A Chipotle on every corner!

Chipotle believes it can penetrate the market further with a new, scaled-down format.

Chipotle is, by any measure, already a huge success. It has impressive sales and stock price growth, a unique management culture, a thriving sustainable-food brand, and industry-leading service speed. But despite having grown to 1,700 locations, the casual Mexican food chain hasn’t achieved anything close to the omnipresence of, say, its former owner.

It’s working on that, though.

Chipotle sees room for more than 4,000 of its prototype locations—and believes it can penetrate the market even further with a new, scaled-down format that puts some of the best aspects of its offering in a much smaller package.

Inspired by extremely expensive occupancy costs in Europe and a growing preference for takeout among its American customers, Chipotle is gearing up to bring comparatively tiny, takeout-focused Chipotles to America’s small towns and strip malls. Co-CEO Montgomery Moran described the plan during Chipotle’s July 2014 earnings call:

“We’re looking at some sites right now in the United States as well where these stores will be really, really, really small and where we would have very, very little ceiling… There are a number of reasons why we think that that is a good idea, one of which is that where as we used to be a mostly a dining restaurant 14 years ago, and I’d say about eight years ago, we were 50/50 dining and take-out. Now we’re about two-thirds takeout.”

Smaller-format locations would require less investment upfront than the $800,000 that its regular stores require. Sales would be lower, too—an expected $1.4 million per location, versus a company-wide average of $2.5 million—but that doesn’t mean they would be any less successful than its standard-size locations. “This ‘new A model’ will be much cheaper and more efficient and presumably could not handle the same volumes of bigger stores, but would allow development in many smaller footprints/markets to generate returns not feasible on the higher investment levels,” restaurant industry analysts at J.P. Morgan wrote in a December note to clients.

The company, which already has put a handful of smaller-format locations in Europe, will try this in the US as a “separate, parallel path” as it continues to open full-size locations, according to the analyst report.

Until now, Chipotle mostly has stuck to high-traffic locations that are used to accommodating big crowds at lunch and dinner hours. But it takes a lot of real estate to house all those customers, not to mention all the staff needed to cook the food and keep the lines moving—and not every town can support a location with the kind of traffic Chipotle has grown used to at its full-size restaurants.

Developing a smaller, cheaper format will let Chipotle go after markets it previously left alone, and give it a sense of just how far its thriving brand can expand.

This post originally appeared on Quartz, an Atlantic partner site.

MORE FROM QUARTZ:

The Man Who Brought Us the Lithium-Ion Battery at the Age of 57 Has an Idea for a New One at 92

Facebook is Now More Valuable Than JP Morgan Chase

RadioShack Was the Starbucks of the 80s and Then It Ran Out of Batteries

About the Author

Most Popular

  1. A crowded street outside in Boston
    Life

    Surveillance Cameras Debunk the Bystander Effect

    A new study uses camera footage to track the frequency of bystander intervention in heated incidents in Amsterdam; Cape Town; and Lancaster, England.                            

  2. A woman wheels a suitcase on a platform toward a train.
    Transportation

    In Denmark's Train Dream, the Next Big City Is Only an Hour Away

    A newly revived rail plan could see Denmark’s trains catch up with its reputation for other types of green transit.

  3. A photo of anti-gentrification graffiti in Washington, D.C.
    Equity

    The Hidden Winners in Neighborhood Gentrification

    A new study claims the effects of neighborhood change on original lower-income residents are largely positive, despite fears of spiking rents and displacement.

  4. Life

    Are These the Last Vape Shops in San Francisco?

    The city wants to stop the rise of teen vaping by banning the sale of Juul and other e-cigarettes. It could also mean the end of a particular kind of store.

  5. A photo of a refrigerator at a dollar store
    Equity

    To Save a Neighborhood, Ban a Dollar Store?

    Some local governments hope that more grocery stores will blossom in “food deserts” if the number of discount convenience retailers can be limited.

×