other fast casual restaurants use quality ingredients, so their customers feel they are consuming healthier food.
Though science says GMOs are perfectly safe, consumers have the final word when it comes to marketability. And food manufacturers and restaurants alike may want to take a tip from Chipotle and cut out GMOs.
In a recent study cited by Food Manufacturing, non-GMO overtook organic as the driving factor behind consumer food choices with 56% of respondents saying that non-GMO was a key influencer in their purchase decision.
3. Keep it quick and simple.
Companies, like Starbuck’s, that are choosing to expand menu items in hopes of attracting more customers end up, in reality, frustrating customers by creating the longer lines. Unwilling to stand in line, customers may decide against getting that extra drink, side order, or specialty item. Worse yet, customers may see a long line and leave before they order anything at all.
On the fast food side, most companies seeing very little in the lines of growth in 2014. Like Starbucks, fast food seeks to do too much. But rather than satisfying the diverse tastes of guests, just left menus cluttered and slowed down service, ultimately creating unhappy customers. As a result, the fast food industry has seen a flat lining in overall global sales and slipping domestic sales that year.
It seems, then, that fast food has something to learn from Chipotle’s quick service strategy. The burrito chain keeps lines short and service fast (not to mention satisfying) with a simple menu combined with an assembly line approach to food preparation.
Restaurants of all sizes can learn important lessons from Chipotle when it comes to serving innovative foods: Use set a fair price, use quality ingredients, and serve it up quickly.
