This is not a stock recommendation, but I thought this was a terrific summary of what makes Chipotle a unique restaurant chain.
Ensemble Capital on Chipotle Mexican Grill (CMG)
“Few restaurant concepts -- even highly successful ones -- break out of their local or regional market.
Once restaurants hit a certain ‘escape velocity’ to break free of the natural gravity of their local or regional market and obtain national scale, it is difficult to unseat them.
Consider that most of the fast-food restaurants that lined Main Street America in the 1980s — McDonalds, Burger King, KFC — are still there today.”
“One thing we find remarkable about Chipotle is that it achieved national scale with fresh, responsibly sourced food.
There are no freezers, microwaves, or can openers at Chipotle restaurants.
The Humane Society of The United States awarded Chipotle an “A+” score on its Food Industry Scorecard, which measures animal welfare.
It is hard to see how another fresh food focused, quick-serve restaurant might be able to match this scale — over 2,600 restaurants today — within a decade or more and with the same level of quality as Chipotle.”
“First, handling fresh food is not easy.”
“Second, developing relationships with local meat and produce farmers takes time and farmers have limits on their supply.”
“Finally, whether you order your regular burrito bowl at your local Chipotle, the one in Missoula, Montana, or Morgantown, West Virginia, you expect it to taste the same.
Making freshly prepared food nationally consistent is a massive obstacle and requires top-notch employee training and, more importantly, high rates of employee retention.”
“You can’t compare what Chipotle does with a taqueria or burrito shop.
Two-thirds of orders placed at Chipotle are bowls”
“We’ve found it more helpful to think about Chipotle as freshly prepared, quickly served food with Central American flavoring.
Not being constrained by any delivery medium like a burrito or taco allows Chipotle to be creative with their menu offerings.”
“The taqueria experience (which many people on the Ensemble team love!) is different from Chipotle’s and we do not believe the customer occasions (‘I’m in the mood for…’) overlap much, if at all.”
“it is worth noting the success of Chipotle’s loyalty program, which has tripled in membership count over the past year to 15 million at the end of the second quarter.
For some perspective, Starbucks’ best in class US loyalty program membership count is approximately 19 million.
Not only does this speak to Chipotle’s relevance with its customers but it provides the company with better data analytics around customer order patterns.”
“if Starbucks’ loyalty program provides an indication of what to expect, Chipotle loyalty members will visit its restaurants more frequently and spend more per order.”
“In the US alone, Chipotle thinks it can more than double its current store count to over 6,000 locations.
A longer-term opportunity is Europe and Asia...Chipotle has a few locations abroad but has not made a strong push there yet.”
Thanks for reading! Hope you have a nice rest of the day.