Latest news with #Chipotlanes
Business Insider
3 days ago
- Business
- Business Insider
Burrito bowl blues
In 2017, Jacob Schneider, then 16, landed his first job at a Chipotle in Lawrence, Kansas. It offered "decent" pay for a person his age, he says, above minimum wage, as well as robust training. "I learned how to do my job really fast," he tells me. "I didn't notice a lot of bad things at first," he says. But eventually, he felt, training quality started to decline. Breaks got shorter. Equipment would break and not get fixed; a cooler was out of operation for about a year, Schneider says. "A lot of corners were being cut over time." The deterioration took its toll. "The morale of the whole store was basically terrible," he says. When he started, people rarely talked about leaving. By last year, the most common topic he and his coworkers discussed was how much they wished they could quit. "It was just getting worse and worse and worse." Schneider was witnessing Chipotle making a sharp U-turn. Founded in 1993 by Steve Ells, a former sous chef at a San Francisco fine dining pioneer, Chipotle became an elevated fast food juggernaut with more than 3,700 locations around the world, going public in 2006. But the company suffered a series of food-borne illness outbreaks starting in 2015, when 60 people were sickened across nearly a dozen states. All restaurants closed for half a day in February 2016 to deal with food safety. Then another norovirus outbreak hit in 2017. Ells stepped down as CEO a few months later, and he was replaced by Brian Niccol, who had just served as CEO of Taco Bell. Niccol led a dramatic turnaround. The efficiency-focused changes he put in place — including order screens, delivery, and "Chipotlanes" drive-throughs — helped the company's annual revenue surge from $4.9 billion in 2018 to $11.3 billion in 2024. Its stock jumped tenfold, from $6 a share in early 2018 to more than $60 when Niccol left in mid-2024 while its market cap grew from $9 billion to more than $80 billion. As happy as these changes made shareholders, the change in culture has been much more than a vibe shift for the company's 130,000 employees. Current and former employees say that Chipotle was once a special place to work — a cut above in fast casual dining — that has since been consumed by a fast food ethos that, for its workers, has made its restaurants barely distinguishable from a Burger King or Domino's. In the past few years, evidence of a downgrade for staff has been popping up around the country. In 2022, Chipotle agreed to a $20 million settlement with New York City over claims of 599,693 violations of the city's scheduling and paid leave laws, more than any company has paid in a worker protection settlement in the city's history. In 2024, the company appeared in the second-place spot, behind Amazon, on the New York City Comptroller's "Employer Wall of Shame," where it still appears. Chipotle also agreed last year to pay $2.9 million to Seattle-based employees in a settlement over allegations of failing to give extra pay for schedule changes and retaliating against employees who didn't take shifts they hadn't been scheduled for — the largest settlement the city had reached since its scheduling law took effect. That same year, a study of Glassdoor reviews from more than 550 of America's largest employers found that Chipotle had the second-highest rate of employee burnout (behind Progressive insurance). In a statement to Business Insider, Chipotle's chief corporate affairs officer Laurie Schalow writes, "Our employees are our greatest priority, and we are committed to providing a best-in-class work experience that includes robust training and development programs." Business Insider spoke with eight current and former Chipotle employees in four states whose tenures span from 2012 to the present; four of them have been involved in union organization efforts. Each told the same story, resonant with the broader allegations and superlatives: Many of the qualities that made Chipotle stand out as an employer — offering a stellar working experience where they were well-trained and valued and able to offer customers a high-quality experience — have precipitously declined. For a fast food brand, Chipotle has lofty values. "Our purpose is to cultivate a better world," its website states. It has long prided itself on offering only fresh food — it doesn't have freezers at its restaurants, a rarity in an industry where the majority of ingredients are frozen. It also makes promises to its employees. "Being real means treating our people right," reads the company's mission statement. "Chipotle brands themselves as the cool fast food place to work," says Quinlan Muller, who started working at the