Chipotle Mexican Grill Overview
Chipotle Mexican Grill is a restaurant chain offering Mexican food and its specialties include burritos and tacos. It is headquartered in the US and has 2950 restaurants serving the markets of the US and Canada along with the UK, France, and Germany. Chipotle Mexican Grill has 100,000 employees and it earned a revenue of $7.5 billion which increased by 26.1% compared to 2020. The company was recognized in the 2021 lists for Forbes' America's Best Employers and Fortune's Most Admired Companies (Chipotle, 2021).
PESTLE Analysis is a great tool for evaluating the external environment of an industry or a company. The PESTLE Analysis assists the companies in deriving effective mechanisms to deal with the situations in the external environment.
Probing further, this article will present a detailed PESTLE analysis that would involve the political, economic, social, technological, environmental, and legal factors that can impact Chipotle Mexican Grill in a certain way.
Table of Contents
- Chipotle Mexican Grill Overview
- PESTLE analysis of Chipotle Mexican Grill
Delineated PESTLE analysis of Chipotle Mexican Grill
Political factors affecting Chipotle Mexican Grill
The US has a stabilized political environment and a stabilized political environment that favors a progressive commercial environment in the country. The taxation system in the country is favorable for companies and the federal government has recently lowered the corporate income tax rates from 35% to 21%. Further, the state of Utah has lowered the legal standard for drunk driving wherein the limit for blood alcohol content has been lowered to 0.05% from 0.08%, and the restaurants that are found to be selling more liquor to guests than the prescribed limit could now be fined or charged if the guest is involved in a car accident after drinking. The state of California requires restaurants to construct and maintain special facilities for female employees so that they can breastfeed their babies ((Romeo, 2019). This could lead to an increase in expenditure of the companies. The companies that have their restaurants in various countries can benefit from the tax treaty that the US has with 80 countries under which the income from a few sourced countries is taxed at a lower rate while income from others is tax-free, hence leading to savings for the companies.
Further, Canada is also the top market for US-based restaurants and the Canadian government has recently launched the Tourism and Hospitality Recovery Program wherein the restaurants would be provided with a subsidy of 75% for their revenue loss during the last 12 month period (Restobiz, 2021). The provincial government of Nova Scotia has listed a few guidelines that include capping delivery and pick-up fees at 15 and 10% respectively when the order is placed through third-party aggregators. This would provide restaurants relief from the exorbitant charges laid down by the delivery companies. Further, the restaurants are allowed to sell hard drinks for takeout and delivery, this would lead to an increase in revenue for the companies.
Economic factors affecting Chipotle Mexican Grill
The USA's per capita income in 2021 was $63, 416 while it is expected to lower to $55000 in 2022 and $57000 in 2023 the lowering of per capita income would lower the disposable income of the people, and therefore they would reduce their visits to the restaurants. The positive aspect of the economy is the decline in the unemployment rate. It was 3.9% in 2021 and is expected to fall in 2022 to 3.8% and 3.5% in 2023 (Knoema, 2021). The low unemployment rate would lead to an increase in restaurant visits as more people would have fixed sources of income. The US economy grew by 5.7% in 2021 (Wiseman, 2022). The future predictions are not good with the economy expected to decline to 4% in 2022 and 2.6% in 2023 respectively (Shalal and Lawder, 2022). The decline in the growth rate would reduce business opportunities.
Further, the growth rate of Canada for 2021 was 6.7% and is predicted to decline to 3.8% in 2022 (CBC, 2022). The current unemployment rate is 5.5% and is projected to stay almost the same at 5.6% in 2023 and 5.5% in 2024. The moderate unemployment rate signifies that the companies would have chances to employ labor at less rates and also there won’t be any significant negative impact on sales.
The fast-casual restaurant industry in the US is valued at $125.6 billion. It is predicted to grow at a CAGR of 10.6% and reach $209.1 by 2027.
