What Chipotle is doing right
In a country of rising health awareness, fast-food chains like McDonald’s (MCD) and Burger King (BKW) are losing customers who deem their food too unhealthy.
But where fast food is losing out, fast-casual dining -- a group that includes chains like Panera (PNRA), Starbucks (SBUX), Chipotle (CMG) and Potbelly (PBPB) -- is gaining traction. These companies (though still arguably unhealthy) often use higher-quality ingredients and pay more attention to ambience.
Of these restaurants, Chipotle and Starbucks rule both in terms of popularity and cold hard cash. Starbucks has nearly 20,000 stores and Chipotle has nearly 1,600 (the company opened 56 new restaurants in Q4 2013 alone). In 2013 Chipotle increased revenue by 17.7% while Starbucks' revenue jumped 12%.
Related: McDonald’s Should Share Billions in Profits With Fast Food Workers: Labor Organizer
In the fast-casual kingdom, however, only one restaurant can reign supreme. Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors, believes he knows which company is winning in the fast-casual space: Chipotle. Here’s why.
1. Faster lines
“If you ever walk into a Chipotle store you see how fast it is; you’re in and you’re out. They have an assembly line and the menu is simple. Starbucks has started to introduce so many new items to the store...the lines slow down and people leave,” says Sozzi.
Related: How Raising the Minimum Wage Would Benefit McDonald’s and Walmart
Do longer lines mean Starbucks is in high demand? Sure, says Sozzi, but these restaurants want to get people in and out as quickly as possible. If someone has to wait on a long line they might not buy that extra food item or specialty drink.
2. Happier Staff
“Chipotle has created a winning culture,” says Sozzi. “Everybody is working super hard and getting people out of the door while offering best-in-class customer service. Starbucks on the other hand has lost a bit of its luster in the eyes of its employees. They have to do so much and the company hasn't raised employee wages."
Related: Which Fast Food Chain Has America’s Best Drive-Thru?
3. No GMOs
Chipotle is ahead of the curve on this issue in the restaurant industry. By the end of 2014, Chipotle’s menu will be free of genetically modified organisms (GMO). Whole Foods (WFM) has already set a 2018 deadline for GMO labeling and General Mills (GIS) announced that its original Cheerios cereal will be made with non-GMO corn and sugar.
So is Starbucks suffering from the "McDonald's syndrome"? The varied menu, long lines and unhappy employees point to yes, says Sozzi.
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