Everybody seems to want to find the next Chipotle Mexican Grill (NYSE:CMG), but at the same time, Chipotle investors look around confidently and see no public competitor that seems to be even a remote threat. However, Chipotle investors should always keep an eye out to the private market, because here are just two examples of fast-casual Mexican food chains that are hotter than habanero salsa.
You didn't think Chipotle was the only one in the country with the secret sauce to fast-casual Mexican food success, did you? As the acceptance and broad appeal of the food and the concept widen, the opportunity for competitors to emerge is simply inevitable.
Anything but flat
You've probably heard by now that Chipotle Mexican Grill is particularly appealing to millennials. Cheap, healthy food available in large quantity that's easy to order with trustworthy ingredients made right in front of everybody. How can you go wrong? You can't, and that brings us to the first up-and-coming competitor, Tijuana Flats.
Tijuana Flats was started by a college student with marketing aimed directly at millennials. It adds a bit of unique twist to fast-casual Mexican by offering serve-yourself hot-salsa bar with 13 different flavors.
Tijuana Flats has no freezer, no microwave, and an always fresh policy. The chain boasts zero trans-fat, 100% hormone-free, zero-lard ingredients along with gluten-free, low-fat, and fat-free options. Between its sane food and crazy marketing, Tijuana Flats is seeing rapid growth. It started out with just six locations in 2001, tripled that number to 18 in 2004, hit 70 at the very end of 2012, and now has over 100, with the plan to grow by 15% annually. It's still a far cry from Chipotle's 1,600 at the moment, but over the long term, Tijuana Flats is one to watch closely.
Who is Moe's, you ask? Moe's refers to the 550 restaurant chain Moe's Southwest Grill, of course. It's the same type of thing as Tijuana Flats and Chipotle Mexican Grill: Get in line, have your burrito/taco/whatever loaded with fresh ingredients, and then take a seat. It boasts all-natural, grass-fed, organic ingredients. Same basic concept, different chain. On the website, the company even brags about not having microwaves.
What's my point? Pay attention, Chipotle investors
Yes, Moe's even has the semi-fancy decor along with the token wise-crack marketing aimed at college students and other millennials. For example, it has on its menu an item called, "Who is Kaiser Salsa" which refers to the bad guy in the movie The Usual Suspects. Its growth, however, has been anything but bad. The first restaurant opened just 14 years ago. A decade later, that number cracked 400 locations in 2010. Today it stands at almost 560 and climbing.
It's not necessarily that Tijuana Flats will grow its 100 locations and take down Chipotle all by its lonesome. Even Moe's Southwest Grill, with 550 locations, apparently isn't doing much to stop Chipotle in its tracks. However, wars are rarely won thanks to a single soldier, and the combination of current and new competitors is something Chipotle investors need to be on the lookout for. Taken all together and growing, they may all very well cut into Chipotle's business, even if just a little, and put a dent in the large premium the stock tends to trade at based on high long-term expectations.
Nickey Friedman has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill. The Motley Fool owns shares of 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.