DCG Posted August 1, 2016 Share Posted August 1, 2016 The name of the restaurant is seriously Tasty Made? Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted August 1, 2016 Share Posted August 1, 2016 More anecdotal evidence from NYC - The restaurant that is next to my work that has been largely empty for months since the initial "scandal" was full at 2 PM (late for typical lunch rush) on a weekday last week. The restaurant a few blocks down was also packed, but this is the first time I've visited that one so don't know how it compares overtime. The one near my apartment seems moderately more busy with me waiting in line every time I've visited in the last month where beforehand I could just walk straight up to the counter. Seems like their summer rewards program has been pretty effective at generating foot traffic in at least two of those locations. Link to comment Share on other sites More sharing options...
Andrew6892 Posted August 4, 2016 Share Posted August 4, 2016 I find the numerical debate interesting but I would frame the issue differently, i.e. let's look at the underlying business economics from the perspective of the customer. Up until about 2012, at least in the urban/suburban areas that I lived in or visited, finding 'healthy'/'organic' food was harder than it is today. Since then, the breadth of choice just exploded. A multitude of packaged brands appeared out of nowhere, peddling everything from protein to oats to gluten-free cookies or almond milk, etc. It's like a massive lollapalooza effect where everything is acting in the same direction. Today, if you want to eat healthy, you have just so many choices, it's like an information overload: - go to Whole Foods salad bar or Trader Joes, etc - go to Sweetgreen - go to Target or any other large food retailer and get their organic private label line (where choice / breadth is increasing) - go to Chipotle - go to Panera Bread, etc - get a salad bowl from Subway - order a 'healthy' food kit from one of the many start-ups, usually working on a subscription model - order a home delivery of food or groceries from a start-up such as Instacart - order food delivery from an upscale restaurant, e.g. via Caviar - order food delivery from a cheap-but-healthy restaurant option, e.g. via Grubhub Supply of healthy food is growing faster than demand. It used to be the case that 'the product' (i.e. fast, high-quality, convenient and reasonably-priced food) was in short supply, and Chipotle took advantage of that. But this is changing, as 'the product' is getting ever more accessible, ever more commoditized. The store-level economics that we saw Chipotle post in 2014 (over $2.4 million average unit volume) are unlikely to be sustainable, in my view. And if the operating ROIC will continue drifting down, then how is Chipotle not a short at these levels? Interesting argument, but, respectfully, I think it is flawed. First, Chipotle was knocking the cover off the ball as late as 3Q 2015. Whole Foods salad bar, Trader Joe's, Sweetgreen, Target, Panera, and Subway were all around and ubiquitous then just as they are now. Healthy food kits through the mail and delivery from an upscale restaurant... I'm not sure those are substitutes for a quick $8 burrito. Second, Chipotle's appeal and the reason why it is among the most popular quick-service/fast casual chains by AUV - still to this day with $2 MM AUV - is mostly, I would argue, because of the taste. What happens to store-level economics over the next several years is certainly up for debate. But the case studies all show the customers always come back. If $2.0 MM is the new normal and it never recovers, it will be unprecedented. Even if $2.0 MM is the new normal, I still think Chipotle is a bad short. This is a company that should be able to double its store count over time at very good, if not great, new unit economics. Maybe you can short it here and there for a trade and make money (I don't have that skill), but it seems likely to me that it's only a matter of time before a short bet would get run over. In 5 years when the company has perhaps 40%-50% more stores - and will almost certainly have recovered at least somewhat - will the stock be higher or lower than it is today? I'm almost certain the answer is higher. So I understand being skeptical and not wanting to be long, but I don't understand wanting to be short - unless your time horizon is measured in weeks or months and you're good at trading that sort of thing. Link to comment Share on other sites More sharing options...
ccplz Posted August 4, 2016 Share Posted August 4, 2016 Investment horizon for short trades are usually shorter. It's in the name. You see few investors who will go short a name for longer than a few months I think, unless they have extremely high conviction in the idea. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted August 15, 2016 Share Posted August 15, 2016 More anecdotal evidence from NYC - The restaurant that is next to my work that has been largely empty for months since the initial "scandal" was full at 2 PM (late for typical lunch rush) on a weekday last week. The restaurant a few blocks down was also packed, but this is the first time I've visited that one so don't know how it compares overtime. The one near my apartment seems moderately more busy with me waiting in line every time I've visited in the last month where beforehand I could just walk straight up to the counter. Seems like their summer rewards program has been pretty effective at generating foot traffic in at least two of those locations. Went back to this same restaurant today. Longest line I've seen at it in months - basically wrapped around the entire wall of the dining area and then started zig-zagging through the seating area preventing people from sitting down in the restaurant. Had it gone out the door instead of zig-zagging, it'd have been 10-15 people out the door. The stock still seems a bit pricey given where I would think earnings will normalize, but the growth is there for Chipotle and they're trying other types of restaurants that we may some some success with. I've gone close to 15x in the past 6 weeks and it really seems like foot traffic has picked up majorly. Whether that is a result of their summer rewards program or just b/c Chipotle is getting back to its old self remains to be seen, but I did pick up a small speculative position today with the expectation that Q3 results will be significantly improved. Link to comment Share on other sites More sharing options...
JayGatsby Posted August 16, 2016 Share Posted August 16, 2016 Went back to this same restaurant today. Longest line I've seen at it in months - basically wrapped around the entire wall of the dining area and then started zig-zagging through the seating area preventing people from sitting down in the restaurant. Had it gone out the door instead of zig-zagging, it'd have been 10-15 people out the door. The stock still seems a bit pricey given where I would think earnings will normalize, but the growth is there for Chipotle and they're trying other types of restaurants that we may some some success with. I've gone close to 15x in the past 6 weeks and it really seems like foot traffic has picked up majorly. Whether that is a result of their summer rewards program or just b/c Chipotle is getting back to its old self remains to be seen, but I did pick up a small speculative position today with the expectation that Q3 results will be significantly improved. The one I go to for lunch (Denver suburbs) has been really busy recently as well. I've started going to one a few minutes drive further because the line is shorter. Will definitely be interesting to see if there's any impact when the Chiptopia stops. Where do you think earnings will normalize? If EBITDA comes just shy of $1B I think the current valuation is reasonable. That would have it at a discount to McDonald's which is shrinking. Key is if they can keep expanding by 200 stores a year. I'm not stoked about the burger restaurant, although I used to go to Shophouse a fair amount when I lived in Los Angeles (oddly no Shophouse in Denver). Thanks for supporting the earnings! Link to comment Share on other sites More sharing options...
TorontoRaptorsFan Posted August 16, 2016 Author Share Posted August 16, 2016 More anecdotal evidence from NYC - The restaurant that is next to my work that has been largely empty for months since the initial "scandal" was full at 2 PM (late for typical lunch rush) on a weekday last week. The restaurant a few blocks down was also packed, but this is the first time I've visited that one so don't know how it compares overtime. The one near my apartment seems moderately more busy with me waiting in line every time I've visited in the last month where beforehand I could just walk straight up to the counter. Seems like their summer rewards program has been pretty effective at generating foot traffic in at least two of those locations. Went back to this same restaurant today. Longest line I've seen at it in months - basically wrapped around the entire wall of the dining area and then started zig-zagging through the seating area preventing people from sitting down in the restaurant. Had it gone out the door instead of zig-zagging, it'd have been 10-15 people out the door. The stock still seems a bit pricey given where I would think earnings will normalize, but the growth is there for Chipotle and they're trying other types of restaurants that we may some some success with. I've gone close to 15x in the past 6 weeks and it really seems like foot traffic has picked up majorly. Whether that is a result of their summer rewards program or just b/c Chipotle is getting back to its old self remains to be seen, but I did pick up a small speculative position today with the expectation that Q3 results will be significantly improved. Welcome to the club! ;D I guess I'm a regular at my Chipotle because the staff all greet me by name now. 8) I'm excited to see what Tasty Burger brings. They've got 4 major food segments now covered with their restaurants: Chipotle (Tex-Mex), Shophouse (East Asian), Pizzeria Locale (Pizza), Tasty Burger (Burger & Fries) I'm curious to see how many more shares they've repurchased this quarter. Link to comment Share on other sites More sharing options...
