Chipotle Mexican Grill (NYSE:CMG) just announced that they are rolling out their catering program nationally. The company first tested the concept in its home state of Colorado and after initial results were positive, the company is now going full force into the catering business. Chipotle won't be the first fast-casual restaurant chain to venture into catering, as Panera Bread Company (NASDAQ:PNRA) and Qdoba Mexican Grill, part of Jack in the Box (NASDAQ:JACK), already offer catering to their customers. Could catering be the next big growth driver for Chipotle's comparable sales and push the stock price higher? For us Fools, it pays to find out.
Catering from Chipotle looks to be the way to go
By venturing into the catering business, Chipotle can now cater board meetings, holiday parties, and just about any event for between six to 200 guests. The new catering program allows consumers to create their own taco, burrito, or bowl just like they would at a Chipotle location.
Consumers also get to choose whether they want the Two Meat Spread or the Big Spread. The Two Meat Spread allows guests to choose two proteins. Guests get their choice of chicken, steak, carnitas, or barbacoa. Then guests get to add their choice of white or brown cilantro-lime rice, black beans or pinto beans, four salsas, sour cream, guacamole, cheese, lettuce, and crispy taco shells or soft flour tortillas. The Big Spread comes with an additional protein choice and fajita vegetables.
A good plan
Why I see catering working for Chipotle is that it seems like they thought of everything. Chipotle is providing bowls, utensils, stands, and chafing dishes with fuel to keep them warm. To go with the meals, Chipotle is also offering chips, its line of fresh salsas, and guacamole. Finally, for events where planners want to keep things flowing, Chipotle is offering pre-made burritos. Chipotle is calling this the Burritos by the Box option. Customers pick their protein with white or brown cilantro-lime rice and the burrito automatically includes black beans, fresh tomato salsa and cheese.
Special deals available
To kick off the catering campaign, Chipotle is offering a holiday promotion for catering orders. A customer who places an order before Dec. 31 will get two free orders of burritos, bowls, tacos, or salads. The customer can then redeem their receipt at any Chipotle location up until Jan. 31. A customer that chooses the Burritos by the Box option gets a bag of chips, tomatillo-green chili salsa, guacamole, and sour cream for every two burritos purchased.
How are Qdoba and Panera tackling the catering market?
Qdoba Mexican Grill is a direct competitor to Chipotle and Chipotle is looking to get a piece of Qdoba's action in terms of catering. Qdoba's catering options include its hot naked burrito bar, hot taco bar, hot nacho bar, and boxed lunches. The hot naked burrito bar, hot taco bar, and boxed lunches are similar to what Chipotle is offering, while the hot nacho bar is one item Chipotle is not offering, though it is very popular for game-day events and home parties.
Panera sandwiches are ideal for catering. Each sandwich is sliced in half for variety and choice. Everything is labeled and Panera has done a great job in keeping everything fresh and providing a great presentation. The primary customer for catering by Panera is businesses that need a catered lunch. The items offered include breakfast sandwiches, morning baked goods, sandwiches, salads, boxed lunches, sweets, and soups.
How do shares compare?
Chipotle is the largest of the three with a market cap of almost $16 billion. Its shares have also had the best run this year after rising 75%. None of the three restaurant chains pays a dividend as they are all focused on growth. Jack in the Box has the lowest P/E multiple and trades at only 18 times next year's earnings. Chipotle has the highest multiple and it is trading at 39 times next year's earnings. This is warranted because Chipotle's comparable sales are growing the fastest. In the third quarter, Chipotle posted a 6.2% increase in comparable sales. Panera Bread has lagged the overall market and underperformed this yea; shares are up only 3% this year. Investors are hoping for an improvement next year.
There's no denying the growth story that is Chipotle Mexican Grill. The chain is not only venturing into catering, it is also looking to grow its ShopHouse Southeast Asian Kitchen, which I talked about in "Will New Concepts From Chipotle and Buffalo Wild Wings Take Off?". For Jack in the Box, it remains focused on Chipotle and it was the topic of "Jack in the Box and Qdoba Look Set To Take Down Chipotle". For Panera Bread, its battle with Potbelly was described in "Panera Bread or Potbelly: What's the Difference?". Overall, I see Chipotle's move into catering as a great move, and I see catering helping to drive sales going forward.
Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill and Panera Bread. 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.