3 Restaurant Chains Delivering Explosive Growth: Chipotle, Buffalo Wild Wings, and Zoe's Kitchen

Chipotle Mexican Grill, Buffalo Wild Wings, and Zoe's Kitchen are generating extraordinary growth rates, and they are well positioned to continue delivering yummy performance in the years ahead.

Jun 24, 2014 at 6:15PM

The restaurant industry can be tough and competitive, but it also allows for exceptional opportunities for growth when you're investing in well-run companies that know how to keep their customers happy and coming back for more. Chipotle Mexican Grill (NYSE:CMG), Buffalo Wild Wings (NASDAQ:BWLD), and Zoe's Kitchen (NYSE:ZOES) are three particularly promising options for investors looking to position their portfolios in restaurant companies delivering extraordinary growth rates.

Chipotle Mexican Growth
When it comes to growth companies in the restaurant business, Chipotle is second to none. Burritos made with fresh and healthy ingredients resonate with consumers, and that's reflected in the company's impressive financial performance.

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Source: Chipotle Mexican Grill.

Year-over-year sales during the first quarter of 2014 jumped 24.4%, to $904.2 million, while comparable-stores sales increased 13.4%. Chipotle opened 44 new restaurants during the quarter, bringing the total count to 1,637 locations.

Management estimates the company has enough room for approximately 4,000 restaurants in the U.S., and there is no reason to doubt that possibility, considering how strong demand has remained over the years.

The company has barely taken its first steps in international markets: Chipotle has seven locations in London, three in Paris, and one in Frankfurt. Initial response has been quite promising in those restaurants, according to management: Locals -- and not only expats -- are regularly eating at Chipotle's international restaurants, so the menu seems to resonate in those locations, too.

Opportunities for expanding the Chipotle restaurant store base are still substantial, both in the U.S. and abroad. In addition, the company is experimenting with new concepts such as Asian cuisine at ShopHouse and pizza at Pizzeria Locale.

If the company can achieve with ShopHouse and Pizzeria Locale at least a fraction of the success it has obtained in its main Chipotle concept, the door could be open for gigantic opportunities in the years ahead.

Buffalo Wild Wings is simple and effective
Buffalo Wild Wings goes for a simple and effective customer proposition: tasty chicken wings, plenty of beer options, and widely available TVs on which to watch sports. The company is focused on providing a comfortable and fun customer experience, which is working out quite well.

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Source: Buffalo Wild Wings.

Buffalo Wild Wings announced an explosive sales increase of 20.9% to $367.9 million during the first quarter in 2014. Same-store sales increased 6.6% at company-owned restaurants and 5% at franchised locations, and the company had 46 more company-owned restaurants and 55 additional franchised restaurants at the end of the period in comparison to the same quarter in 2013.

Buffalo Wild Wings has 1,018 restaurants across the U.S., Mexico, and Canada. This encompasses 574 franchised locations and 444 company-owned restaurants. Management believes it has enough room for more than 3,000 restaurants on a global basis in the long term.

Unlike Chipotle, Buffalo Wild Wings relies heavily on franchises for international growth, and this allows for rapid expansion in a capital-efficient way. Franchise partners in coming months are opening nine restaurants in countries including Mexico, Saudi Arabia, the United Arab Emirates, and the Philippines.

Zoe's Kitchen: the new kid on the block
Zoe's Kitchen went public in April, and returns for investors have been quite tasty since then. From an opening price of $26.65 on April 11, the stock has risen to approximately $32.70, an impressive performance for such a short period of time.

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Source: Zoe's KItchen.

This fast-casual restaurant is focused on "fresh, wholesome, Mediterranean-inspired dishes delivered with southern hospitality," and sales growth has been truly impressive over the last several years.

The latest financial report was no exception: During the 16 weeks ended on April 21, Zoe's Kitchen delivered a 47.4% revenue spike, to $46.3 million. Comparable-restaurant sales increased 5.7%, while Zoe's Kitchen opened 13 company-owned restaurants and acquired two franchised locations.

Zoes Growth

Source: Zoe's Kitchen.

Zoe's Kitchen today has 120 restaurants in 15 states, so the company is materially smaller than both Chipotle Mexican Grill and Buffalo Wild Wings. Although this can be seen as an additional source of risk, it also means that Zoe's Kitchen offers exceptional opportunities for growth, since it's usually easier for smaller companies to expand rapidly over long periods of time without saturating the market.

Foolish takeaway
When investing in competitive industries such as restaurants, sticking with the best names in the business is of utmost importance. Chipotle Mexican Grill, Buffalo Wild Wings, and Zoe's Kitchen are generating extraordinary performance for investors, and they are well positioned to continue making both customers and shareholders happy in the years ahead.

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Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Buffalo Wild Wings and Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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