Chipotle Mexican Grill Inc. (CMG) is a market leader in the fast-casual dining sector and faces five main rivals. They include Qdoba Mexican Eats, Moe's Southwest Grill, Baja Fresh Mexican Grill, and Rubio's Coastal Grill. Chipotle also competes on a less head-to-head basis against Taco Bell, the market leader in the Mexican-style fast-food sector.
Competition became more intense when the industry experienced unprecedented challenges during the coronavirus crisis in 2020. Companies in the restaurant chain business continue to compete on several different levels. These factors include menus, dining experience, innovation, and prices as well as size, geographic reach, established reputation, and attractiveness to investors. Chipotle's rivals use various approaches to pursue their growth.
- Chipotle has expanded rapidly due to the growing demand for Mexican food and the increasing preference for fast-casual dining.
- Qdoba Mexican Eats, Moe's Southwest Grill, Baja Fresh Mexican Grill, and Rubio's Coastal Grill are Chipotle's main competitors.
- Although it is fast-food oriented rather than fast-casual, Taco Bell has also started to compete with Chipotle by improving the quality of its food.
Background on Chipotle
Before diving into the details on its competitors, it helps to know more about Chipotle. Like other fast-casual restaurant chains, Chipotle tries to combine the convenience and low price of fast-food eateries with higher-quality dishes and a more appealing environment. Meals are typically somewhat pricier than at a fast-food restaurant. The food is also prepared on the spot using healthier ingredients, such as fresh vegetables, poultry, and meat products.
As of 1998, five years after its establishment, Chipotle only ran 16 restaurants, all situated in Colorado. That same year, fast-food behemoth McDonald's Corporation (MCD) became a major investor. By 2006, when McDonald's completed a divestiture from Chipotle, the Mexican-style dining chain had mushroomed to 500 locations. By 2019, the publicly traded Chipotle owned and operated over 2,600 restaurants.
Qdoba Mexican Eats
Qdoba operated and franchised eateries in over 700 locations in 2019. As a large Mexican fast-casual restaurant chain, it is one of Chipotle's most significant competitors. A major difference is that about half Qdoba's restaurants were franchises in 2019. After 15 years of expansion under the ownership of fast-food giant Jack in the Box (JACK), Qdoba was sold to Apollo Global Management in 2018. Apollo's other restaurant holdings included Chuck E. Cheese’s and Peter Piper Pizza.
Moe's Southwest Grill
Moe's Southwest Grill, which is owned by Focus Brands, had more than 700 restaurants in 2019, mostly located east of the Mississippi River. Moe's Southwest Grill restaurants attempt to differentiate themselves with a fun and offbeat environment. They feature menu items named after TV and movie stars. Focus Brands emphasizes franchising. As of early 2020, their other brands included Auntie Anne's, Carvel, Cinnabon, Jamba, McAlister's Deli, Schlotzsky's, and Seattle's Best Coffee.
Baja Fresh Mexican Grill
MTY Food Group is a company that operates or franchises Baja Fresh Mexican Grill, while also overseeing La Salsa Fresh Mexican Grill. Baja Fresh Mexican Grill introduced a new restaurant design in 2013, along with a revamped menu that places a bigger emphasis on food flavor and freshness. When MTY acquired Baja Fresh Mexican Grill in 2016, the restaurant had 162 locations. Its subsidiary, La Salsa Fresh Mexican Grill, had 23 locations at that time.
Rubio's Coastal Grill
Chipotle is not the oldest Mexican-style fast-casual dining chain. In fact, Rubio's started ten years earlier. However, Rubio's has not attained the same geographic footprint as Chipotle. Although Rubio's is mostly based in the West, they expanded into Florida during 2019. Privately owned, Rubio's runs establishments in over 200 locations.
In 2010, Rubio's went private through a merger with a subsidiary of Mill Road Capital. Rubio's is now trying to set itself apart from Chipotle and other competitors by unveiling new fresh fish items and giving some of its California restaurants a beach-like look.
Chipotle is still dwarfed in size by fast-food giant Taco Bell, which had over 7,300 locations in 2019. However, traditional fast-food chains are not growing nearly as fast as the fast-casual segment. On the other hand, Taco Bell has made changes to keep up with shifts in consumer preferences. They introduced a Fresco menu featuring healthier fare and also improved the quality of their ingredients during the last decade. Taco Bell is owned by Yum! Brands (YUM), the worldwide leader in fast-food chains. Yum! Brands also owns Pizza Hut and KFC.
The Bottom Line
Chipotle has been one of the most dynamic growth companies in the restaurant industry during the early 21st century. Chipotle taps into the rising influence of Hispanic culture in America and the nation's growing appetite for fast-casual dining. After initially crashing in response to the coronavirus, Chipotle's stock rallied to new highs after gaining more than 100% in just two months.
However, Chipotle does not have a monopoly on fast-casual Mexican food. It must face close competitors, such as Qdoba Mexican Eats and Moe's Southwest Grill. For investors, the key consideration might be the structure of the business. Chipotle owns almost all its restaurants. That makes it a more volatile and aggressive play for investors in the stock market. However, those who want to open a franchise need to look to competitors.