| Course | BU 106 Introduction to Business |
|---|---|
| Unit | Unit 8 |
| Paper type | Company analysis with recommendation |
| Length | About 1,020 words, 6 pages |
| Format | APA 7 student paper |
| School | Herzing University |
| Program | BS in Business Management |
| Updated | October 2026 |
Free sample paper for BU 106 Unit 8
Spend Less on Buybacks, More on the Avocado: A Company Analysis of Chipotle With One Recommendation for 2026
Student Name
Business, Herzing University
BU 106: Introduction to Business
Instructor Name
March 5, 2026
Spend Less on Buybacks, More on the Avocado: A Company Analysis of Chipotle With One Recommendation for 2026
The Firm, the Recommendation and the Reason
Chipotle Mexican Grill is a profitable fast-casual chain that owns and operates nearly 4,000 U.S. restaurants. This paper recommends that in 2026 Chipotle reduce its share repurchases from about $2.4 billion to roughly the 2024 level of about $1.0 billion, and use part of the difference to fund a program that secures second sources for its most exposed imported ingredients, starting with avocados, while holding a larger cash cushion. The reason is that the company's biggest operational risk and its thinnest financial margin of safety both grew in 2025, and the same money can address both.
Ownership and Structure
Chipotle owns every U.S. and Canadian restaurant instead of franchising (Chipotle Mexican Grill, 2026). That gives it control over quality and the ability to change practices quickly through its geographic chain of regional vice presidents, team directors and field leaders. It also means Chipotle alone bears every cost shock: when California's wage rose to $20 an hour, the company, not franchisees, absorbed the cost and raised prices 6% to 7% in that state (Littman, 2024). The same is true of an ingredient shock. There is no franchisee to share a spike in avocado prices.
Marketing
Chipotle positions itself on ingredient quality and convenience rather than value, charging extra for guacamole while rivals include premium toppings. More than a third of food and beverage revenue, 36.7%, came through digital channels in 2025 (Chipotle Mexican Grill, 2026). Guacamole matters to this position in two ways: it is part of what customers see as quality, and it is one of the few items Chipotle can reprice without touching the price of the core bowl. A guacamole shortage would therefore hurt both the product and the pricing strategy.
Operations
The avocado is Chipotle's most fragile major ingredient. Most U.S. avocado imports come from Mexico, 89% in 2023, and a single security incident in June 2024 paused U.S. inspections in Michoacán, stopping certified exports from that state until safeguards were reviewed (Corpi, 2024). Chipotle's own report lists avocados among ingredients exposed to tariffs, weather and limited sources, and says it is working to add suppliers to reduce reliance on a few (Chipotle Mexican Grill, 2026). The fruit cannot be stockpiled, so the only real protection is approved alternate sources that can ship when Mexican supply is interrupted.
Finance
Chipotle kept about 12.9% of 2025 revenue as net profit, but spent about $2.43 billion repurchasing shares, well over double the prior year's roughly $1 billion. Cash fell from about $749 million to about $351 million, and the current ratio fell from 1.52 to 1.23 (Chipotle Mexican Grill, 2026). The company is not in financial difficulty; operations generated about $2.11 billion of cash in 2025. But the buybacks consumed more than the business produced, leaving a thinner cushion at the same time supply and trade risks were rising.
The Recommendation, in Full
What Chipotle would do, in order. First, in the first quarter, the board would set 2026 repurchases at about $1.0 billion, freeing roughly $1.4 billion compared with 2025. Second, over the first half of the year, the supply chain team would qualify avocado suppliers in at least two countries besides Mexico, such as Peru and Colombia, whose harvests peak at different times, and agree contracts for a guaranteed share of Chipotle's volume, paid for even in months when Mexican fruit is cheaper. Third, it would apply the same approach to the other ingredients its report names as coming from a limited number of suppliers, such as limes and tomatoes. Fourth, it would hold a larger cash balance, restoring cash to at least the 2024 level of about $750 million.
What it would need. The cost of alternate-origin contracts is a premium on a portion of avocado purchases, which the company could offset partly through guacamole pricing, already priced separately. The cash comes from the reduced buyback, not from new borrowing.
Costs and Risks of the Recommendation
The largest cost is to shareholders who value buybacks, which support earnings per share and the stock price. A smaller buyback may disappoint some investors in the short term. The second cost is higher average ingredient cost in normal years, because contracted alternate supply is more expensive than spot purchases from Mexico. The third risk is that the insurance is never needed: if Mexican supply is never interrupted, the premium looks like waste in hindsight. The recommendation accepts those costs because the alternative risk, empty guacamole pans across thousands of company-owned restaurants during a disruption, falls entirely on Chipotle and would damage the product customers pay extra for.
Alternatives Considered
Two other recommendations were weighed and set aside. The first was to keep the 2025 buyback pace and fund supply resilience from operating cash alone. Operating cash flow of about $2.11 billion could cover both, but only by continuing to draw down cash, which already fell by more than half in 2025; a year with a sales slowdown or a tariff shock would then leave very little cushion. The second was to address avocado risk by reducing the ingredient's role, for example by promoting menu items without guacamole during price spikes. That would protect costs but weaken the product feature customers pay extra for, and it treats the symptom rather than the supply risk. The recommended course costs more in the short term than either alternative in a quiet year, but it is the only one that protects both the product and the balance sheet in a bad one.
