There certainly were restaurant winners and losers during the pandemic. The ones that survived, although battle scarred, are now better positioned in the marketplace since some competition has been eliminated.
Chipotle Mexican Grill (NYSE: CMG) was one of the winners. Commercial real estate investors might want to find out more.
Chipotle is kicking it in the fast-casual arena. It reported a net income for the quarter ending March 31 of this year of $127 million, up from $76 million from the same time last year. How did such growth happen? Digital sales.
Chain Store Age reports digital sales for Chipotle rose 134% during the quarter, accounting for half of all sales. Part of the reason for this tremendous growth is the Chipotle model has always supported takeout options. So Chipotle got a jump on restaurants that had to reconfigure the way they did business.
Of the digital sales, more than half were "order-aheads," an ordering method that became more popular during the pandemic. Chipotle cleverly added the "Chipotlane" for quick pickup of items ordered ahead. The Chipotlane caused the chain to get even more of a head start on providing customers what they want, causing even more growth for this chain; restaurants with a Chipotlane earned 10% more than ones that didn't.
What's new for Chipotle
Because of Chipotle's success of late, it has a major expansion plan in mind -- to open 200 new restaurants in undisclosed suburban and urban locations. It currently has 2,803 locations. Chipotlanes will be in 70% of the new restaurants.
Keep your eye on fast-casual
Chipotle occupies the fast-casual restaurant space, which is a cross between a standard fast food outlet and a sit-down restaurant with table service. The fast-casual market consists of higher quality food choices -- typically serving more fresh ingredients than regular fast-food restaurants that serve a lot of processed foods. Patrons, particularly millennials, who want variety and care about nutritious food choices but who still want low prices and convenience drive demand for the product.
The fast-casual market size in 2019 was valued at $125.6 billion and is projected to grow by $35.01 billion by 2024. Stringent industry regulations hinder the growth of new players to the market, according to Business Wire. As a result, the marketplace favors the big, established chains over startups. Chipotle, along with Five Guys, Panera (NASDAQ: PRNA), and Shake Shack (NYSE: SHAK) (to name a few) are leaders in this market.
The Millionacres bottom line
If you invest in restaurants, you might want to take a deeper dive and look into Chipotle. Some analysts pick this as the best stock to buy this year. If you invest in strip malls, look at the ones with a Chipotle in the mix.