Good Things Come In Small Packages
On February 3, 2015, Chipotle reported its full year end earnings report. To no one’s surprise, the company reported an increased revenue of 27.8%, raising its year-end sales from $3.21 billion in 2013 to $4.11 billion. In the fourth quarter alone, revenue increased 26.7% to $1.07 billion from the same quarter in 2013. Comparable restaurant sales increased 16.8%, the net income was $445.4 million, an increase of 36.0%, and it opened 192 stores, making the total store count almost 1,800.
In the press release co-CEO Steve Ells states, “Consumer trends are changing, which we believe is a great result of people becoming more discerning about where their food comes from, how it was raised, and how their meal was prepared. The continued loyalty we see from our customers, as well as third party research, and the growing number of concepts imitating Chipotle, all point to the relevance of our vision and the impact we are having on food culture. We are delighted to see that this vision, a very lofty goal, is becoming a reality.”
So what’s next for America’s favorite Mexican restaurant? Think small, “really, really really small.” In July, Ells hinted that the company was looking into a smaller format, but now it seems as though that small format is soon to become a reality. The company expects to open 4,000 smaller format stores. This would bring the total store count to almost 6,000. These stores wouldn’t be the typical format with the expected Chipotle atmosphere. Instead, it will be completely take out and will populate real estate in locations that weren’t possible before (i.e. malls and other crowded locations).
The concept was inspired by the Chipotle’s in Europe, which have to be smaller because they are usually in larger crowded cities. Not only will the stores be smaller and take out only, but it is also expected to be much cheaper to operate. For those wanting to open their own Chipotle, the initial investment will be much lower than the typical $800,000 of normal stores. The new ‘A model’ won’t be able to handle the high traffic of regular stores or make as much money, but it is expected that the new locations will be just as successful.
While some see this plan as risky on Chipotle’s part, the management team believes that Chipotle has a highly reputable reputation and is sufficiently well known among consumers to be able to sacrifice the in-house dining experience. Co-CEO Steve Ells has also been quoted as accusing other fast food restaurants of trading quality for quantity and making “short sighted” decisions. Time will only tell if this new venture will be a slippery slope or the chance to make Chipotle even more of an American staple.
Ten Year Store Count*
*Source: Chain Store Guide Chain Restaurant Operators Database.