How to Judge It
At the end of 2026, the recommendation would be judged on three measures: whether Chipotle could source avocados without a stockout during any interruption in Mexican supply; whether cash returned to at least $750 million and the current ratio above 1.4; and whether net margin stayed near 13% despite the sourcing premium. The course text describes good financial management as balancing returns to owners against the resources a business needs to keep operating (Gitman et al., 2018); this recommendation tilts that balance modestly back toward operations.
References
Chipotle Mexican Grill, Inc. (2026). Form 10-K for the fiscal year ended December 31, 2025. U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/1058090/000105809026000009/cmg-20251231.htm
Corpi, S. (2024, June 21). U.S. halts avocado imports from Mexico after inspectors caught up in violence. Texas Public Radio. https://www.tpr.org/economy-and-labor/2024-06-21/u-s-halts-avocado-imports-from-mexico-after-inspectors-caught-up-in-violence
Gitman, L. J., McDaniel, C., Shah, A., Reece, M., Koffel, L., Talsma, B., & Hyatt, J. C. (2018). Introduction to business. OpenStax. https://openstax.org/details/books/introduction-business
Littman, J. (2024, May 16). How 6 chains are reacting to California's minimum wage law. Restaurant Dive. https://www.restaurantdive.com/news/jack-in-the-box-shake-shack-chipotle-pricing-california-minimum-wage/716193/
BU 106 Unit 8 instructions, in plain terms
Unit 8 asks you to analyze a company across the course's main areas and make one recommendation. Expect to introduce the firm and your recommendation, analyze ownership, marketing, operations and finance, set out the recommendation in full, discuss costs and risks, describe alternatives and say how to judge the result. Students often ask how to choose one recommendation. Look for a problem that shows up in more than one area, such as a supply risk and a thin cash cushion, since one action can address both. Reuse findings from earlier units. Give the recommendation steps, timing and costs. Weigh at least two alternatives. Name measures that can be checked in next year's report.
Inside the BU 106 Unit 8 example
The analysis opens with Chipotle's size, its recommendation and the reasoning in a few sentences. The ownership section explains company-owned restaurants and the regional structure. The marketing section covers quality positioning, guacamole pricing and digital sales. The operations section describes avocado dependence and the 2024 inspection pause. The finance section summarizes margin, buybacks and falling cash. The recommendation section lists four steps in order: lower repurchases, qualify avocado suppliers in Peru and Colombia, extend the approach to limes and tomatoes and rebuild cash. The costs section discusses shareholder reaction and contract premiums. The alternatives section explains why two other options were set aside. Three year-end measures close it.
BU 106 Unit 8 rubric: what full points look like
Herzing's rubric for a company analysis with recommendation typically covers the introduction, functional analysis, the recommendation, costs and risks, alternatives and measures. A recommendation that follows from findings in several areas earns the most credit, because the capstone of the course is seeing how ownership, marketing, operations and finance connect. Introduction points reward a clear thesis. Analysis criteria look for each area supported by sources. Recommendation credit goes to specific steps, timing and costs. Risk points reward honest discussion of downsides. Alternatives should be real options. Measures should be checkable. Gitman's course text, Chipotle's Form 10-K, Corpi's report on the avocado halt and Littman's trade reporting support the analysis.
Common BU 106 Unit 8 mistakes, and how to avoid them
Company analyses in BU 106 Unit 8 fall short most often by summarizing each area without connecting them. Another frequent problem is a recommendation that does not follow from the analysis. Students often recommend several things instead of one. Costs and risks are ignored. Alternatives are missing. Findings from earlier units change without explanation. Measures are vague, such as improve performance. Sources are general websites rather than company filings. The analysis ignores what shareholders and lenders would say, though both groups decide whether a recommendation like this one can actually happen. Finally, let one action solve problems in two areas, because graders credit an analysis that reveals how the parts of a business lean on one another.
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BU 106 Unit 8 questions, answered
Can I reuse my earlier assignments in this one?
Usually yes, though not as they stand: the earlier work comes back shortened and pointed at the recommendation. A marketing section written to describe a firm has to be rewritten to support or complicate one choice, and any part that lost credit is worth putting right before it is folded in. An instructor who marked the original will recognize an unchanged paragraph, and old text tends to sit oddly inside a new argument.
How specific should the recommendation be?
Specific enough that somebody could start on it. Name what the firm does, what it stops doing to make room, roughly what it needs and in what order the steps come. Recommendations phrased as improving customer engagement or expanding market presence cannot be acted on or argued with, and they are the commonest reason a strong analysis ends weakly.
Does the paper need numbers behind the recommendation?
Some sections want illustrative figures and many at this level are satisfied with reasoning, so check the instructions before building a table. Where figures are wanted, keep the arithmetic simple, write every assumption next to it, and label the result an estimate. No outside reader can predict a company's results, and a confident forecast undermines the argument standing on it.
Where can I find a free BU 106 Unit 8 sample paper?
Read the complete BU 106 Unit 8 company analysis here at no charge, Chipotle across four business areas with one recommendation, costs, alternatives and measures. Ask for a custom analysis of another company.
How do I write a company analysis with a recommendation?
Analyze ownership, marketing, operations and finance using company filings, find a problem that appears in more than one area, recommend one action with steps and costs, weigh alternatives and set measures. This sample does that.