Business Plan

Tuesday, March 14, 2006

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Slide 2

Contact

• Jack Smith123 MainstreetColumbus, IN 47203(555) 555-5555jsmith@chipotle.com

• Company Website: www.chipotle.com

Slide 3

The Idea

• The idea for Chipotle (pronounced chi-POAT-lay) is simple: Offer a simple menu of great food prepared fresh each day, using many of the same cooking techniques as gourmet restaurants.

• Then serve the food quickly, in a cool atmosphere.

Slide 4

The Sandbox: “Fast-Casual”

• We compete in a category of dining called “fast-casual”—the fastest growing segment of the restaurant industry.

• The fast-casual market pulls together the finer qualities of multiple restaurant sectors. It takes the fast from fast-food, the quality and ambience of casual dining, and adds a focus on health and freshness, all at an average ticket price below $10.

• Because of these appealing characteristics, sales for the market have grown at an average of 12.5% per year since 2001.

Slide 5

The Business Model

• Using higher-quality ingredients. We use a variety of ingredients that we purchase from carefully selected suppliers. We concentrate on where we obtain each ingredient. Some of the ingredients we use include naturally raised pork, beef and chicken, as well as organically grown produce, and we continue to investigate using even more naturally raised, organically grown ingredients, in light of pricing considerations.

• A few things, thousands of ways. We only serve a few things: burritos, burrito bols (a burrito without the tortilla), tacos and salads. We plan to keep a simple menu, but we'll always consider sensible additions.

Slide 6

The Menu: Choose an Entrée…

Slide 7

And Finish Up…• A focused menu.

You choose exactly what you want. We make it while you watch. That may mean a little more salsa, a little less sour cream, whatever you'd like. Build your version of the perfect burrito.

Price of Desire: About 5 Bucks.

The Customer:Market Analysis

Slide 9

The Customer

• The primary customer for Chipotle’s is between the ages of 25 and 54. The customer is slightly older than the typical fast-food customer mainly due to their desire for a more healthy menu without sacrificing speed.

• These customers desire a…– Focus on freshness, with products made to order, and excluding the

use of frozen ingredients and microwaves – Focus on innovative flavors, including condiments that fuse elements

from distinct cuisines – Focus on consumer choice, sometimes provided through extensive

selection of condiments, but frequently extended to complete control of product content

– Focus on health, including whole-grain, and organic, as well as trans-fat and MSG free ingredients

Slide 10

Bartholomew County, Indiana

Slide 11

Community Profile

• Population of Columbus is 40,000• County (Bartholomew) population is 70,000• Manufacturing is main industry. Two Fortune 500

companies – Cummins Engine Co. (diesel engines) and ArvinMeritor (auto parts)

• Also, a regional hub for retail, educational and medical services

• In 1994, Columbus, Indiana was one of ten cities in the

United States awarded “All America City” status

Slide 12

Business Climate

• Columbus has the best business climate in Indiana:• Ranked #1 of any city under 50,000 population in

Indiana (Site Selection Magazine)

• Columbus has the 30th best small community business climate in the United States• Based on a February 2002 ranking by

BizDemographics of 496 small U.S. cities

Slide 13

A Growing Community

Slide 14

An Educated Customer Base

Slide 15

A Market of Wealth

Slide 16

Targeted Customers

• Within Columbus, Indiana, Chipotle’s will target three primary customer segments. These are as follows:– The Local Market: Defined as customers within a seven

mile radius of the store location.

– Commuting Workers and Tourists: Customers commuting into the city on a daily basis or for leisure travel.

– Commercial Events: Business customers within the county that require catering services.

