3 Well Managed Restaurants With Tasty Growth Potential

Management quality is a key variable to consider when making investment decisions. Especially in the restaurant business, where competition is tough and delivering the right customer experience is a crucial factor for success, investing with the right management team is of utmost importance. These well-run restaurants can add some flavor to your portfolio.

A Spicy Burrito
Chipotle Mexican Grill
(NYSE: CMG  ) is one of the most explosive success stories in the restaurant business over the last few years. The fast casual category, which maintains the basic speed and experience of the fast food industry while offering higher quality food and atmosphere, is a booming niche, and Chipotle is a growth leader in that segment.

Steve Ells, founder and CEO, opened the first restaurant in Denver, Colorado, in 1993 and has built a national brand with more than 1,500 stores from that single location. Amazingly, Chipotle has managed to stay true to its values during the expansion process, the company´s "food with integrity" approach to the business may create operational complexities and higher costs, but customers seem to really appreciate better ecological standards and the high quality ingredients that come with it. h

The business is firing on all cylinders; the company reported an 18.2% increase in revenue during the last quarter supported by comparable restaurant sales growth of 5.5%. Higher food costs are affecting margins, but Chipotle has healthy profitability with restaurant level operating margin at 27.6%.

The stock is priced for growth, trading at a P/E ratio above 44. However the company has plenty of room for expansion and management has proven that it can handle growth without hurting quality or customer experience.

Hot Chicken Wings
Sally Smith joined Buffalo Wild Wings (NASDAQ: BWLD  ) in 1994, when the company only had 30 restaurants. She became CEO and president in 1996, and has seen the company expand to more than 900 locations since then. Smith has an amazing track record at the company, in the last ten years alone Buffalo Wild Wings has compounded sales growth at nearly 27% per year.

Buffalo Wild Wings offers a simple and effective proposition to its customers: tasty food, plenty of beer options and widely available TVs to watch sports. The company is implementing a new wing by the portion program to keep costs under control and ensure that customers receive a more consistent amount of chicken in their order rather than a fixed number of wings.

Simplicity is working quite well for the company judging by financial results: total revenue increased 27.8% in the last quarter and earnings per share grew at a whopping 41.9%. Same-store sales increased 3.8% at company-owned restaurants and 4.1% at franchised restaurants during the quarter.

The company trades at demanding valuation with a P/E ratio above 34, but it has the growth potential to justify its valuation. Strong demand is proving that Buffalo Wild Wings has plenty of room for growth in the U.S., and international markets are still practically untapped.

Much More Than Coffee
Starbucks
(NASDAQ: SBUX  ) is world famous for its wide variety of sophisticated coffees, but the company is about much more than that. Brand differentiation and a unique customer experience are invaluable competitive assets for the company, generating premium prices for its products and superior profit margins for shareholders.

The company´s founder and CEO, Howard Schultz, is a powerful driving force behind the company´s success. Schultz practically invented specialized coffee as a popular product category, and he came back as a CEO after an eight year hiatus in 2008 to reinvigorate the brand and lead Starbucks into its next growth stage.

Starbucks is expanding internationally, adding new products to its menu and developing new sales channels for its growing portfolio of products. The company acquired Evolution Fresh in November of 2011 for $30 million, La Boulange for $100 million in June 2012 and Teavana for $600 million in November of last year. With these deals, Starbucks is growing into segments like juice, pastries and specialized tea. This will provide more options and flexibility for its customers around the globe as the companies continue to expand.

Financial performance has been nothing short of stellar at Starbucks lately, earnings per share increased by 28% in the last quarter on the back of a 13% increase in revenue and a strong growth of 8% in global comparable store sales. Just like the company´s products, the stock is a bit pricey at a P/E ratio near 37, but premium quality usually comes for a premium price.

 Bottom line
A savvy management team with a deep understanding of its organizations' key success drivers is an enormously valuable asset in the restaurant business. These three companies are being well managed by the right leaders, and their recent financial performance demonstrates that. All these facts mean that these three companies are worth a look by Foolish investors. While they don't come at cheap valuations, high growth companies seldom do.

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