QUOTE AND NEWS
Motley Fool  Aug 15  Comment 
The franchising business model generates tons of cash for restaurant operators, but it also has a huge drawback.
Market Intelligence Center  Aug 14  Comment 
The option-trade picking algorithms behind MarketIntelligenceCenter.com's Artifical Intelligence Center have selected a covered-call trade on Chipotle Mexican Grill Inc (CMG) that includes 6.31% downside protection. Sell one contract of the Dec....
Benzinga  Aug 11  Comment 
Shake Shack Inc (NYSE: SHAK) reported better-than-expected second-quarter results on Monday. Since its stock market debut, investors and experts have compared the company with Chipotle Mexican Grill, Inc. (NYSE: CMG). Can Shake Shack ever be...
Clusterstock  Aug 11  Comment 
Starbucks is determined to give the fast casual industry a run for its money.  The coffee giant has added several limited time offers this month geared toward lunch, according to DataEssential, a food industry research firm.  The new items...
The Australian  Aug 11  Comment 
Craig Mostyn Group will be the major shareholder in a new listed seafood play after the sale of its ­distribution arm.
Clusterstock  Aug 7  Comment 
Wingstop's business is on fire. Sales at the newly public company soared 9% in the most recent quarter, double what analysts at Morgan Stanley were expecting. That puts it among the best in the industry.  The company "is uniquely positioned...
Market Intelligence Center  Aug 7  Comment 
Chipotle Mexican Grill Inc (CMG) is an excellent choice for either a diagonal spread or a covered call expiring in Dec. '15 at the $745.00 level according to MarketIntelligenceCenter.com’s patented algorithms. A covered call on Chipotle Mexican...
Clusterstock  Aug 3  Comment 
Chipotle is taking over.  The brand has expanded to nearly 2,000 restaurants around the world. Analysts at Morgan Stanley believe Chipotle could double the number of locations in the coming years.  Chipotle's cult following and reputation...
Motley Fool  Aug 2  Comment 
One of the two top names in fast casual dining offers a much better combination of revenue growth and earnings growth than the other.




 

Chipotle Mexican Grill (NYSE: CMG) is a quick-service Mexican-inspired restaurant chain based out of Denver, Colorado. The company is primarily known for its large burritos, which are served wrapped in aluminum foil. The company emphasizes its simplified menu in which a small set of quality ingredients are combined to create items such as tacos, fajitas, and "burrito bowls" in addition to its burritos. All food items are assembled in front of the customer using an assembly line process.

The company is known for its simple and humorous print ads, its primary method of advertising. Its self-professed emphasis on quality ingredients has led to initiatives such as increasing the use of naturally-raised meats. Chipotle's stores are typified by an industrial-styled interior with heavy use of dark red color and corrugated metal accents.

At the end of 2010, Chipotle opened 128 new restaurants, bringing its total to 1,084 in the United States, Washington D.C., and Ontario, Canada. Furthermore, the company plans to open 135-145 new restaurants in the year 2011.[1]

Company Overview

In 2010 Chipotle reported revenues of $1.84 billion, a 21% increase from 2009. Net income for the year was $179 million, representing a 41% growth.[2]

Up to 25% of Chipotle's new restaurant openings will be what are called “A Model” restaurants, which Chipotle plans to put in well established markets with high levels of brand awareness. A Model locations will be built primarily in secondary trade areas which have attractive demographics but are typically characterized by lower occupancy costs. The company expects that A Model locations will be constructed for substantially lower investment costs and have lower operating expenses than its recent traditional restaurant openings. The economic environment has put pressure on the commercial real estate market and developers, reducing the number of new real estate developments available to the company, which have historically accounted for a majority of the Chipotle's new restaurants.

Trends and Forces

Increasing Hispanic Culinary Influence

New Mexican fast food restaurants like Chipotle and Qdoba are catering to the Hispanic market to drive sales. According to the US Census Bureau, 25% of the US population is of Hispanic descent. Hispanics account for over $600 billion in purchasing power in the US alone and by 2050, it is projected that 1 out of every 4 Americans will hail from a Spanish-speaking country or region. It is no surprise, then, that the burrito has become an American culinary staple and that the industry is adding Southwestern cuisine to its menu offerings. Chipotle – with its flavorful Mexican cuisine – is positioned to extract value out of this powerful demographic over the next 10 years.

No Time, More Money

The baby boomer generation, time-pressed Gen Ys, and the rise of dual- income families means more people are dining out. There are 77 million Boomers in the US currently and they are getting older and wealthier. Americans can more readily afford to eat out, but they are also more time constrained than ever: according to the Department of Labor, more than 50% of American families were dual earner households and US disposable personal income should continue to grow in the forseeable future. With both parents holding full-time jobs, less time is left to prepare meals. Simply stated, eating out is the most convenient solution and the industry can quickly ramp capacity to meet demand. VIVA LA RAZA

More room for growth

Presently, the company operates all of its restaurants within the US and believes the potential for domestic stores is around 3,000 locations. Since current restaurants only comprise of roughly a third of that level, there is significant room for growth before the company hits saturation.

Whole Foods Effect

The company is well positioned to capitalize on the “Whole Foods effect” and secular drive towards high quality ingredients. According to the organic Trade Association (OTA), organic food sales are growing at a 20% clip annually in the US, although such food only accounts for 3% of all food and beverage sales. The company is ambitiously redefining the way America grows, serves, and eats its food. Most of the food is made fresh daily: its people chop fresh tomatoes, pull oregano leaves off stems, and toast cumin seeds. Among its suppliers, Chipotle avoids meat from livestock raised with hormones or antibiotics and looks for fresh ingredients naturally raised with respect to the land, animals, and farmers that produce the food.

Chipotle, seems to have created a sustainable branding strategy that leverages its good food, humorous ads, distinctive interior design, and in-store world music. It is a testament to Chipotle’s success that they have built a purpose bigger than its product and accomplished so without any finger-pointing.


References

  1. CMG 2011 10K
  2. CMG 2011 10K
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