Lawrence, Kansas, location with Schneider in 2018. It pays better than many of its competitors: According to survey data from the Shift Project, a research venture from Harvard's Kennedy School and UC San Francisco that tracks low-wage workers over time, Chipotle employees report earning $16 an hour on average nationwide, while Burger King and Domino's pay $14. Arrow Smith took a job at the Augusta, Maine, franchise a few years ago because a previous job at Dollar General"wasn't paying me enough to survive," and they could make a dollar or two more per hour at Chipotle, plus tips. Anna started out at minimum wage at a location in Ohio in 2012, but quickly was making over $60,000 a year between raises and regular bonuses for exceeding sales metrics. She says she also got "excellent" health and dental benefits. She made more, in fact, than she does now in a marketing job. (She asked Business Insider to use a pseudonym because her husband still works at Chipotle.) With the higher pay came higher expectations. "You had to be near perfect on everything," Anna says. If she prepped produce that wasn't cut to the right size, it would get thrown out, and she would start over. "I never worked for a fast casual or fast food restaurant that had such a high level of standards," she says. "It was a great environment." Those standards, the people Business Insider spoke with say, were upheld by a rigorous training program that looked more like those at the Culinary Institute of America, Ells' alma mater, than what is typical in the fast food industry. Muller came into her job at Chipotle fresh off a short stint at another fast food company where the training barely existed. At Chipotle, she was able to get trained in lots of different positions. "It felt more fulfilling," she says. The training had a built-in progression to help people move from crew to managers and above. "They wanted to grow people and bring them up," McNease says. A new hire started out by watching training videos for each position and looking through booklets that broke down every minute aspect of the job. Then workers would watch other people do the tasks before doing the tasks themselves with a trainer to offer feedback. "It was a really in-depth process," says Brandi McNease, who started as a crew member at a location in Augusta, Maine in 2016. Workers were trained for multiple positions, from manning the tortilla press to grilling the food in the back. The training also had a built-in progression to help people move from crew to managers and above. "They wanted to grow people and bring them up," McNease says. Smiling Estrella, who started working at a New York City Chipotle in 2016, was promoted from crew to kitchen leader within three years. Brian Niccol espoused a fast-food mindset that Chipotle had previously eschewed. "His experience and worldview is processed, profitable, and not very organic foods," says Michael W. Morris, a professor at Columbia Business School. "He's an MBA quantitative marketing kind of guy, good at cutting costs in supply chains." Niccol brought in executives from Bloomin' Brands, which owns fast casuals Outback and Carrabba's, and Panda Restaurant Group, the owner of Panda Express. Niccol left Chipotle last summer to become CEO of Starbucks. Chipotle's new CEO is cut from the same cloth: Scott Boatwright, who joined in 2017, had spent the previous 18 years at Arby's. With Ells' exit came a change in internal culture. "You can't have an organizational culture of a fast food restaurant and maintain a brand image of an organic, sustainable place," Morris says. It "doesn't allow for the craft feeling or for the people who are passionate about food to be displaying that passion." Chipotle says it still conducts intensive "real culinary training." In a video on its recruitment site, a worker named Ryan says that when he started there, "they had so many step-by-step processes on how to learn everything." Schalow says in her statement, "We have always had new worker training, and we continuously re-assess our training program and revise it as we deem appropriate." Each of the workers Business Insider spoke to say that the company's training quality has dropped off. By the time Leslie (who asked that Business Insider use a pseudonym; she still works at Chipotle) started working at a New York City location in 2019, she didn't get to watch a video or receive any hands-on guidance before she was put to work, she says. For each task, she says, "they would explain it maybe once and that's it." She didn't know how to wrap burritos for four months and figured it out by asking people to help her and watching videos during her off hours, she says. At the Augusta store, McNease says, "It was pretty clear that what