Chipotle views occupancy costs in England and France as being “super, super high”, a fact that’s encouraging the group to introduce smaller format restaurants with less seating for its rollout.
The group expects to open between 180 and 195 new restaurants during 2014, having opened 89 in the first half, Chipotle revealed at its H1 results yesterday. Around 15% of these will be in emerging markets and the same proportion in new territories.
Asked at a conference call for analysts about plans to introduce new brand formats, co-chief executive Monty Moran said the company is “giving a lot of thought to that”.
“One thing that’s generated those thoughts is the highest occupancy costs that we see in Europe and how it may be prudent for us to take some much smaller pieces of real estate in France or England, where occupancy costs are super, super high.”
Moran said the group, which operates six UK outlets, all in London, would look at smaller designs for the US market too. He pointed to the move away from dine-in restaurants, which used to form the majority of sites but the proportion reduced to about 50% eight years ago and is now about one third.
“We feel good about the idea of going out and building some scrappy restaurants and we will continue to experiment with that in the future,” he said.
Chipotle yesterday reported a 17.3% rise in comparable restaurant sales in the second quarter of 2014, which the group said was one of its strongest comparative periods as a public company.
Q2 revenues grew 28.6% to $1.05bn (£0.6bn) and net income was $110.3m (£64.6m), an increase of 25.5%, as it opened 45 new restaurants in the period. Restaurant level operating margin was 27.3%, a decrease of 30 basis points, and diluted earnings per share was $3.50 (£2), an increase of 24.1%.
Chipotle said: “Comparable restaurant sales growth was driven primarily by increased traffic and to a lesser extent from an increase in average check, which includes the benefit of the nationwide menu price increases that were fully rolled out by the end of the quarter.”
