Ticker: CMG │ Business: Fast-casual Mexican-style food| My Buy Price (Fair Value): $37-39
🍽️ What Chipotle Does
Chipotle is the place where you pick your own burrito, bowl, tacos, or salad and watch it get made in front of you.
They don’t franchise — meaning they own almost every restaurant themselves, so all the profit stays in-house.
Growth mainly comes from opening more stores and getting people to order through the app or drive-thru pickup lanes called Chipotlanes.
💵 How They Make Money
Simple model: they sell food.
- About one-third of all sales come from digital orders
- Chipotlane locations make more money per store
- No franchise fees or royalty income — just restaurant revenue
🛡️ Why Chipotle Stays Strong
✅ Fast assembly-line service → more customers per hour
✅ “Real ingredients” brand → customer loyalty + pricing power
✅ Huge buying power → better food cost control
✅ Chipotlanes → convenience + higher store profits
⚠️ Main risks: wage inflation, food cost swings (beef, avocados), brand damage from any food-safety issue
📊 Quick 5-Year Numbers
| Year | Revenue | Free Cash Flow |
|---|
| 2020 | $6.0B | $0.42B |
| 2021 | $7.5B | $0.83B |
| 2022 | $8.6B | $0.93B |
| 2023 | $9.9B | $1.32B |
| 2024 | $11.3B | $1.52B |
| 2025 TTM | 11.8B | $1.57B |
📐 Key Metrics
| Metric | Value | Notes |
|---|---|---|
| ROE (Return on Equity) | 44.96% | Shows how much profit they earn per $1 of equity |
| ROIC (Return on Invested Capital) | 15.25% | True measure of business quality & reinvestment power |
| Debt to Equity | 1.55 | Should be very low due to no traditional debt |
| Debt to EBITDA | 1.67 | Mainly lease-based, not bank debt |
🔼 What Can Grow the Business
- 300+ new stores per year (mostly Chipotlanes)
- More app + loyalty usage
- Occasional new menu items
- Slow but steady international expansion
⚠️ Things That Could Hurt the Business
| Issue | Why It Matters |
|---|---|
| Fewer customers | In a slowdown, people cut back on eating out |
| Higher wages | Direct hit to store margins |
| Ingredient spikes | Avocado, beef, dairy costs can move fast |
| Food safety headlines | One issue can drop traffic overnight |
💡 My Take
Chipotle is a rare restaurant company that funds its own growth, doesn’t need debt, and gets strong payback on every new store. But because it’s so good, the stock is usually priced high.
So I’ll only buy it if it falls to a level that makes sense long term.
My Fair Value / Buy Target: $37-39
⚠️ Personal Disclaimer
I ate at Chipotle once a long time ago and didn’t enjoy the experience.
This write-up is based on the business, not the taste.
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