I had stepped into was a transition period that was not going in the right direction." New hires started to be put on the floor with no training, she says. "It got to the point where you were lucky if you got to watch videos." The same was happening in Kansas, as new hires wouldn't know how to do important tasks, Muller says. Thomas started working at the same Chipotle in 2022 (he also asked that I use a pseudonym). By the time he left in late 2023, he says he consistently had to correct employees on food safety procedures. In her statement, Schalow says the company's current training program "includes food safety training, workplace and employment-related training, and a range of operational training for various roles." When Schneider first started, there was a strict rule enforced that no one under 18 could use a knife; later on, kids as young as 16 were doing that prep work, he says. Schalow says the company has "policies and procedures that comply with state laws for the employment of 16- and 17-year-olds." Thomas says the focus switched from creating high-quality food to drilling down on portions — not giving customers too much. Managers "really started hammering that into us," he says. Employee scheduling has also been tumultuous. According to Shift Project data, three-quarters of Chipotle employees it surveyed say they get their schedules less than two weeks in advance. More than a third get their schedules with less than a week's notice. Shifts also move frequently: Three-quarters of Chipotle employees report having received a shift timing change in the previous month; 22% had a canceled shift. When it comes to employee scheduling, "Chipotle is really at the bottom of the heap" of comparable restaurants, says Daniel Schneider, a principal investigator at The Shift Project. Kristen Harknett, another principal investigator, says that canceled shifts are "extremely disruptive," particularly for workers who show up to a shift only to be sent home without receiving any pay. In Kansas, managers put up a printed schedule once a week on Saturday night or Sunday, say Schneider and Muller. There was no way to access it online; if someone didn't work that day, they might not know they were supposed to show up the following one. At the Maine store, workers sometimes wouldn't have their schedules by Sunday and would be told to show up to whatever shifts they had been scheduled for the previous Monday, says McNease. All the workers Business Insider spoke to also say that staff was so lean that employees on any given shift weren't able to handle the crush of customers, and that many shifts were chaotic. At the Augusta Chipotle, Smith says, "It went from awesome and well-staffed to a skeleton crew in like a month." McNease says managers told workers to work more hours and take over more positions without extra pay. Prep tasks like chopping food with sharp knives were done by two people instead of six, she adds, leading to injuries. One coworker cut his fingers seven or eight times trying to cut meat fast enough to keep up with the line of customers, Smith says. "Every day felt like a new set of small catastrophes. We were begging for more staffing, more help, and they just wouldn't send us anybody." McNease also says that food would get left out too long and dirty dishes piled up. At the Lawrence Chipotle, says Muller, there were shifts with one person working on the line in the front and a shift manager in the back cooking food. Sometimes the store would get so busy that no one would be able to properly wash dishes and bowls between uses. During the company's earnings call in April 2025, Boatwright noted that internal research had found that some restaurants were unclean during peak hours. Employees blame the hecticness, in part, on climbing turnover rates. In 2016, the rate was 130%, according to the company. By 2021 it had swelled to 194%, meaning nearly twice as many people left as were employed there that year. Rates have fallen since then, clocking in at 145% in 2023 and 131% last year. "We firmly believe in consistent and predictable scheduling and providing our employees with sufficient advanced notice of their schedule," says Schalow. "Our staffing levels are the best they have been in recent years, and we continue to see record low turnover rates in our restaurants." The issues have trickled down to customers, who workers say have had to wait in longer lines or forgo ingredients that couldn't be cooked and prepped in time. Last year, after a chorus of customers accused the company of skimping on portions on TikTok, a Wells Fargo restaurant analyst ordered and weighed 75 iterations of the same item at eight locations across New York City — and found a lot of variation. Niccol