Chipotle: A Recipe for Long-Term Investment Success
With Chipotle down 25% from its all time high amidst macro uncertainties, it presents a compelling long-term investment opportunity. During a challenging first quarter, the company still posted 6.4% revenue growth year over year. They plan to open between 315 and 345 new restaurants in 2025. With just under 3,800 restaurant locations today, long term they see an opportunity for over 7,000 locations in the USA and Canada, while an international roll out is still in its infancy.
Over 80% of the new restaurants will have a Chipotlane, a drive-thru for digital orders only, which is extremely efficient and increases both sales and profit margins. Digital sales represented 35.4% of total revenue for CMG 0.00%↑. As a company that embraced digital sales early on, the focus on a digital strategy continues to generate significant long term value. They also see a huge opportunity in their catering business long term, which today only represents about 1.5% of sales, with little to no marketing.
The fast-casual restaurant space is growing quickly with new entrants like Sweetgreen and Cava, yet it is still a small chunk of the total restaurant industry. What I found most interesting was what management had to say when asked about competition from other fast-casual chains:
“What gives me a lot of confidence is we have competition, as you can imagine, that opens up near or in close proximity to Chipotle's today. And we don't see any material impact to our business. As a matter of fact, in most cases, we see an increase in traffic to the area and we garner more than our fair share. And what I attribute that to is an extraordinary value proposition, a speed at which our competitors are hard-pressed to manage or at least even compete with. And that gives me a lot of confidence regardless of what's happening in the marketplace. The Chipotle brand has never been stronger. Our value proposition has never been greater. Our food has never been better and our speed is unmatched.” - CEO Scott Boatwright
Boatwright also pointed out that the 315 - 345 new restaurants they will build this year alone is larger than the total number of locations of many competitors.
As the fast-casual dining segment continues to grow, Chipotle is well positioned for continued success. Chipotle's strong brand, consistent growth, strategic expansion, and healthy financial position enable it to weather short term storms and make it a compelling opportunity for a long-term investment.
Here is a link to my last article on Chipotle where I discuss more of the company’s strengths:
