menu, and other innovations, Miksa used a
management philosophy based on the “4
Ms”: measure, meet, manage, and motivate.
She met with managers weekly, reviewing
unit scorecards and results.
“You’ve got to talk to your guest, formally or
informally,” Miksa says. “That’s how we learn
and get better, not by doing things that won’t
improve the guest experience. We look at the
restaurants as individual profit centers.”Miksa returned the company to its “Baja
inspiration” roots. She rolled out a new
menu and redesigned the physical menu to
be brighter and easier to read. Sales rose for
the chain and for comparable stores.
Transactions increased by 5.9 percent but
average check amounts remained about flat.
The company’s quick expansion after the
IPO underwent its bumps and setbacks.
Rubio’s lost $6.5 million in the two years
after going public and had to close 11 stores.
Miksa’s plans for the future include expan-
sion but she was reticent to discuss specific
opportunities. She does not rule out franchis-
ing, although there are now only four fran-
chised units in Nevada. Rubio’s is currently
debt-free and has financed expansion in the
past with cash from operations. The compa-
ny receives inquiries about franchising, and
considers this interest good news. But as
Miksa says, Rubio’s must find partners “who
share the passion for the brand, the focus on
quality and who really understand the
uniqueness. With the right franchisees, it
could be a good thing.”
The article in Chain Leaderalso contained
some commentary from restaurant consult-
ants and business analysts. A sampling of
these comments is provided in Exhibit 3
below.
COMPETITIVE AND
FRANCHISING ISSUES
The competitive factors stand out as a serious
hurdle for Rubio’s. The fast-casual segment
of fresh Mexican food is heating up. In a Wall
Street Journal article (January 4, 2005), the
problems faced by the segment and specifi-
cally Wendy’s Baja Fresh chain were high-
lighted.
Wendy’s International purchased Baja
Fresh in 2002 for $270 million in an attempt
to break into the fast-growing fast-casual seg-
ment. Rival McDonald’s had already bought
a stake in Chipotle. At the time of the
Wendy’s purchase, Baja was the industry
leader.
But the investment in Baja has not paid
off. In December 2004, Wendy’s wrote off
almost $100 million of its Baja investment.
They closed over 20 stores and announced
they would focus new units only on the east
and west coasts. Baja, with about 300 units,
is no longer the industry leader. Chipotle has
over 400 stores and Moe’s is growing so
quickly that it could have about 400 units by
2006.
How does a success become a problem so
quickly? Conjecture was that it was a result of
poor site selection, increased complexity in
cooking and food preparation, rising com-
modity and labor costs, and the perceived
resistance to Mexican food in the conserva-
tive Midwest. But not all chains had all these
problems. Janice Meyer, an industry consult-
ant, concluded that, “They just didn’t run as
tight a ship from the operations standpoint.
And when you have a broad menu, it’s easy
to get your operations mucked up.”
Bill Moreton, the new CEO brought in
for the turnaround adds, “As you put new
items on the menu, you ask, ‘does it fit with
the concept and the brand? How does it
affect operations?’ ”
But streamlining Baja will take some
effort. Chipotle has a Subway-type assembly
line process that is faster—even faster than
Taco Bell’s. Chipotle is less expensive on an
item-by-item basis for comparison. Steve
Ells, cofounder of Chipotle, is proud of his
creation. “What is appealing about Chipotle
is it isn’t mysterious food. It’s not concocted
in the back. It’s prepared in front of the cus-
tomer. That lends realness,” he says. And
Chipotle has been growing in the Midwest
too.468 ENTREPRENEURSHIP CASE