denied there was any directive to offer smaller portions, and announced training to ensure consistent amounts across locations — although not before a shareholder lawsuit over the matter. "We have not changed our portion sizes, and we have reinforced proper portioning with our employees," says Schalow. "If we did not deliver on our value, we want our guests to reach out so we can make it right." More and more often, customers get nasty with employees. "We'd get yelled at, screamed at," Anna says. "It got so much worse as the years went on." In response to the portion-skimping allegations, customers have taken to filming workers as they make their burritos. It made employees "really uncomfortable to have cameras in our faces while we were working," Thomas says. "People were very rude about it." Schalow at Chipotle says, "We do not condone guests who mistreat our teams and fail to give them the respect they deserve." "A lot of people would lash out," says Smith. "It got really dehumanizing." Anna, who had at one time loved her job so much she planned to stay as long as she could, says that the job became so disorganized and overwhelming that she quit after eight years with the company. In April's earnings call, Boatwright also noted that employees were "not as friendly as we probably should be in restaurant." His solution: Urging them to greet customers with a friendly smile. "The fact is," he said, "smiles down the line don't slow us down." In recent years, a number of Chipotle workers around the country have decided to organize. In New York, Leslie was approached by SEIU 32BJ, a union that organizes primarily low-wage workers like cleaners and food service workers. She had previously been in a union while working at a nursing home, and she liked the idea of having one at Chipotle, too. Chipotle did not agree, she says. "I'll tell you one thing, Chipotle hates the union," says Smiling Estrella. After he was on the news for attending a protest in New York, Chipotle accused him of forcing someone to work during his unpaid break and making employees clock out before working to close up the store. He denies it, calling the accusations "lies." In early 2023, he was fired. "That was really freaking hard," he says. "I went through a deep depression." He nearly lost his apartment as he struggled to make rent, and his phone service was cut off twice. In 2023, Chipotle was hit by seven unfair labor practice charges in New York City, the most of any employer. There are four open charges against the company sitting with the federal National Labor Relations Board for alleged behavior such as unfairly disciplining and threatening workers. Workers at a Michigan location prevailed in forming a union. In 2022, employees at a Chipotle in Lansing overwhelmingly voted to join the International Brotherhood of Teamsters to address what they said were similar issues of understaffing and inconsistent schedules. The workers say they were barraged by captive-audience meetings and anti-union messaging; the NLRB found the company had violated labor law by trying to deny raises to the unionized workers. They are, to date, the only unionized location. More than two years later they don't have a contract. No other union campaign has succeeded. In March 2022, the "wheels started to fall off" at the Augusta location, McNease says. She had been trying to do training "correctly," but struggled, particularly as people kept quitting. A gas leak in the restaurant started making people sick, and it took the company weeks to send someone out to fix it, she says. That's when she got in touch with someone she knew who was in a union to find out more about the process. The first step, she was advised, was to talk to coworkers about forming a union. "It immediately just took off," she says. Employees were primed for it. "We were just tired of corporate not listening to us. We were literally begging for help," Smith says. On June 15, McNease sent an email on behalf of her coworkers to the restaurant's team director, laying out their demands. It said that, since the previous December, the store had gone without training for new or existing employees, that two workers had been "routinely expected" to complete the prep tasks usually done by six, and that three or four people had to open the store, work that required seven people. These issues put not just employees but customers at risk, with food safety "compromised," McNease wrote. If the company didn't schedule a "full crew" to open the store by the following morning, the letter said, they wouldn't show up to work until they had enough staff and training. That kicked off a two-day walkout. Six days later, the workers became the first Chipotle location in the country to file