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!
Georges Yared is the editor of YaredsGameChangers.com and author of the new report "How to Spot the Next Google."
Here's Why United Was Just Named America's Worst Airline
The Smart 401(k) Rollover Option That Almost Everyone Forgets


Reader Comments (Page 1 of 2)
6-27-2008 @ 9:10AM
tom Williams said...
certainly the worst mexican food and quite possibly the worst food that i've ever put in my mouth
6-27-2008 @ 10:34AM
Parissa said...
On this one, I wish I were a betting fool: I'd bet ~ put all my money in the pot ~ that Chipolte NEVER reaches the level of service and acceptance that MacDonalds has. But, I'm not a betting fool ... so I'll just wait the next ten years and be satisfied when Chipolte is a forgotten name in a sea of forgotten fast-food eateries! Sorry, but there it is! ;-)
6-27-2008 @ 11:33AM
ardyngarden said...
For a first-timer at Chipotle's, the food signs were a little confusing. Food was fresh, but just had a veggie burrito, bland. The main thing I came away with was a smell of Mexican spices and smoke. not wanting to deal with that, anymore than I did the one time I went to Red Robin...serious smoke in my eyes, and on clothes, leaving my throat raspy from "cooking type" smoke in the air.
6-28-2008 @ 6:33AM
goriajk said...
You're making me hungry right now...at 3am and my local Chipotle is closed. Shame on you. My favorite restaurant of ALL - Chipotle is MY McDonalds, In and Out Burger & Jack In The Box combined...Long Live Chipotle and I'll see you there with a Burrito in hand. JG
6-29-2008 @ 4:22PM
Terry said...
With so many people of latin descent moving into so many areas, Chipolte has lots of growth potential. Will it be another McDonalds? Probably not. It doesn't have the world wide appeal that McDonalds enjoys. Chipolte also needs to add items to its menu selection. Too limited for my tastes. I only frequent McDonalds on ocassion, so I don't have a high opinion of their food either. My favorite would be Jack in the Box or In and Out Burger.
6-28-2008 @ 8:10PM
Ron Meltzer said...
Just had Chipolte "food" one time. Once was enough!! It was lousy and I could barely eat it; as it was, I threw most of it away. Don't think i'll ever be back again!!!! :~['
6-30-2008 @ 1:44AM
Me said...
U all have to be kidding me! Chipotle rocks and will be the best ever until the day I die. The only praise I have for my ex-hubby is for introducing me to this restaurant. I love it!!!!!!!!!!!
6-30-2008 @ 12:22PM
dean E. said...
I do not understand why chipotle's stock is not marketing higher than 90$ if you consider it a new, future McDonallds. Chipotle does have tasty food, and supposivley is good for you, but I do not understand why the stock is at such a low level. I know that the stock market as a whole is decreasing in value, but I still think if Chipotle is consider the next McDonallds!! then the stock should gain in value. Also, Chipotle rocks and people who think it taste terrible are out of their mind. GO CHIPOTLE!!!!!!!
6-30-2008 @ 3:55PM
Woody said...
I thought Mc D's was a majority share owner in it anyway...
6-30-2008 @ 4:06PM
johnwroberts said...
What a bunch of bs. Mcdonalds owned seventy per cent of chipotles. They stepped aside but the major stockholders of mcdees owns them now.
6-30-2008 @ 4:45PM
Scott said...
Are you sure about that 10 fold increase?
That would be 747,520 stores.
Maybe you misused the term and simply meant that they could increase their total 10 times.
If you fold something you double it. So 10 fold would be doubling ten times. Not just increasing by 10 times the starting amount.
10 fold is a hell of a lot more than 10 times something.
6-30-2008 @ 4:41PM
Susy said...
Chipotle is the worst Mexican restaurant I've ever been too. I am Mexican, I grew up eating and making Mexican food from scratch, when I visit my family in Mexico all we eat is food from locals or our own home made food. When I was introduced to Chipotle I had high hopes for it because the name is an indigenous word, then I saw the menu, what kind of menu is that? They pretty much just have burritos which is not even a native dish and is only made in tourist areas of Mexico. What can I say about the food, well all I could say is that it was the worst food I've ever had. Not only was it bad compared to real Mexican food, it was bad compared to food I've had from other countries and other so called Mexican restaurants that I do not like. And to make matters worse, my roommates and I all got sick from the food. So to say that Chipotle is the next McDonalds is just pure stupidity. I do not like McDonalds very much but Id rather eat its fatty food than even step a foot in Chipotles' restaurant.
6-30-2008 @ 4:56PM
rdywenur said...
I don't speak Spanish and I don't eat Mexican. And don't ever anticipate either ...E_V_E_R!!!!!
6-30-2008 @ 8:48PM
Roberta said...
Accolades to "rdywenur"! Ditto.......I do not speak Spanish and I do not eat Mexican food nor do I ever plan to either. I hate it when I go into an American restaurant and some foreign cook puts chipolte or some taco flavoring in my food. I can smell and taste it immediately. I am so glad there is a Chipolte restaurant for people who want a "Breakfast Burrito" I have never eaten a burrito for breakfast. I don't need those spices early in the A.M. Yes, this restaurant chain will do well because of the huge Mexican population in America, and yes, those people can afford $9.00 and up because they all work off of the books and do not pay taxes. The rest of us, taxpaying American citizens, cannot afford to eat out any longer because we are paying for all the illegals who are giving birth every 2 seconds!!!!!!!! Hence the large Mexican population. Maybe McDonald's will take the burritos off of the menu, let the Chipoltes have them and we can go back to an American menu and hope to get food without the Spanish flavoring that we did not ask for in the first place!
6-30-2008 @ 7:51PM
boris said...
i dont know about this optomism. The mass appeal isnt quite that broad and there is tons of competition. In some of the new florida stores (WPB and Orlando) the entree cooking execution is a let down. The new stores have lower then projected volumes, even though managment knew this for a few quarters while they were selling stock. Also the founder skims 10% of net profits for himself every year, talk about a drain on shareholder assets.
7-01-2008 @ 11:40AM
Brian said...
Chipotle is far from "the finest Mexican food." Real Mexican food doesn't use monterey jack cheese.
Read chef Anthony Bourdain's experience with authentic Mexican cooking in the food travel book "A Cook's Tour" to see what I'm talking about.
7-03-2008 @ 11:52AM
lamo said...
Some of you are rediculous "it's not authentic mexican food, in mexico we don't serve burritos!" Chipotle serves "gourmet burritos" not authentic mexican... so if your from mexico and know burritos aren't authentic to your culture, why would you even go/ why would you go to a burrito joint and be upset when all they have are burritos? Chipotle is amazing, hands down
...and we don't even have dance dance revolution, sooo your dumb
7-06-2008 @ 11:26PM
victory said...
lol Chip nothing lol If I haven't heard of it till now it means its never going to be anything but another average restaurant. By the way how in the hell is Applebeeswax better than Bennigans, Chillis, or even Fridays? I went there one time and they didn't even have the righ to play tv with volume lol what kind of shit is that .. lol its like going to a sports bar and having nothing but silent tv screens LOL what a joke fuck applecrap
7-07-2008 @ 1:42PM
jacob said...
This is really awesome resturant. Daily i'm seeing more crowd in it...Long queue always....which means people like it. I donno why its trading only $80 nowadays...It suppose to be $130....
7-25-2008 @ 11:19AM
Bob said...
What states are in line for start-ups (openings) of this restaurant? If Utah is in the running I do have a very good location available.