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Market Analysis Task: Business Overview Report (Assessment)

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The proposed business will function in the catering sector and provide services and products of Mexican cuisine in a more fast-food-oriented manner. Like many similar brands in the market, the target demographic will include individuals between the age of 25 and 35. Similarly, the intended market will be the fast-food market with a special focus on Mexican cuisine. The suggested business model for the firm will be a combination of fast-food convenience with high-quality products. Customers will be offered competitive deals or prices and the business model should allow for ease of access by providing online or phone orders as well. The mission statement of the business is as follows: “our firm aims to give customers high-quality meals while providing them with comfort and convenience.” The vision statement can be summarized through the following statement: “the firm aims to become a top restaurant for Mexican cuisine as well as a leader in high-quality fast-food items.” Overall, the business will provide for a diverse client population and compete by offering high-quality products at reasonable prices. Similarly, the needs of the customers will guide changes to the business model, such as prioritizing digital sales.

Market Analysis

Mexican-centric restaurants attract a largely white client population of people in their mid-twenties to their mid-thirties. The firm can aim to provide for already existing customers but can expand to better serve other demographics by improving the authenticity of Mexican products. The main competitors of the firm are fast-food chains such as Wendy’s or Chick-fil-a, which have similar price ranges, and Brands like Chipotle and Taco Bell, as they target similar demographics and provide Mexican-centric or inspired meals that the firm will as well. Estimating the market value and three possible scenarios are presented in Table 1.

Table 1: Expected Market Value: Chipotle.

Expected Market Value: Chipotle Restaurant
AssumptionsProbability p(x)Units (‘000)Avg. Unit Price ($)Market Value (‘$000)Expected Market Value (‘$000)
Pessimistic0.2254,040143,557711.40
Most Likely0.5254,040174,3192,159.50
Optimistic0.3254,040205,0811,524.30
Totals1.0762,1201712,9564,395.20

A single Chipotle restaurant serves approximately 696 customers a day, which results in 254,040 annual customers in the case that the restaurant works every day. Every customer spends in average 17.08$ per trip (Mensenzahl, 2021). As the Mexican fast-food market produces nearly $76 billion annually through approximately 65,000 sales points (IBIS World, 2022). While the overall market value is $76 billion, a single sales point can make about $1,169,230 annually, which will be the total addressable market value. The results in Table 1 showed, that Chipotle can produce less only in pessimistic scenario, while in other two cases the income is significantly greater. Compared to the development potential shown by the network’s growing revenue over the past three years in Table 2, one can consider the geographical expansion of the franchise around the world.

Table 2: Income Statement: Chipotle.

Year202020212022
Revenue5.985$b7.547$b7.826$b
Year-by-Year7.13%26.11%23.92%

Recommendation

Despite a relatively large number of potential competitors, Chipotle’s profit per restaurant is well above the industry average. Moreover, the company is showing significant growth consistently every year, which creates financial room for such maneuvers. Entering a new market is possible in various ways, and the most risk-minimizing of them is the sale of a franchise. Growth potential in existing markets may sooner or later be exhausted, so expansion is the right decision to maintain competitiveness and brand strength in the eyes of loyal and new customers. Implementing a business in a new market, in this case, looks risky but recommended because of the above analysis.

References

IBIS World. . IBIS World. Web.

Macrotrends. . Web.

Mensenzahl, M. . Insider. Web.

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