for a union election with the NLRB. "Management descended on us immediately," McNease says. Employees were called into mandatory meetings that were filled with anti-union rhetoric. The company made new hires that diluted the organizing unit, McNease says; managers screamed at people and overloaded supporters with tasks. People were sent home for slight uniform infractions and fired for "stupid reasons," Smith says. Then, on the same morning that the workers had an NLRB hearing to set an election date, Chipotle sent employees notice that it was shutting the store down permanently. "It was like the rug had been pulled out from under us," McNease says. Workers settled with the company, receiving a total of $240,000 in back pay. "We fought so hard," McNease says, "and in the end, they were able to just walk away." "We respect our employees' rights to organize under the National Labor Relations Act and are committed to ensuring a fair, just and humane work environment that provides opportunities to all," says Schalow. "We closed our Augusta, Maine restaurant because of location-specific staffing challenges of this fairly remote location and other issues, not because of any union activities of the employees there." Muller started talking to her coworkers about unionizing around the time McNease's campaign faltered. She drew up a petition for the NLRB and quickly got most of her coworkers to sign. After management found out in October 2022, the company deployed similar tactics as those in Maine, she says. Higher-ups workers had never seen before showed up, employees say, pulling them into lengthy one-on-one meetings with anti-union talking points; employees felt they were disciplined or even fired for small things that had never previously raised alarm bells. That December, one of Muller's friends came in for a burrito bowl and some chips in the evening, and Muller offered her the chips for free before they got thrown out for the day, a practice accepted by other managers, she says. Her manager wrote her up, and she was fired for stealing. It happened just days before a deadline to have Chipotle reimburse her tuition for the semester, costing her $2,600. She was unemployed for six months. It was also emotionally difficult to lose her job. "It was kind of a part of my identity," she says. Muller filed complaints with the NLRB, which later found that the restaurant had punished workers who were involved in unionizing and had tried to discourage the effort, leading to a settlement that required Chipotle to post a notice about workers' rights to organize. No one was reinstated or given back pay. The union campaign fizzled. "Everyone was scared," Schneider says. Nearly a year into Boatwright's tenure as CEO, Chipotle keeps expanding — it plans to open more than 300 locations this year — though there are signs of trouble. The company's same-store sales have declined for two consecutive quarters in 2025, the first two quarterly drops since the COVID-19 pandemic. Chipotle's stock sits at $41.44, down 37% from a high of $66.16 last December. After more than seven years at Chipotle, Schneider left last year after he graduated from college. He even took a pay cut to take his new job as a graphic designer. But now he feels respected and valued as a member of a team, and the person above him treats him "like a person." "I've never been happier, honestly," he says.
Miami Herald
13-05-2025
- Business
- Miami Herald
Popular Mexican chain reveals surprising growth plans
Restaurants have faced a particular set of headwinds in the years since the pandemic. Covid brought widespread shutdowns, social distancing (remember that?) that forced them to operate at limited capacity, and a sharp drop in foot traffic. Plenty of independent restaurants didn't survive, and even large chains were hit hard when indoor dining disappeared. Don't miss the move: Subscribe to TheStreet's free daily newsletter Between higher prices for everything from labor to real estate to transportation and supply costs, it's hard to succeed in the restaurant business, even in the best of times. Brands that embraced technology like mobile ordering, including Panera and Chick-fil-A, have fared better than most over the last couple of years. Some chains managed to adapt and emerge even stronger, and few have done it better than Chipotle Mexican Grill (CMG) . Chipotle has carved out a unique place in the fast-casual space by offering high-quality ingredients - e.g., fresh avocado, tomatoes, lettuce, cauliflower rice, and house-made salsa - with seemingly endless customization options. You can even order keto, vegetarian, and gluten-free meals, with no fuss. It's not exactly typical fast-food fare. So why is Chipotle so popular? In the years