This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.
The most impressive game-changer story in the fast food industry over the past 50 years is indisputably McDonald's (NYSE: MCD). Founder Ray Kroc was a visionary and pioneer in serving customers hot fast food at a reasonable price. Thirty thousand units later, McDonald's is still a growth story. But the better growth story is Chipotle Mexican Grill (NYSE: CMG), so much so, in fact, that McDonald's was an early investor in Chipotle! (McDonald's no longer owns shares of Chipotle.)
McDonald's went through some execution issues in the mid-1990s through 2003. The fast food industry was taking some hits from nutritionists, and the quality of food was suspect. McDonald's re-tooled its entire operation from store front to menu offerings. The standard hamburgers and those delicious french fries are still on the menu, but McDonald's has added a variety of salads, wraps and other healthier options. In the past five years the stock has nearly tripled in value, validating McDonald's make-over.
Chipotle, founded in 1993, has not had to re-tool or redefine itself. The freshest of ingredients, naturally raised poultry and beef are highlights of the limited, but superb menu. Chipotle is a favorite of almost every demographic group, from teenagers to the elderly. Chipotle has succeeded in offering the finest fresh Mexican food, but not at the cheapest price. The average ticket at Chipotle comes in near $9. The company recently raised prices at different levels depending on geography. Sales have not slowed a bit in spite of the price increases.
McDonald's has saturated its key markets and must make "the box" yield greater sales leverage. The company will add units strategically, but for the most part, the key real estate corners are already "Golden Arches" occupied. Whereas Chipotle, with only 730 units, has room to easily 10-fold that base over the next decade. This does not include any international expansion in the equation. The Chipotle concept is portable to selected nations that fancy Mexican food.
Only in existence for 15 years, Chipotle has defined the casual, fast-food Mexican industry. The company offered its initial public offering (IPO) on January 26, 2006, at $22 per share. The stock saw a high of $150 and now rests at $90, still a four-bagger since the IPO. The strength of the story lies in its flawless daily execution and fierce customer loyalty. Chipotle is a GameChanger company and Ray Kroc would be proud of Chipotle!