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Call it the "new pizza."
Just heat up a tortilla, pile on rice, beans and whatever else you crave, wrap it up and you're out the door.
As simple to make as its cheesy predecessor, the once humble burrito -- previously the domain of mom-and-pop taquería joints in places like San Francisco's Mission District -- has been reinvented and embraced by a new generation in which all things Latino aren't merely accepted as part of the American experience, they even have bling.
Just ask the folks lining up at Chipotle Mexican Grill (CMG, news, msgs), the most successful and perhaps the hippest of a collection of "fast casual" Mexican restaurants that together have swallowed up about 20% of the $11 billion quick-service restaurant market.
Chipotle Mexican Grill generates more than $1 billion in annual sales and has a stock-market value upwards of $4 billion. Shares have more than quintupled in price since the company went public in 2006, though the stock has slipped some 20% since late last month as the overall market has tumbled on recession worries.
But the flood of burrito lovers hasn't abated.
"Everybody who eats there just keeps going back, and they bring their friends," says Dean Haskell, senior vice president of equity research at Morgan Joseph, a Nashville, Tenn., investment banking firm. Revenue at restaurants open at least a year grew 12.4% in the third quarter over a year earlier. That's more than double what Haskell had estimated for the third quarter. (Total sales were up 35.6% to $286 million.) "They have a great concept."
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Just 3 items on the menu
Chipotle is succeeding thanks to an elegantly simple business model, one its 42-year-old founder and chief executive, Steve Ells, can sum up in a single sentence: "Focus on just a few things, and do them better than anybody else." Thus, the menu contains only three items: burritos, tacos and salads. (The last was added only in 2005.)Of course, Chipotle's taquería-style format, in which 16 basic ingredients are displayed in front of customers on a glass-covered assembly line, affords a panoply of variations on its Mexican theme.
Yet as anyone with a sweet tooth will quickly discover, there's not a sopaipilla, cup of flan or even a cookie to be had in the joint. Restaurant analysts say that such additions at the end of the food line could instantly boost sales by 10% or more, something impressed upon Ells by executives at McDonald's (MCD, news, msgs), which until last year owned a majority stake in Chipotle.
But the company's single-minded founder has steadfastly rebuffed the idea. "We've had 10 years of double-digit comps in a row, and we've done that without cookies," he says. "So why start now? I see only the downside to adding cookies."
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Chipotle's 'simple' business modelChairman and CEO Steve Ells says customers want the company to continue doing a few things well and not worry about updating the menu.
Trained at the prestigious Culinary Institute of America, Ells started his first Chipotle in 1993 near the University of Denver as a "cash cow" to help fund a "real restaurant." The shop was so busy that he quickly added four more eateries and then, with McDonald's financing, took the concept nationwide. Ells has continually upgraded Chipotle's basic ingredients and tweaked its recipes.
Take the time he called then-director Mats Lederhausen out of an important meeting. "He was screaming on the other end of the phone, 'I've found it! I've found it!' " the former McDonald's executive recalls of the eureka moment when Ells figured out what was wrong with the taste of Chipotle's black beans. " 'They're not cutting the oregano in the right sizes!' "
"So?" Lederhausen said.
Ells then launched into a diatribe about "how the size of the oregano, when it mixes with the water, oil and salt, doesn't embed the right taste layers in the beans," Lederhausen recalls. "Sure enough, the next time I tasted the beans, they were better."
Continued: Hormone-free sour cream
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