since the pandemic, Chipotle has doubled down on its technology, including making investments in its digital ordering platform, its delivery partnerships, its loyalty program, and by adding "Chipotlanes" to more locations. Related: Trader Joe's has a delicious copycat of a Chipotle favorite Chipotlanes are the convenient drive-thru lanes for mobile orders; according to Restaurant Dive, restaurants with Chipotlanes have around 15% higher sales than those without them. Chipotle says 80% of the restaurants it will open in 2025 will feature Chipotlanes, according to USA Today. Just as they are in the U.S., customers around the world are in search of healthy, customizable fast-food options. The company revealed it will open between 315 and 345 restaurants in 2025, in Canada, the UK, and Europe. As many as 20 of the new restaurants will be in Canada. So far this year, Chipotle has opened in Arizona, California, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Maryland, New Jersey, New Hampshire, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennesssee, Texas, Utah, Virginia, Washington and West Virginia. Only Alaska and Hawaii are Chipot-less. In a bold move, Chipotle will also make its debut in Mexico early next year. More Fast Food & Restaurant News: Starbucks makes shocking pricing move customers will loveBankrupt restaurant chain offers new deal, stiff drinkNew Taco Bell menu items combines multiple classics At the company's most recent earnings call in February, Chipotle CEO Scott Boatwright said the company's 2024 total revenue was $11.3 billion, an increase of 14.6% from 2023. "I want to make sure that as we continue to scale Chipotle, everything we do is in service of our guests or those who serve our guests which will enable us to achieve our long-term ambitious goals of reaching 7,000 restaurants in North America, growing our AUVs beyond $4 million, expanding margins and making progress toward becoming a global iconic brand." Related: Veteran fund manager unveils eye-popping S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
24-04-2025
- Business
- Yahoo
Chipotle Mexican Grill (NYSE:CMG) Reports Q1 Revenue Increase To US$2,875 Million
Recently, Chipotle Mexican Grill announced robust first-quarter earnings, with revenue rising to $2,875 million and net income increasing to $387 million, sparking positive investor sentiment. Concurrently, the company's signing of a development agreement with Alsea to enter the Mexican market added a strategic growth layer. This backdrop coincided with general market gains, as investor optimism surged amid a strong earnings season for multiple companies. While the Dow and Nasdaq reported solid gains, Chipotle's share price increase of 1.41% mirrored broader economic optimism, contributing positively to the company's market performance. Buy, Hold or Sell Chipotle Mexican Grill? View our complete analysis and fair value estimate and you decide. This technology could replace computers: discover the 21 stocks are working to make quantum computing a reality. The recent announcements by Chipotle Mexican Grill, including robust Q1 earnings and expansion plans into the Mexican market, are poised to impact the company's narrative by highlighting its focus on growth and operational efficiency. These developments align with expectations of revenue growth through strategic initiatives like Chipotlanes and tech enhancements, potentially contributing to increased margins. Over the past five years, Chipotle's total return stood at 176.31%, illustrating strong long-term performance. Despite this, the company underperformed the US Hospitality industry and the broader US market over the past year, with returns lower than industry and market averages. The impact of the recent news on revenue and earnings forecasts appears positive, bolstering expectations for growth in the coming years. Analysts remain optimistic, anticipating revenue to grow annually by 12.4% and earnings to increase as operational enhancements come into play. The current share price movement, with a modest 1.41% rise, reflects broader economic optimism and leaves room toward the consensus price target of US$61.22, suggesting a potential 23.1% upside from the current level of US$47.1. However, the stock trades at a high Price-To-Earnings Ratio compared to industry and peer averages, which may weigh on investor sentiment. Click to explore a detailed breakdown of our findings in Chipotle Mexican Grill's financial health report. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include NYSE:CMG. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@
Yahoo
23-04-2025
- Business
- Yahoo
Chipotle Mexican Grill: No significant diminishing returns on new units over the 10-year forecast.
