Qdoba vs. Chipotle
Riah VandeZande
Economics
Mr. Reuter
14 March 2017
Qdoba vs. Chipotle
One of the most raging debates of this decade lives on as consumers continue to debate whether Chipotle or Qdoba is the better buy. When choosing their preferred Mexican fast food restaurant, many cite ingredients, taste, and price, among other criteria. However, to truly compare the two chains, we can perform cost-benefit analysis of their pricing strategies, marketing, and growth.
Chipotle and Qdoba can trace their origins to Denver, Colorado in the mid-1990s. Both found immediate success and began franchising by 1998. As competitors from the start, Chipotle began marketing its natural and fresh ingredients to set itself apart from the rest of the field. This strategy proved beneficial as the number of Chipotle locations jumped from 16 to over 500 in just 8 years. Since then, Chipotle has added locations in the UK, Germany, and France while Qdoba has yet to leave the US and Canada. The figure below compares the prices of Qdoba and Chipotle in 2012, and indicates that Qdoba used to be only about $0.13 cheaper, on average. At the time, it seemed to investors that Chipotle was a better value due their high quality ingredients. However, it was not long until Qdoba dropped a shocking new promotion.
In October of 2014, Qdoba shook the world of Mexican casual food when it began including extras such as guacamole and queso at no extra charge. However, Qdoba’s decision, like every decision, involved an opportunity cost. While the new method was designed to grow sales, it also decreased profit margins and caused the price of Qdoba entrees to increase by almost $2. For many, the higher price combined with lower quality ingredients meant a switch to a new fast food restaurant, perhaps even Chipotle.
So how did this monumental decision turn out for Qdoba? Well, from the figures below, it is apparent that Qdoba’s stock, Jack in the Box, has continued to increase since 2012, whereas Chipotle has not grown steadily. That said, Chipotle still has almost 1,400 more locations and its stock market value is still 4x greater than Qdoba’s. This is partly due to the stifling effect of Chipotle’s massive economic growth early in Qdoba’s startup. As Chipotle’s stock grew by more than 600%, Qdoba simply could not keep up. But it is that same rapid growth that has recently caused investors to favor Qdoba’s stock. Simply stated, it is impossible for Chipotle to continue such rapid growth, however; Qdoba has been steadily growing and continues to project yearly growth in the double digits.
Which casual Mexican-style restaurant is better? I’ll leave that up for you to decide. However, based on statistics alone - it is difficult to say which chain will edge the other out as more and more fast casual restaurants are introduced to the free market. Additionally, as scarcity begins to play a role in the Mexican-style food industry, it will be interesting to see what tough decisions are made by the two chains in an attempt to keep their share of the market sector. I believe I speak for all consumers when I say that hopefully, there is more free guacamole in our future.
Works Cited
La Monica, Paul R. "Chipotle vs. Qdoba: Investors like the Q." CNNMoney. Cable News Network,
21 Oct. 2014. Web. 9 Mar. 2017.
Tuttle, Brad. "Chipotle Rival Qdoba Adds Free Guacamole, Queso, Extras to Menu | Money."
Time. Time Inc., 3 Oct. 2014. Web. 9 Mar. 2017.
Shen, Lucinda. "How Chipotle Is Still Putting Pressure on its Competitors." Fortune. Time Inc., 12
May 2016. Web. 13 Mar. 2017.
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