Small towns fuel Chipotle’s ambitious North American expansion plans
An elderly woman with a facemast leaves Chipotle Mexican Grill in Monterey Park after she has placed her takeout order.
Frederic J. Brown | AFP | Getty Images
It’s fueling small towns with big burritos Chipotle Mexican GrillNorth America’s Development Strategy.
Investors were informed Tuesday by the chain that they are expanding their long-term North American goal from 6,000 to 7,000 locations. This is largely because of its success in small towns. Here’s a comparison: McDonald’sThe company has 13443 restaurants across the U.S., but the majority of these are managed by franchisees. At the end of 2021, Chipotle had 2,966 restaurants worldwide — the bulk of which are company-owned and in the U.S.
Chipotle shares rose almost 9% on Wednesday in morning trading the company topped Wall Street’s earnings estimatesIt also shared its development targets.
Andrew Strelzik, a BMO Capital Markets analyst wrote that while we expected an increase in unit growth over the next few years, the scale of the phenomenon is much greater than what was anticipated. The higher-return small market opportunity in this area is intriguing, as similar dynamics have worked well for others.
The chain plans to open 235-250 new stores by 2022. The chain believes it will be able to accelerate the pace at which it opens new restaurants to an average of 8%-10% per year by 2023. It cites improved returns for its investment. The new restaurant will have more than 80 percent of its “Chipotlanes” drive-thru lanes that are dedicated to taking digital orders.
“What Chipotlane is also allowing us to do is go into these small towns, where we have another convenient access point,” CEO Brian Niccol said on the conference call with analysts. Niccol defined small towns as those with fewer than 40,000 inhabitants.
There are many up-and coming restaurants chains like SweetgreenCava and Chipotle have started shifting to suburbs, while Chipotle enters the next phase of its growth as it expands into the sprawling suburban centers of Canada and the U.S.
Scott Boatright is Chief of Chipotle’s Restaurant Operations. He attributes Chipotle’s popularity and success to Niccol. Niccol became CEO in 2004 after having a long tenure leading successful restaurants. Yum Brands’ Taco Bell. Chris Brandt (a Taco Bell graduate) was promoted to chief marketing officer at Chipotle. It even had its own newspaper. its first-ever Super Bowl adLast year.
Boatright explained that the company now has a “national presence” in an interview. Boatright said that smaller communities recognize the brand’s existence and share it via social media. [media]Television has shown that people are coming out in large numbers, even in the smaller towns where they have suffered in the past.
Boatright claimed that small-town leases are cheaper for the chain. Even though they serve a smaller population, smaller restaurants still see strong sales.
He said, “It is a very favorable position to have.”