According to reports from Bloomberg, Chipotle Mexican Grill, Inc. CMG might just be stepping into the intensely competitive burger industry.
The Colorado-based fast casual restaurant is mulling over a restaurant concept focused on hamburger. The company has reportedly filed a trademark application for the name “Better Burger” this month with the U.S. Patent and Trademark Office.
This is not the first time that Chipotle is venturing into a new concept. It already operates 13 ShopHouse Southeast Asian Kitchen restaurants, serving fast casual, Asian inspired cuisine. The company also holds an equity stake in a consolidated entity that owns and operates three Pizzeria Locale units, a fast casual pizza concept.
However, the expansion comes at a time when the company is battling a number of odds. Towards the end of last year, a series of E. coli and norovirus contamination incidents throughout the U.S. took a toll on its reputation. Ever since, traffic has been severely hit and the company is still reeling under the impact. Comps stumbled in the three month of the first quarter and the company is finding it difficult to bring back diners.
Also, earlier this month, Chipotle announced that it expects to incur a loss of $1.00 per share in the first quarter due to declining comps, higher expenses and lower margins. This would be the first time that Chipotle slips into the red since its IPO.
However, we believe Chipotle’s decision to open a burger chain would help it, especially as the U.S. market probably isn’t saturated with too many burger chains, per Technomic – a research and consulting firm specializing in the food and foodservice industry. With declining beef prices, the burger business would also be profitable for the restaurant chain be leveraging its primary marketing strength of fresh ingredients and customized menu items.
Chipotle currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the same sector are Carrols Restaurant Group, Inc. TAST, Darden Restaurants, Inc. DRI and Dave & Buster's Entertainment, Inc. PLAY. All these stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment