Financial Analysis: Chipotle

Topics: Financial ratios, Fast casual restaurant, Fast food restaurant Pages: 10 (1753 words) Published: May 17, 2014

Table of Contents:

Company Background *3*
Industry Analysis *4*
Ratio Analysis *5-8*
Ratio Summary *8*
Recommendations *9*
References *10*

Company Background
Chipotle Mexican Grill was a concept turned reality by a gentleman by the name of Steve Ells. Chipotle Mexican Grill provides excellent Mexican cuisine driven by a concept of “Food with Integrity”. The first chipotle Mexican grill was opened in 1993 in Denver Colorado. By the end of 1995 there were three. In 1996 alone, Steve Ells opened five more Denver-area restaurants growing by a total of eight stores in three years. By 1998 Chipotle Mexican Grill was showing much promise. In order to meet their growth needs Chipotle took on outside investors. In 1999 they opened their first out-of-state stores in Minnesota and Ohio. As Steve was seeing rapid growth with his company, he was also noticing significant issues with the quality of the food being desired in this industry. After learning how pork was traditionally raised in the United States Steve Ells started his business down a new path. This lead to the concept of “Food with Integrity” , which was as a result of Steve’s decision to sell only the highest quality organic and naturally raised foods. Chipotle Mexican Grill continues to grow rapidly and in 2006 went public on the New York Stock Exchange. By 2012, Chipotle Mexican Grill had over 1400 company-owned stores taking over as the number two Mexican fast food restaurant for total sales in the US market. Today the overall business environment for Chipotle Mexican Grill is very good. The company has grown by over 50% since 2010 and is seeing increases in revenue averaging between 18% and 20% each year. Since going public the company has seen a 4000% return in their stock prices. Chipotle Mexican Grill continues to grow an average of 150+ stores per year. Based on their financial reporting for 2013 they had reached $3.21 billion in revenue. The significant amount of growth demonstrated since 2006 shows that the business environment and the combination of food quality, social responsibility, and their current unique market strategy shows to be very positive. Industry Analysis

As of 2012 the Mexican fast food industry reached $84.4 billion in revenue. The majority of this industry exists within the convenience store market. The Mexican fast food restaurants equal $31 billion of the industries revenue. Within that, five companies own 38% of the overall market share in the Mexican fast food industry. Those companies are: 1. Taco Bell

2. Chipotle Mexican Grill
3. Del Taco
4. Qdoba Mexican Grill
5. Moses’s Southwest Grill
The Mexican fast food industry has grown steadily and continues to grow each year due to increasing Latino population and the increased popularity of Oriental and Latino-based foods. As we live in an age where we have increasingly stressed and rushed lifestyles, consumers are continuing to look for healthier and more unique cuisine from the fast food market. This is increasing the demand for fast-casual dining opportunities. In order to be a Fast Casual restaurant you must meet the following criteria; the restaurant must be a limited or self-service format, average meal prices must remain between five and $15 restaurant must be made to order food with more complex flavors than an average fast food restaurant, it must have a more upscale or unique décor than the standard fast food restaurants, and in most cases it should not have a drive-through. Chipotle Mexican Grill is one of those fast casual restaurants that is leading the way within the Mexican food industry.

Ratio Analysis
Current Ratio: The current ratio is a liquidity ratio that measures a company’s ability to pay current liabilities with their assets that are expected to be converted to cash in the near future. Current Ratio = Current Assets/ Current Liabilities

Chipotle: 666,307/199,228=3.34
Yum! Foods: 1,691,000/6,490,000=.75
Chipotle’s...

References: Brigham, E.F. and Houston, J.F. (2009) Fundamentals of Financial Management. 12th Edition. Cengage Learning.
Chipotle Mexican Grill. (CMG) Balance sheet, Dec. 30, 2013. Yahoo!Finance. Retrieved from https://finance.yahoo.com/q/bs?s=CMG+Balance+Sheet&annual
Chipotle Mexican Grill. (CMG) Income statement, Dec. 30, 2013. Yahoo!Finance. Retrieved from https://finance.yahoo.com/q/is?s=CMG+Income+Statement&annual.
Oches, Same."The QSR 50 Mexican Segment." (Aug. 2013): QSR. 27 Apr. 2014. http://www.qsrmagazine.com/reports/qsr50-2013-mexican-segment-breakdown.
Rebecca S.(9. Oct. 2012): 20 Apr. 2014. http://www.prweb.com/releases/mexicanfood/restaurantsurvey/prweb9985561.htm.
Yum! Brands, Inc. (YUM) Balance sheet, Dec. 28, 2013. Yahoo!Finance. Retrieved from https://finance.yahoo.com/q/bs?s=YUM+Balance+Sheet&annual.
Yum! Brands, Inc. (YUM) Income statement, Dec. 28, 2013. Yahoo!Finance. Retrieved from https://finance.yahoo.com/q/is?s=YUM+Income+Statement&annual.
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