Investment Thesis Chipotle's business strategy is built on five pillars: operating profitable restaurants, luring and keeping diverse talent, building brand awareness and love, making significant investments in restaurant technology and innovation, and enhancing customer convenience and accessibility. Competitive menu prices, exceptional convenience, and "food with integrity" have allowed the company to carve out a long-lasting niche in the US restaurant market, drawing clients from both casual dining and more established fast-food rivals. In just five years, Chipotle's digital investments have grown its loyalty program to 40 million members, and in 2024, its online sales of $1.1 million per store will surpass the combined unit sales of many of its name-brand rivals. The brand's value proposition and customer lifetime value are enhanced by the loyalty program, which also encourages more frequent orders and lowers customer attrition. We appreciate Chipotle's focus on unmediated customer access, creating an engaging order history database, price elasticity, and new product resonance. The company's unit development story is still compelling, and estimates of high-single-digit annual unit growth are driven by strong returns on investment. Warning! GuruFocus has detected 9 Warning Signs with TXN. Notable Guru Holdings Bill Ackman (Trades, Portfolio) 21 Chipotle Mexican Grill transactions (Pershing data-href="" style=""/> Steven Cohen (Trades, Portfolio) 34 Chipotle Mexican Grill transactions (Point72 data-href="" style=""/> We can not talk about Chipotle without mentioning Bill Ackman (Trades, Portfolio). Bill Ackman (Trades, Portfolio)'s portfolio is currently exposed to Chipotle by 12.81% with a position worth $1.24 billion. However, Ackman, by far the biggest fan of Chipotle, had trimmed his stake at Chipotle past 2.5 years. This sends a cynical signal to investors who are mulling over adding Chipotle to their portfolio. However, it is important to comprehend that Bill Ackman (Trades, Portfolio)'s Pershing Square has added fresh positions in Alphabet and Brookfield over the same timeline. Therefore, the trim could also be a part of a wider portfolio management decision Investment Upsides The intangible asset of Chipotle's brand has significantly improved since the height of the food safety crisis. Disciplined pricing, technological investments, and operational improvements have all helped to significantly increase margins and broaden appeal. Chipotle has been able to reach a wider audience thanks to a closing value gap with the quick service restaurant (QSR) channel. Meanwhile, other levers like menu and daypart expansion, premium beverage innovation, and international development support significant long-term profit potential. By adding a digital-only second make line and implementing "Chipotlanes," among other operational improvements, Chipotle has significantly increased throughput capacity, enabling its locations to offer competitive prices and make up the volume gap. With digital orders still accounting for about 35% of total sales despite a robust rebound in in-store traffic, the launch of the second make line seems especially prescient. These advancements are made possible by technological investments, such as smooth ordering across platforms. Although Chipotle is still in the early stages of implementing its technology roadmap, digital acuity is probably going to continue to be crucial to the company's success. A 40 million-member loyalty program and omnichannel ordering offer a solid basis for one-on-one marketing, directing orders to high-margin fulfillment channels, and promoting data-driven menu innovation in response to consumer preferences. With chicken bowls and burritos on average costing less than $10 and being up to 20%30% less expensive than their imitation fast-casual rivals, Chipotle has become more and more appealing to customers who are price conscious. Chipotle's strong value positioning enables the company to gain transaction share across customer income cohorts and dayparts as average checks continue to converge. With estimates indicating cash-on-cash returns of 50% to 60% for full-volume stores and a payback period of just under two years, Chipotle has some of the best unit economics in the business. This suggests higher returns on investment than most competitive QSR concepts, which tend to see payback in four to six years due to larger footprints and lower restaurant margins. Chipotle's expansion is supporting its goals of high single-digit (8%10%) unit growth, which will enable it to scale up its advertising spending, supply chain and quality assurance investments, fixed labor and rent costs, and continuous technology stack investments. Concerns about a permanent increase in discounting and promotional activity to buy comparable sales growth, which would indicate brand impairment, have been allayed by the fact that, despite a sharp increase in marketing expenses in 2016, trailing five-year figures of 2.8% of system sales are materially lower than wide-moat McDonald's, wide-moat Yum Brands, and wide-moat Domino's Pizza. Intrinsic Valuation The target share price for Chipotle's stock is $53.7. The company's valuation drivers include comparable-store sales, new unit openings, and restaurant margins. Comparable sales outperformance has been fueled by early investments in loyalty and mobile ordering, as well as operational enhancements based on former CEO Brian Niccol's Taco Bell playbook. The company is expected to see 4.3% average annual comparable sales