Chipotle Mexican Grill (NYSE:CMG) opened its European location in London in 2010. At the time, Founder and co-CEO Steve Ells said, "We think the prospects are very good for Chipotle in London and around Europe. The food culture in Europe is based on local, sustainable, and artisanal foods, which are all core values of Chipotle and we have been instrumental in bringing this kind of thinking to fast food in the U.S."
More than six years later, Chipotle has just 12 restaurants in Europe, while it has added more than 1,000 new locations in the U.S during that time, doubling its domestic store count.
Outside of the U.S., Europe would seem to represent the best opportunity for expansion for the company, and with U.S. sales hobbled after last year's series of foodborne illness outbreaks, Europe may be the company's best opportunity at renewed growth. However, with only 12 stores, that's not going to happen any time soon.
A new beginning
To give a boost to its European presence, Chipotle tapped Jim Slater this week as its first Managing Director in Europe. Slater brings experience building European brands like Costa Coffee, a brand with 2,000 locations in the UK, Bombay Sapphire Gin, and Sunderland Association Football Club. "We have great confidence in his abilities and expertise, and believe his leadership will help us enhance and grow our business in Europe," Ells said.
It's unclear what Chipotle's goal in Europe is in terms of the number of restaurants it can open, and the company has provided little hard data on its results thus far. In the U.S., the chain seems to be targeting a total of 5,000-10,000 restaurants.
Europe has a history of being receptive to American fast-food brands. McDonald's (NYSE:MCD) has about 8,000 locations across the continent, while Starbucks has about 2,000 locations in Europe. Chains like Subway, Burger King, and Yum! Brands' KFC and Pizza Hut also number in the thousands.
The burrito frontier
Chipotle has been quiet about results from Europe thus far as recent attention has turned to recovering U.S. sales after last year's crisis. As recently as 2013, co-CEO Monty Moran said "you won't see a significant push in international" as the company intends to let its current stores mature to build demand for the brand.
However, Chipotle's menu faces a different challenge than its fellow fast-food peers. Burritos and tacos are familiar to most Americans due to this country's proximity to Mexico, but that cuisine is hardly known in some parts of Europe. In 2013, management conceded on an earnings call that volumes in London were much lower than in North America, a problem they blamed on poor brand awareness.
However, Mexican food has been a tough sell for other chains as Taco Bell entered the U.K. in the late 1980's before pulling out a few years later, and price has also been an issue for some customers as high occupancy costs in London have forced it to charge higher prices than in the U.S.
Still, Europeans' traditional attitudes toward food align closely with Chipotle's. Last year, 19 E.U. countries voted to ban GMO crops, echoing a similar move by Chipotle that year, and McDonald's, despite its popularity, has been a regular flashpoint in France, the site of a bombing, a looting, and a year-long union protest.
It won't be easy to build a big European brand for Chipotle, but Slater did with Costa Coffee, guiding it to take over Starbucks as the leading U.K. coffee brand, and even won "Brand of the Decade" from The Times of London.
As Chipotle flounders in the U.S., now may be the time to spend on international growth. Hiring Slater is a good first step. Hopefully, we'll hear more about his Chipotle European plan in its earnings report next month.