Target Market DescriptionsDescription Target Market #1 Target Market #2 Target Market #3

Name Local Market Commuting Workers & Tourists

Commercial Events

Description People and households within 7 miles of the restaurant

People migrating into Bartholomew County for work or tourism

Commercial business in Bartholomew County that need catering event services

Demographics Consumers ages 25 to 54 / $54,000 average household income

Workers and Tourists ages 21 to 54

Businesses from 20 to 300 employees

Buying Behavior Frequent but small purchases (5 times per year at about $9.00 per patron)

Infrequent but larger purchases (1 time but spends upward of $12.00 per patron)

Infrequent but very large purchases (2 events per year spending $600.00 per event)

Size (numbers/dollars) 58,600 residents / 20,000 households / $58 million local market for restaurant sales

9,000 daily commuters / 28,000 annual tourists

400 businesses

Projected Sales $400,000 $150,000 $100,000

Trends slow to moderate growth / spending less on meals away from home on average

Good growth / new arts theatre nearby should improve traffic

Excellent growth in company numbers and employment trends

Target Market StrategyStrategy Target Market #1 Target Market #2 Target Market #3

Positioning Message The Gourmet Restaurant Where You Eat With Your Hands

Gourmet Burritos…Fast Big Burritos For Big Crowds

Pricing Entrees between $4 and $6 Entrees between $4 and $16 Per head range from $8 to $12

Product Customization Lunch time drive-thru speed is largest consideration

Banquet style service

Distribution At retail location At retail location On-site catering set-up and service

Promotions:

-Contact Sphere Visitors center, community development, tourism bureau, hotel concierges

Chamber of commerce, HR managers, event planners, public relations managers

-Advertising Newspaper, yellow pages, specialty publications, website

Hotel brochures, tourism directory, billboards, restaurant guide

Direct mail, business section of newspaper

-Public Relations Annual 5K charity run for diabetes assn.

-Personal Selling Part-time banquet sales coordinator

-Sales Promotions Discount coupons, samples Hotel referral fees 15% off first event promotion

Slide 19

Commuting Patterns

• More than 16% of Bartholomew County’s workforce commutes into Columbus on a daily basis.

• This commuting inflow surges the daily workforce to over 39,000 employees.

Almost 9,000 worker’s

commute into Bartholomew

County every day.

Slide 20

Customer Ring Study

• The proposed location for Chipotle is500 Franklin Street in Columbus, IN

• Within a 7 mile radius of this location the market contains…

Description 7 Miles

Population 58,600

Households 20,000

Average Household Income $54,000Source: Easidemographics.com

Slide 21

The Size of the Market

• According to the 2002 Economic Census for Bartholomew County:– Full Service Restaurants: 104– Total Restaurant Sales ‘02: $78 million– Average Sales Per Rest: $750,000

Slide 22

Targeted Market Size in Dollars

• According to the Consumer Expenditure Survey in 2003, consumers spent an estimated $885 on “Food away from home”

• This would predict the 7 mile market radius to be worth approximately $52 million in restaurant and meal preparation services. ($885 times 58,600 consumers) and could support about 70 establishments.

Slide 23

The Food Service Market in Columbus, IN

Source: Google Earth

Future Site of ChipotleFuture Site of Chipotle

X

Slide 24

The Competition

• Qdoba, is a “fresh-Mex” chain that offers more choices, like poblano pesto burritos, but less discipline in its execution. Its wider menu offerings sometimes compromise food quality. Nonetheless, Qdoba is a series competitor in all respects as it plays in the same “sand box.” In 2003, Qdoba was acquired by Jack in the Box Inc., a publicly traded (NYSE: JBX) restaurant company headquartered in San Diego.

• Bajio Mexican Grill is also a fresh-Mex franchise chain that again offers more choices than Chipotle, but its franchising model puts a strain on store-to-store consistency.

