Chipotle reports earnings today after markets close.
The burrito chain continues to report strong traffic trends and open new stores, according to research firm Trefis.
Shares are up by nearly 50% in the past year, and Chipotle is increasingly taking market share from fast food chains like McDonald’s.
In recent years, fast food restaurant growth in the US has slowed down or stalled — largely because of competition from fast-casual chains led by Chipotle, writes Leslie Patton at Bloomberg News.
The burrito chain posted a 9.3% sales gain in 2013. Meanwhile, former parent company McDonald’s saw sales fall by 1.4%.
Here are a few reasons Chipotle is killing traditional fast food.
1. Diners who eat healthier don’t go to burger chains. McDonald’s CEO Don Thompson acknowledged that only a small percentage of customers buy salads, while Burger King killed the lower-calorie Satisfries it introduced in late 2013. Fast-food chains continue to be plagued with a perception their food is heavily processed and full of additives. Meanwhile, Chipotle touts grilled meats and vegetables without antibiotics or GMOs.
2. The menu remains classic. As McDonald’s tacks on new menu items to entice customers, Chipotle has stuck to the same menu since it opened. The menu at McDonald’s has grown 70% since 2007, Bloomberg reported last year. Chipotle does a few things really well, making it easier to execute and reduce customer wait times.
3. Millennials want customised food. Chipotle’s menu items are built around customisation, making it beloved by the younger generations, according to Patton. Meanwhile, McDonald’s and Burger King’s value meals give the perception that options are limited. To appeal to a younger demographic, McDonald’s has been testing a program that lets patrons customise their burgers with toppings like jalapenos and guacamole.
4. Instant gratification. Chipotle has aggressively worked to reduce wait times during peak periods. Meanwhile, McDonald’s is struggling with the longest drive-thru wait times in decades. McDonald’s is attempting to fix wait times by cutting some menu items and adding employees to assist at checkout. But the overloaded menu makes it difficult for operations to run smoothly, Brian Sozzi, chief equities strategist at Belus Capital Advisors, told Business Insider.
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