Some name brands manage to fill a void that makes them resonate with consumers in a way that others do not. In the fast-food space, McDonald's is probably the one that stands out the most, but smaller competitors are always looking to gain a foothold. Chipotle Mexican Grill (CMG -0.41%) is just such an upstart. Smart investors know this chain's growth is nowhere near over.

Paying up for good food

Chipotle's model is to provide quick, fresh food in a highly customized manner. While you can argue that the Mexican-themed restaurant doesn't actually offer all that many products, what you can do with your order is so unique that the choices feel almost unlimited. And customers can see just how fresh the food is, given the assembly line style of the ordering process. Other companies have tried this, but Chipotle has clearly succeeded.

A person eating a burrito in a restaurant.

Image source: Getty Images.

What's most impressive of late is that inflation has raised the prices Chipotle has to pay for its ingredients. As you would expect, the restaurant has passed those costs on to its customers. Typically, when prices go up, you expect some consumer pushback -- but that just hasn't been the case so far. To put some numbers on that, same-store sales in the third quarter of 2022 rose 7.6%, with the company's operating margin improving to 15.1% from 12.3%.

CEO Brian Niccol basically, and perhaps rightly, bragged about the company's strong results in its earnings release: "Our performance in the third quarter confirms our brand and value proposition remain strong, even during a challenging economic environment." Giving credit where credit is due, he's correct. And that sets up the long-term story here.

A long way to go

Chipotle has roughly 3,100 restaurants and recently opened its 500th location with a digital drive-through option. That's a lot of locations, but the goal is to reach 7,000. Think about that for just one second: Management is still looking to double the size of the company. Can Chipotle get there? If it can raise prices and increase same-store sales and margins, there's no near-term reason to think it can't keep opening new locations.

As for the long-term, McDonald's has around 40,000 locations across more than 100 countries. If a burger joint can do that, it isn't too hard to believe that a strong food concept like Chipotle can reach 7,000. Yum! Brands' Taco Bell division, for comparison, had roughly 7,700 locations at the end of 2021. That makes Chipotle's goal seem perfectly reasonable, if not perhaps a bit low.

To be fair, Chipotle's stock gains over the past decade reflect the business's growth potential. Up around 400% and sporting a price-to-earnings ratio over 50, the stock is hardly cheap. That said, the stock is nearly 25% below its 2021 highs, despite the business's ongoing strength and still-massive growth potential.

More growth ahead

Value investors may not be interested here, but those with a growth bent may want to put Chipotle on their wish list. If there's a further drawdown (it has fallen more than 50% before), it will most likely be a great opportunity.

But even at its current price, long-term investors should be happy if this still-growing fast-food company gets anywhere near its 7,000-store goal. And that is why Chipotle's ongoing success at opening new locations is what smart investors are watching very, very closely.