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Description

Evaluation Plan

Evaluation of the financial performance of Chipotle Mexican Grill is one of the most important aspects of the company’s business and marketing plan. Normally the financial assumptions required to develop forecasting are inaccurate, resulting in the underestimation of expenses and overestimation of income. However, a good evaluation plan requires the financial assessment aspect to be as accurate and realistic as possible. Thus, it is of extreme importance that all financial assumptions are made conservatively and carefully. In the case of Chipotle Mexican Grill, all assumptions are made conservatively. For instance, when computing cost of goods sold by the company, the company considered a unitary cost for each item on the menu. No average cost was done for these unitary costs; instead, it was considered the price of the most expensive option.

Chipotle Mexican Grill’s evaluation plan will be conducted in the currency of dollars since it is the official currency of the country of operation. The first months will be dedicated to the development and fulfillment of the suppliers’ contracts, the HACCP plan and the renting contract. The remaining months of the financial year will be dedicated to performance evaluation. Key taxes that will be considered include:Evaluation Plan

  • Personal Income Tax: Based on the understanding that the average salary of the company’s workforce is $780, a tax rate of 8.5% will be contemplated since this is the highest personal income tax for people with a monthly gross salary of between $750 and $850.
  • Value Added Tax: 13% of VAT will be incorporated for restaurant services and sales, as well as, a maximum VAT rate of 23% for other transactions.
  • Income Tax Rate: An income tax rate of seventeen percent will be applied for the earnings until $20.

When it comes to costs, it is vital to note that staff costs were considered as fixed costs, costs of goods sold were contemplated as a variable cost, and external services and suppliers were considered as hybrid.

Cost of Goods Sold

The cost of goods of good sold is to be computed by adding the costs of the most costly raw material in each material required. The indicative unit costs are then amassed in several suppliers and an increase of ten percent is added to cater for the cost of distribution.

Human Resources-evaluation Plan

In order for Chipotle Mexican Grill to attract and retain quality workers and avert employee turnover, it will pay a salary that is above the average wage in the fast food industry, that is, $780 for full time workers and $580 for part time workers since full time workers have the additional responsibility of being team supervisors. The manager will earn a salary of $1,580. It is vital to note that there will be no food allowance since Chipotle Mexican Grill can and will provide lunch or dinner for the working staff.

External Services and Suppliers

When it comes to external services and suppliers, the expenses that will be incurred by the company are represented in the table below:

  %Variable %Fixed Monthly Value
Water 70 30 300
Electricity 60 40 500
Tools 40 60 100
Fluids 50 50 50
Rent   100 2.6
Stationery 70 30 20
Insurances   100 250
Communication 60 40 100
Litigations and notary 30 70 20
Fees 30 70 100
Advertising   100 100
Maintenance 50 50 400
Specialized work (Accounting, Pest Control, Food Engineer, Laboratory)   100 1
Others 50 50 500

 

Sensitivity and Scenario Analysis-evaluation Plan

Chipotle Mexican Grill developed its sensitivity and scenario analysis based on three main variables, that is, price of goods sold, units sold and cost of goods sold. As such, sensitivity analysis will be conducted throughout the subtraction and sum of ten percent of variation in each variable. Following the completion of this process, three scenarios will be considered including:

  • The pessimistic scenario in which all downright variations will be conjugated, for instance, increasing of cost of goods sold and decreasing of units sold and price.
  • The base scenario in which all the financial evaluation will be undertaken.
  • The optimistic scenario in which all upright variations will be conjugated, for instance, decreasing of cost of goods sold and increasing of units sold and price.

Based on this analysis, it is safe to conclude that the only scenario whereby the project is not viable is in the pessimistic scenario whereby all the variables have a downright ten percent variation. Since all the financial assumptions were made extremely conservatively by Chipotle Mexican Grill, it is highly unlikely that such conjugation of downright variations will occur in all three variables. Moreover, all other tendencies or scenarios of the analysis of the risks associated with operating a fast food restaurant are bound to produce outcomes that are still quite intriguing in terms of viability of the project. This means that based on the projections of cash flow and revenue, Chipotle Mexican Grill has a high likelihood of becoming a successful business in the fast food industry.