Slide 25

The Message

Slide 26

The Sales Approach

• Chipotle will use a combination of the following media in creating its advertising and promotional campaign:– Yellow Pages– Newspaper– Direct Mail– Radio– Website

Slide 27

The Sales ApproachMedia Annual Cost

Yellow Pages (South Central Edition)

Category: Restaurants, Restaurant Guide $3,600.00

Newspaper (The Republic: Circulation 28,000)

Ad Design Costs $800.00

Media Costs (24 ads @ $328) $7800.00

Direct Mail (Brochures and Special Occasions)

Distribution (5,000 @ $.50 per piece @ $.27 postage) $3,850.00

Radio (QMIX 103 / Adult Contemporary & WTIU/NPR)

Media Costs (600 :30 second ads @ $6.20 per spot) $3,720.00

Total Annual Advertising and Media Costs $19,770.00

Slide 28

The Inner Workings: The Line

Slide 29

Two Things, Thousands of Ways

• We only serve a few things, so we can concentrate on doing them very well. And we use only the best ingredients. But they're simple. And that idea, taking something simple and elevating it to something special is what Chipotle is all about.

• It's all summed up in our name. A chipotle pepper is just a simple jalapeño pepper that's been smoked and dried elevating it from ordinary to something extraordinary. Tasting is believing.

Slide 30

The Inner Workings

• Chipotle will be open six days a week from the hours of 10:00am to 9:00pm.

• To operate the location we require 8 full-time employees and 7 part-time staffers all of which work on a rotating schedule which avoids overtime scheduling. Wages are about $8.00 to $9.00 per hour.

• It is imperative that we keep food costs below 28% of sales and labor costs just under 40%.

Slide 31

Location Design

• The design of Chipotle mirrors the idea behind our food: simple ingredients put together in creative, new ways, elevating them to a higher level.

• Each Chipotle uses the same basic materials—wood, concrete, raw steel and metals—but no two look the same.

Slide 32

Location Interiors

Slide 33

Location Exteriors

Slide 34

The Management Team

• Jack Smith, Location ManagerMr. Smith will oversee the day-to-day operations and management of the location. He has over 14 years of experience in retail fast food and is one of the founding members of Chipotle.

• Loretta Johnson, Assistant ManagerMs. Johnson is an experienced chef with over 12 years of commercial cooking knowledge. She will oversee the all ingredient purchasing and grill staffing according to the philosophies of Chipotle as presented within this business plan.

Slide 35

The Legal Structure

• Chipotle will be legally formed as an “s” corporation.• This structure was selected for its pass through tax

advantages, limited liability protection, and freedom from having to pay corporate income taxes.

• Ownership of shares will be broken down as follows:

Owner Shares Percent Owned

Jack Smith 1,000 50%Loretta Johnson 500 25%Equity Investors 500 25%

Slide 36

Risk Management

• Chipotle will require the following types of insurance in its efforts to manage risk:

– General Liability (up to $2 Million in coverage)

– Worker’s Compensation Policy

– Property Insurance (building & contents)

• In addition, it will also provide health care for its two member management team estimated at about $1,000 per month.

Slide 37

Required Start-Up Funds

Item Amount

Real Estate $220,000

Building $580,000

Equipment $68,000

Furniture & Smallwares $12,000

Initial Inventory $4,500

Deposits $900

Legal & Accounting $2500

Advertising $5000

Working Capital $15,000

Totals $907,900

Slide 38

Capital Strategy

Total Amount Required $907,900

-4 Investors ($50,000 each will get 25% share of company) $200,000

-Commercial Bank Loan (Real Estate & 80% Building) $684,000

-Owners $23,900

Debt Service Payments

-Principal Amount Borrowed $684,000

-Interest Rate 7.25%

-Term In Months 240

Total Monthly Loan Payment $5,406.17

Slide 39

The Milestones

• Present business plan to investors March 2006

• Finish legal work around investments March –April 2006

• Request and review construction bids April 2006

• Obtain building permits May 2006

• Begin construction May 2006

• Begin final fixturing of location July 2006

• Conduct health department inspections August 2006

• Begin hiring and grand opening marketing August 2006

• Cold opening August 22th, 2006

• Grand opening September 1st, 2006