Pros And Cons Of Chipotle

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April 20, 2012 Cons ume r Goods Chipotle Mexican Grill Ticker: CMG Current Price: $432.03 Recommendati on: HOLD Implied Price: $403.77 Investment Thesis  Chipotle Mexican Grill is a firm with a s trong bus ines s model, focus ed growth s trategies , and impres s ive brand image that it has s ucces s fully leveraged into cons is tent growth over the pas t five years .  CMG has experimented implementing its bus ines s model into other cuis ines and if s ucces s ful, could introduce Chipotle to new markets .  CMG’s Food With Integrity initiative appeals to growing cons umer preferences concerning res pons ibly rais ed ingredients , healthy menu options , and environmental s us tainability.…show more content…
Since patrons of fas t- food res taurants us ually s eek quick, convenient, and cheap eating options , the limited-s ervice res taurants that can deliver thes e attributes the mos t profitably to cons umers are the mos t s ucces s ful. Companies als o benefit from brand awarenes s and equity, which is increas ed through effective marketing and franchis ing. Franchis ing (or operating as a multi-es tablis hment res taurant s uch as CMG) has become increas ingly important in this indus try, es pecially through the reces s ion, becaus e it allows firms to reach economies of s cale and increas e profitability. In 2010, franchis ed and multi-es tablis hment companies accounted for 65% of indus try revenues , while only accounting for around 10% of total es tablis hments . In general, concentratio n within the limited-s ervice res taurant indus try is very low. In fact, approximately 48% of operators within the indus try are s mall bus ines s es with nine or fewer employees , and the five larges t firms in the indus try only control approximately 38% of revenu es . Concentration within the indus try has increas ed recently as firms at tempt to increas e profitability, market s hare, and financial flexibility . For example, Wendy’s and Arby’s merged…show more content…
was given the highes t weighting of the comparables at 40% becaus e of its realized growth and its brand identity. Both Chipotle and Panera s trive to deliver fres h ingredients and provide s imple goods at a relatively fas t rate. They are als o located s olely in the US & Canada and have yet to expand into Europe, although they plan to when they find a s uitable menu. Starbucks Corp. (SBUX) – 20% Starbucks purchas es and roas ts whole bean coffee in the United States , Canada, UK, China, Germany, and many other countries . Starbucks provides a variety of coffees and es pres s os as well as fres h food items including pas tries , s andwiches , s alads , and other items . Additionally, it s ells branded bottled co ffees and ice cream. Starbucks als o owns s everal brands including Seattle’s Bes t Coffee and Tazo tea. Starbucks Corporation was given a weighting of 20% becaus e of its brand image and appeal to its target market. Starbucks offers a s imilar fres h ingredien t environment and values its employees highly. Though much larger than Chipotle, Starbucks realized s ignificant growth over the las t few years and has s ucces s fully expanded

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