Went to Chipotle Mexican Grill in my neighbourhood yesterday. I heard about it because of its stock (CMG)Â has done very well since IPO early last year (up 88%). I was curious about the food and the atmosphere so I went. It seems there are lots of young people, I mean people in 20s (Generation Y), whichÂ are generally younger than Panera crowd. At Panera, there are many older people in the morning. Also there are people working and gathering at Panera because of its free Wifi access and community feeling.
Back to theÂ Chipotle. The foodÂ is ordered veryÂ similar to Subway, except here we are talking about Burrito, and Fajitas. The food qualityÂ is good.Â The price isÂ in the Panera range. I paid $6 for the Beef Fajitas (which turns out to be a mistake, will order chickenÂ next time).Â
Of course my analysis can not be complete without looking at its business and stock. I thinkÂ both Chipotle and Panara play the “fast casual” theme, i.e., fast foodÂ using muchÂ better ingredients than McDonald etc, yetÂ not too expensive. This plays well with healthÂ consciousÂ people. ChipotleÂ is in a sweet spot becauseÂ American increasingly fallÂ in love with Mexican food, and young people like the brand just as they like theÂ apparel brands such as Aeropostle, Abercrombie, etc.Â CMG got a hit lately because of rising prices of corn, chicken,…if you are interested in the stock, here is a good article at Seekingalpha.
From growth point of view, IÂ thinkÂ they all follow similar model: find a new place, lease or build the restanrant, hire people, prepare food and sell to people. Eventually theyÂ will run out of places to open (e.g.,Â Starbucks?) in the US, or peopleÂ initially need to drive 5 miles to an old store nowÂ drive 1 mile to a new store. In other words, there is a point the market will be saturated.Â Chipotle seems notÂ at this point yet. Another risk is food business increasinglyÂ look like fashion, e.g., people could change their apptite fromÂ Mexican to Chinese, or Italian. Â Â Â