Andrew6892 Posted August 17, 2016 Share Posted August 17, 2016 Management has said they'll most likely do another rewards program after Chiptopia. Ultimately, I believe they are developing a Starbucks-style app-driven rewards program, given that they hired the former CIO from Starbucks last Fall. Starbucks has had tremendous success with that. They probably can't get that done by the end of September, so I'd expect another temporary rewards program in the meantime. Chorizo is rolling out nationwide in Sept/Oct. They are also developing a new back line order system for online and app orders. Essentially, it's a patented system where the employees see visual indicators telling them which ingredients are in the order. It might be some sort of light that lights up around or onto the ingredients. So the employees can very quickly make orders without having to read a screen or piece of paper. The goal is to speed up the ability to make orders on the back line, so they can really market the ability to order online/app and skip the line. They are considering self-service pick up shelves for pre-paid orders like Panera has. What I am most interested in is they are working on marketing that directly addresses food safety. According to a sell-side poll, 44% of respondents were not aware that Chipotle has made any changes to its food handling procedures. I would like to see them hammer home the point that Chipotle is probably the safest place to eat now given the extensive changes they have made. There are clearly some people who have not returned; hearing that message would bring some of those back. And anecdotally, my Chipotle has been absolutely packed since July 1 when Chiptopia started. Lunchtime lines of 15-25 people every day for hours. Long lines are better than no line, but long lines turn some people away. As a shareholder, I want a constant short line all day long. What matters is throughput - how many customers they serve per minute or increment of time. Higher throughput means faster service, shorter lines, no lost customers who leave because of the long line, and higher sales. I think Chiptopia, to some extent, slows throughput. The 30% of transactions that participate in Chiptopia have to swipe 2 cards instead of 1. Plus, non-participants sometimes are asked if they'd like to participate and some people have questions, etc. A Starbucks-style app where you just scan your phone would be a lot quicker. Link to comment Share on other sites More sharing options...
JayGatsby Posted August 17, 2016 Share Posted August 17, 2016 Chorizo is rolling out nationwide in Sept/Oct. They have it here (Denver). I guess it's part of the test. It was fine, but I had it once and went back to chicken. Personal preference obviously, but I wouldn't expect a pop from this. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted August 17, 2016 Share Posted August 17, 2016 I think Chiptopia, to some extent, slows throughput. The 30% of transactions that participate in Chiptopia have to swipe 2 cards instead of 1. Plus, non-participants sometimes are asked if they'd like to participate and some people have questions, etc. A Starbucks-style app where you just scan your phone would be a lot quicker. Not that it matters that much, but the bottlenecks in the lines I've been in always seem to be at the burrito making process and never for payment - even when swiping two cards. Link to comment Share on other sites More sharing options...
fareastwarriors Posted August 24, 2016 Share Posted August 24, 2016 Looks like the Sequoia Fund added CMG to their holdings... http://www.dataroma.com/m/holdings.php?m=SEQUX Link to comment Share on other sites More sharing options...
Astrea Posted August 24, 2016 Share Posted August 24, 2016 I don't live in the US and so I wondered if someone could please let me if CMG has any close substitute there? In other words, can customers get any place else: (i) the same quality burrito (organic, GMO-free, healthy, fresh, nutritious, responsibly farmed, locally sourced etc etc); (ii) for the same price or less (average check ~ $11); and (iii) served as fast? I've heard of Qdoba, Moe's, Pancheros, Del Taco but I don't think any of these have (i) above. Thanks Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted August 25, 2016 Share Posted August 25, 2016 I don't live in the US and so I wondered if someone could please let me if CMG has any close substitute there? In other words, can customers get any place else: (i) the same quality burrito (organic, GMO-free, healthy, fresh, nutritious, responsibly farmed, locally sourced etc etc); (ii) for the same price or less (average check ~ $11); and (iii) served as fast? I've heard of Qdoba, Moe's, Pancheros, Del Taco but I don't think any of these have (i) above. Thanks I've been to Qdoba and Moe's. Those may be substitutes for anyone looking for just any burrito shop (like me). They probably aren't substitutes for the people who like Chipotle's business practices, ingredients sourcing, etc. I kind of view Chipotle as a burrito-based Starbucks jr., but don't think it will have as much relative success in its field because it's not as radically different, or radically better, as Starbucks was from the alternatives. There's definitely a market for it though. Link to comment Share on other sites More sharing options...
influx Posted August 25, 2016 Share Posted August 25, 2016 I read this yesterday, I am new to this so it was very informative to read https://glennchan.wordpress.com/2016/07/30/the-chipotle-mexican-grill-way/ Link to comment Share on other sites More sharing options...