Social factors affecting Chipotle Mexican Grill
The emerging social trends are favorable for the restaurant industry in the US with 73% of people preferring to eat out at a restaurant even after a pandemic (Shavenock, 2022). Further, 85% of people in the US are changing their diet and started consuming more health-conscious food. This highlights the need for restaurants to serve more healthy food items.
Besides, in Canada, the trend of veganism is on the rise and there has been an increase of 1.4 million people that have started consuming plant-based meals. This trend poses a significant opportunity for restaurant companies to explore new markets. Further, there is a huge shift in the behavior of people towards ordering food online in Canada, in 2021 more than 45% of people ordered food once a week while more than 49% would prefer ordering food online regularly in the future (Rendaje, 2021). This signifies the need for the companies to invest aggressively in the delivery network.
Technological factors affecting Chipotle Mexican Grill
The US government spends the highest on Research and Development in the world. It spent $157 billion in 2021 and the expenditure for 2022 is estimated to be $171 billion. The Canadian Government spent $40.1 billion in 2021 (Statistics Canada, 2021). Various new technologies have emerged in the restaurant industry including self-ordering kiosks wherein the customers can themselves order and pay at the screens. Furthermore, robotic chefs are gaining popularity for preparing orders. This ensures more consistency in the orders and optimization of order delivery time. In addition, the concept of a cloud kitchen wherein a commercial kitchen is used by the restaurants to prepare food and offer delivery services with no dine-in facilities is gaining popularity as it involves less cost than setting up traditional restaurants.
Legal factors affecting Chipotle Mexican Grill
The restaurant industry in the US is subjected to various regulations that include Federal Food, Drug, and Cosmetic Act (FFDCA) and the Public Health Services Act, The Occupational Safety and Health Act among others. The Federal Food, Drug, and Cosmetic Act contain the guidelines and quality standards for the food products sold in the US. The guidelines are enforced by the Food and Drug Administration and the agency is empowered with the right to conduct surprise inspections at the establishments the health department provides grades to the restaurants based on the food quality, cleanliness, and other related parameters which are mandatory for the restaurants to display in the front. The Occupational Health and Safety Act is related to protecting the rights of the employees and ensuring their safety at the workplace.
Further, in Canada, Health Canada establishes standards that include safety requirements, nutritional regulations, and other policies for food businesses across the country under the Safe Food For Canadians Act. Additionally, the Canadian Inspection for Food Agency is responsible for enforcing health and safety standards and inspecting the establishments. The other factor that can have an impact on the operational cost of the restaurant industry is the increase in minimum wages in the provinces of Ontario, New Brunswick, Nova Scotia, and British Columbia (Retail Council of Canada, 2022). In addition, both the US and Canada encourage innovation wherein the companies can avail the patents for 20 years from the date of filing and these can be licensed or sold to generate more income.
Environmental factors affecting Chipotle Mexican Grill
The restaurant industry in the US generates around 22 to 33 billion pounds of food waste per year. Further, the restaurants use 78% of all disposable materials. The restaurants also consume a lot of energy for lighting, heating, etc. along with using plastic for packaging and disposable cutlery. To reduce food wastage, the states of California, Connecticut, Massachusetts, Rhode Island, and Vermont have passed regulations that restrict companies from dumping their food waste in landfills instead, they are required to convert it into compost or donate it to the food banks.
Further, the restaurants in Canada use lots of plastics for various purposes including packaging of food and use of straws for drinks, etc. The federal government is planning to ban single-use plastic from 2022, hence the companies would have to use other biodegradable and compostable materials that could increase their cost and ultimately lead to an increase in the prices of the goods.
To conclude, the restaurants operating in the state of California are required to provide additional facilities for new mothers so that they can breastfeed their babies with comfort. The federal government of Canada has announced financial incentives for the restaurants and the Canadian government has also provided relief to the restaurants by capping the fees that the delivery companies can charge the restaurants. The consumption of healthy food and the trend of ordering from online sources is continuously rising, so the companies need to adapt to the changing conditions to sustain their businesses for a longer time. Also, to learn about the internal strengths and weaknesses of the company, you can go through our diligent SWOT analysis of Chipotle Mexican Grill.
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