By any standard, Chipotle Mexican Grill is one of the great success stories of the restaurant industry. Since its launch in 1993 with a single Denver eatery situated in a former ice cream shop, the company has grown to encompass more than 1,500 locations with revenue reaching $3.21 billion in 2013.
Moreover, it’s a company, with its emphasis on “food with integrity,” that many industry observers credit with changing the way America thinks about dining out. (In fact, Chipotle helped establish the entire category of quality-focused fast-food eateries that became known as “fast casual.”) A Chipotle burrito is not just a meal on the run, the company declares; it’s a Mexican-inspired creation that relies on sustainably grown and locally sourced ingredients.
It’s a formula that’s clearly working, at least for Wall Street. Since the company went public in 2006, Chipotle’s share price has increased by more than 1,000%.
But financial analysts see challenges ahead. While Chipotle’s third-quarter revenue ($1.08 billion) was 31% higher versus a year ago and same-store sales were up 19.8%, some question whether a company that’s enjoyed such spectacular growth can maintain the highflying momentum. “How much more can they squeeze out of these boxes?” asks RBC Capital Markets analysts David Palmer regarding same-store sales. (That said, Palmer maintains an “outperform” rating on the company’s stock.)
The company faces major competition in the fast-casual niche, including Mexican-oriented chains like Qdoba and Moe’s Southwest Grill. Chipotle’s somewhat limited menu—no breakfast fare, no dollar items—may also limit its sales. And while Chipotle has started to look overseas for growth, Mexican food isn’t as popular outside North America as, say, pizza and burgers.
Chipotle acknowledges the challenges it faces, particularly in maintaining momentum. “We are guiding toward lower same-store sales growth [in 2015] because this year’s rate has been so high,” company spokesman Chris Arnold says. At the same time, Chipotle plans to open the highest number of stores in the company’s history in 2015.
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