Astrea Posted August 25, 2016 Share Posted August 25, 2016 Thanks. I read a Morgan Stanley report that says they believe there's room for 4,000 Chipotles in America. Sequoia also think that CMG can more than double its current unit count (i.e. reach 4,000 +) at "terrific unit economics". Link to comment Share on other sites More sharing options...
awindenberger Posted August 25, 2016 Share Posted August 25, 2016 Thanks. I read a Morgan Stanley report that says they believe there's room for 4,000 Chipotles in America. Sequoia also think that CMG can more than double its current unit count (i.e. reach 4,000 +) at "terrific unit economics". I believe that if Chipotle is willing to lower their average unit volumes, they could do very well with a smaller concept in a lot of small towns. My 10k town in Iowa would love a Chipotle; but obviously wouldn't support $2-2.5M/year UV. Link to comment Share on other sites More sharing options...
bookie71 Posted August 26, 2016 Share Posted August 26, 2016 There are no Chipotles in our area. We are visiting in Georgia and my wife saw one at noon and suggested we stop as I had been talking about them. We left without ordering as the music was so loud it hurt. Most of the tables were empty (at noontime). Next door at the Shake and Steak they were busy. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted September 6, 2016 Share Posted September 6, 2016 http://www.reuters.com/article/us-chipotle-ackman-idUSKCN11C2JY Ackman takes 9.9% stake in Chipotle. Dunno if this means I should take my money and run OR if this will be the investment that redeems him and I'll feel like a genius for beating him to it... Link to comment Share on other sites More sharing options...
TorontoRaptorsFan Posted September 6, 2016 Author Share Posted September 6, 2016 LOL You beat me to it...things just got a lot more interesting! http://www.nytimes.com/2016/09/07/business/dealbook/bill-ackman-chipotle.html?ref=business http://www.wsj.com/articles/pershing-square-reveals-9-9-stake-in-chipotle-1473197908 Link to comment Share on other sites More sharing options...
ccplz Posted September 7, 2016 Share Posted September 7, 2016 LOL You beat me to it...things just got a lot more interesting! http://www.nytimes.com/2016/09/07/business/dealbook/bill-ackman-chipotle.html?ref=business http://www.wsj.com/articles/pershing-square-reveals-9-9-stake-in-chipotle-1473197908 What's so funny...? Link to comment Share on other sites More sharing options...
TorontoRaptorsFan Posted September 7, 2016 Author Share Posted September 7, 2016 LOL You beat me to it...things just got a lot more interesting! http://www.nytimes.com/2016/09/07/business/dealbook/bill-ackman-chipotle.html?ref=business http://www.wsj.com/articles/pershing-square-reveals-9-9-stake-in-chipotle-1473197908 What's so funny...? What is your investment thesis regarding Chipotle? Do you agree with Ackman's assessment of the company? Link to comment Share on other sites More sharing options...
johnny Posted September 7, 2016 Share Posted September 7, 2016 What is it exactly do you see Ackman as being able to do here? It's not apparent to me that there is some low hanging fruit to be snatched by shaking up the board or dislodging the founder. Link to comment Share on other sites More sharing options...
KCLarkin Posted September 7, 2016 Share Posted September 7, 2016 What is it exactly do you see Ackman as being able to do here? It's not apparent to me that there is some low hanging fruit to be snatched by shaking up the board or dislodging the founder. 3G/QSR? Link to comment Share on other sites More sharing options...
handycap5 Posted September 7, 2016 Share Posted September 7, 2016 Could someone who likes this explain why it is attractive quantitatively? I couldn't make the numbers work playing with them and using Ruane's rationale for their purchase. Clearly, some other guy who knows a little about fast food disagrees. Double the revenue $9B, 16% op margin, a few other assumptions gets one $30/share in EPS. What am I missing? Link to comment Share on other sites More sharing options...
NBL0303 Posted September 7, 2016 Share Posted September 7, 2016 What is it exactly do you see Ackman as being able to do here? It's not apparent to me that there is some low hanging fruit to be snatched by shaking up the board or dislodging the founder. 3G/QSR? 3G's restaurant investments had quite different characteristics as this. Massive re-franchising, etc. I can't imagine 3G would be willing to pay anything like this multiple for CMG when there is not an obvious way to cut costs/expenses in a massive way for a business like this. I guess one possible theory, that seems exceedingly unlikely to me, could be that 3G would buy it and sell of the Chipotle's to turn it into a franchisor. I believe there under a 1% chance, probably well under, of 3G getting involved in this. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now