Corporate Governance

Chipotle v. Starbucks

By J. Robert Brown

We have been writing a bit about the competitive threat about to be unleashed on Starbucks as McDonalds inserts baristas in its 14,000 resturants in the United States.  We have suggested that Starbucks move away from providing a commodity to providing an experience.  One way to do that would be to engage in more socially responsible activity and let consumers know that quaffing a Starbucks latte is helping to reshape the world.  We have held up Chipotle, a local burrito chain (once mostly owned by McDonalds but spun off) as a model.

We note that Chipotle issued its fourth quarter earnings and net income was up by 62%, same store sales by 11%.  As the Journal reported:  

• Founder and Chief Executive Steve Ells attributed the results "to our continued focus on changing the way the world thinks about and eats fast food." He added, "We continue to spend more on our food as a percentage of revenue than any other restaurant company, and that is strengthening our bond with customers, as we are able to deliver better tasting food, and a better dining experience."

Not bad for a company that lets every consumer know that it is providing organic beans and free range meet.  It is a savvy method of maximizing profits. 

Full post as published by The Race to the Bottom on February 17, 2008 (boomark / email).