growth through 2034, ahead of the industry's nominal growth of 3% to 3.5%, as it doubles down on operations investments and restaurant technology. With Chipotlanes and smaller-footprint locations opening up new trade areas, Chipotle is anticipated to open just under 340 net units in 2025. With a median run rate of roughly 500 net new stores annually, the model predicts high single-digit unit growth through 2034 (9%). The long-term goal of 7,000 US units is thought to be attainable, with significant digital volumes and robust adoption in smaller and rural markets serving as important growth drivers. Investment Downsides With double-digit yearly sales growth and transaction-driven same-store sales, Chipotle is a rapidly expanding brand. The business must operate flawlessly as it expands its supply chain, looks for new real estate opportunities, and enters new trade areas in order to sustain these results. The company's operational, technological, and development teams are under a lot of pressure to meet the market's expectations for high single-digit percentage growth in net new units through 2034. Forecasts are made riskier by competition for personnel, construction crews, and real estate. While labor relations are Chipotle's biggest ESG concern, the company's environmental, social, and governance risk is still relatively low on the product side. Given that they are at the bottom of the labor market hierarchy, restaurant operators may be under pressure to lessen their reliance on labor if minimum wage increases and worker benefits receive more attention. Chipotle's strong value positioning and restaurant margins help shield it from labor market volatility, and automation efforts are a positive step. Portfolio Management Because of Scott Boatwright, the CEO of Chipotle, following the company's investment plan, ROICs have strengthened from 30% in 2024 to 52% in 2034. With digital pushes enabling smooth in-app and online ordering, the 2019 loyalty program relaunch boosting customer acquisition and lifetime value, and new store development yielding strong cash-on-cash returns, recent investments have been noticeably strengthening the moat. It is anticipated that rural stores will unlock a sizable market by providing comparable or superior returns on incremental investment. Chipotle's investments have put the company in a strong position to compete in a market that favors off-premises dining, close proximity to customers, quicker fulfillment, and customizable menu pay plan aligns management interests with investors by favoring restaurant margins and same-store sales growth. By encouraging investments in menu development, customer experience, and operational efficiency, this structure enables Chipotle to sustain its brand over the 20 years that the wide moat rating suggests. With strong free cash flow generation, a readiness to adopt new technology, and a focus on a distinctive, unmediated customer experience, the model recommends continuous investments in technology, equipment, and maintenance capital expenditures. This article first appeared on GuruFocus.
Yahoo
22-04-2025
- Business
- Yahoo
Chipotle Mexican Grill (NYSE:CMG) Ventures Into Mexico With Alsea Partnership For Expansion
Chipotle Mexican Grill has made recent strides in its international expansion by entering into partnerships to open restaurants in Mexico and the Middle East. However, the broader market conditions, particularly the Dow Jones dropping 1,000 points amid intensified trade tensions, likely overshadowed the company's ambitious growth plans, resulting in a flat performance over the last month. This suggests that while Chipotle's expansion efforts could potentially support its long-term growth, the immediate share price was influenced by macroeconomic headwinds prevalent across the market. Buy, Hold or Sell Chipotle Mexican Grill? View our complete analysis and fair value estimate and you decide. These 10 companies survived and thrived after COVID and have the right ingredients to survive Trump's tariffs. Discover why before your portfolio feels the trade war pinch. The recent developments in Chipotle Mexican Grill's international partnerships and market conditions are important for understanding its current and future trajectory. Despite macroeconomic challenges weighing down the short-term share performance, with a five-year total return of 172.74%, Chipotle's shares have shown considerable strength over the longer term. Over the past year, however, the company underperformed both the US Hospitality industry and the market, as these returned positive single-digit percentages compared to the company's performance. The company's strategic expansion, exemplified by its entry into the Mexican and Middle Eastern markets, alongside operational advancements such as Chipotlanes, aims to bolster its revenue and earnings forecasts. Analysts project revenue growth to 12.6% annually for the next three years, with earnings potentially reaching US$2.4 billion by April 2028. These forecasts suggest optimism in continued growth, yet challenges such as rising costs and competitive pressures could impact margins. However, with a current share price of US$48.08 and a consensus price target of US$62.35, this reflects a significant potential upside of 22.9%, contingent on successful execution of growth initiatives and favorable market conditions. Learn about Chipotle Mexican Grill's historical performance here. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include NYSE:CMG. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@
