Tomahawk, WI 10/23/2013 (BasicsMedia) – Chipotle Mexican Grill, Inc. (NYSE:CMG) has opened more than 1,500 new restaurants in the last decade or so. This is quite impressive for a company with a market cap of around $15.70 billion, and enjoying presence in the U.S, Canada, and England. It is heavily dependent on the U.S market for revenue and profits, and this is quite telling bearing in mind that CMG is often quite aggressive with its expansion programs. Some of CMG’s major rivals are Yum Brands Inc as well as Domino’s Pizza Inc. What can we learn from CMG’s latest quarterly results?

CMG’s Third Quarter 2013 Revenues Rise by 18.0%

CMG’s third quarter financial results for 2013 indicate that its revenue increased to $826.9 million, thus representing an increase of around 18.0%. This is not the only area where CMG enjoyed good performances, since the comparable restaurant sales also increased by 6.2% during this financial quarter. The chain-restaurant’s level operating margin fared quite well during this quarter as well, where it improved by 26.8% compared to the similar period in 2012. CMG’s net income of $83.4 million also shows that the company enjoyed profits yet again.

CMG Continued With Its Expansion Programs

Perhaps one of the best lessons we can learn from CMG’s 2013 third quarter financial results is that it did not reduce its expansion activities. The company now boasts of 37 new restaurants that were opened during this third quarter of 2013. This number is expected to rise as the chain restaurant opens new facilities in the remaining months of 2013. Its diluted earnings per share also benefited from all these good news by showing an increase of around 17.2% to settle at $2.66. The financials for this three-month period were quite good for CMG.

CMG May Be forced to Increase Menu Prices

CMG faces a major challenge. Due to its business model, the ingredients it needs to make its mouth-watering and extremely popular dishes are quite expensive. CMG developed a unique food culture, which is quite popular among its clients. CMG is the pioneer across a number of sectors with regard to its unique food culture but in order to maintain these standards, it contemplates raising the menu prices. CMG says that it will limit the increase in menu prices to between 3% and 5%, although this will depend on the location of each of its restaurants.

CMG’s business model and classic dishes continue to be a favorite of many food enthusiasts, and they demonstrate their love by reporting to its restaurants in large numbers. CMG is not your typical fast food restaurant, since it pays attention on the quality of the dishes coming out of its kitchen. I expect the company’s good financials to continue, although this could suffer a hit immediately the new menu prices take effect in mid-2014. Few restaurants can increase menu prices and come out of the whole exercise unscathed, and I hope that CMG is one of them.

Alternatively, instead of increasing menu prices, CMG could also embark on looking for cheaper sources of the food ingredients it needs in order to prepare its dishes. The only problem is that this could compromise on quality, and its clients will be displeased.

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