QUOTE AND NEWS
Market Intelligence Center  Jun 25  Comment 
The initial public offering (IPO) market has been very strong as of late, though it hasn’t been tech names leading the way as restaurants have actually been in focus during this IPO boom. And with the recent group of restaurant IPOs like...
Motley Fool  Jun 20  Comment 
The burrito roller's mission to make its tortilla more natural is the latest evidence that the company is in league of its own.
TheStreet.com  Jun 19  Comment 
NEW YORK (TheStreet) -- McDonald's , Chipotle and other big franchises better be looking over their shoulders, since there are some new and rejuvenated franchises gunning for them. Nowhere was that more on display than at the annual...
guardian.co.uk  Jun 18  Comment 
Chains like Chipotle that market themselves as serving better food and a new breed of ‘better burger’ chains have chipped away at McDonald’s dominance The burger chain that put “supersize” into the American vernacular is slimming down:...
USAToday.com  Jun 16  Comment 
Chipotle is usually the stock your friends brag about owning. Not now
Motley Fool  Jun 16  Comment 
Noodles & Company is taking on debt to buy back its own shares. Here's why it's a mistake.
New York Times  Jun 15  Comment 
The Bread Lab at Washington State University is working to improve the quality of the chain’s tortillas and make them as tasty as an abuelita’s.
Forbes  Jun 12  Comment 
With investors clamoring for shares, Wingstop looks to go the way of Shake Shack, Chipotle and Buffalo Wild Wings with an IPO smash.
Forbes  Jun 11  Comment 
With investors clamoring for shares, Wingstop looks to go the way of Shake Shack, Chipotle and Buffalo Wild Wings with an IPO smash.




 

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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