Went to Chipotle Mexican Grill in my neighbourhood yesterday. I heard about it because of its stock (CMG) 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), which 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 the Chipotle. The food is ordered very similar to Subway, except here we are talking about Burrito, and Fajitas. The food quality is good. The price is in the Panera range. I paid $6 for the Beef Fajitas (which turns out to be a mistake, will order chicken next time).
Of course my analysis can not be complete without looking at its business and stock. I think both Chipotle and Panara play the “fast casual” theme, i.e., fast food using much better ingredients than McDonald etc, yet not too expensive. This plays well with health conscious people. Chipotle is in a sweet spot because American increasingly fall in love with Mexican food, and young people like the brand just as they like the apparel brands such as Aeropostle, Abercrombie, etc. 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, I think they all follow similar model: find a new place, lease or build the restanrant, hire people, prepare food and sell to people. Eventually they will run out of places to open (e.g., Starbucks?) in the US, or people initially need to drive 5 miles to an old store now drive 1 mile to a new store. In other words, there is a point the market will be saturated. Chipotle seems not at this point yet. Another risk is food business increasingly look like fashion, e.g., people could change their apptite from Mexican to Chinese, or Italian.