Chipotle and Jack: Head to Head
Jon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Recently I’ve had a change of heart over Chipotle Mexican Grill (NYSE: CMG). I used to be a hater. Nowadays I can be caught singing in the shower “I’m a bull, I’m a bull, and I don’t care who knows it!” My transformation has been drastic, but it’s not been without reason. I outlined in an article of mine, why I expect Chipotle to continue to deliver for years to come.
I’ve been confronted by investing fanatics for a different company. It seems that Jack in the Box Inc (NASDAQ: JACK) also has shameless fans. There is no lack of articles toting the future greatness of JB. But interestingly, many Jack in the Box bulls are simultaneously Chipotle Mexican Grill bears. What leaves me dumbfounded is the only category that Jack is better than Chipotle is their ticker is easier to remember. JACK is pretty darn easy.
Regardless of whether or not Jack is a good investment, the point I would like to make is this: anywhere Jack is good, Chipotle is better.
Chipotle 0. Jack 0.
New Markets
Chipotle is spreading like a wildfire. They opened 55 new Chipotles in the 2nd quarter alone. US growth is still happening, but Chipotle is honing in on its global vision of late. The highly anticipated Paris location is finally open. Management wants to try Germany next. Canada and England have already been exposed to the burrito mania.
While Chipotle is getting its passport stamped, Jack is still trying to see our own country. They have only opened restaurants in 20 states. But let's not put them down; they are growing at a good clip. Management is hoping for 35 new locations this year, compared to the 31 that they opened last year. It seems like a small number, so let's restate it. Jack is hoping to open a new restaurant every 10 days. That sounds better. It's good growth.
Jack has some good growth going on, but Chipotle has great growth going on.
Chipotle 1. Jack 0.
Dual Chains
One of the greatest things I believe that Chipotle has going for them is the new ShopHouse Southeast Asian Kitchen chain they are starting up. This endeavor started out last September. It met all of management's wildest hopes and dreams. ShopHouse number 2 is coming your way soon. There may only be plans for one new restaurant right now, but that is a 100% growth plan after only one year.
I thought that Chipotle was the only company with this kind of trick up their sleeve, but as it turns out Jack in the Box can play this game as well. Qdoba Mexican Grill is up, running, and growing at a faster rate than Papa Jack itself. They have over 600 locations now in 42 states. They are growing at a fantastic rate, though not quite as fast as management hoped. Originally they saw between 70-90 new Qdobas opening this year. They have since lowered expectations to 60, which is still solid and is nothing to look down on. While some would see this point I'm making as a 600 to 1 win in favor of Jack in the Box, there are some key differences in these two companies.
Qdoba Mexcian Grill has been around for 17 years now. Shophouse has been around 11 months. Qdoba was started independently and later Jack in the Box shelled out $45 million to buy out the budding business in 2003. I think it was a fantastic move. But, I think Chipotle's choice of having a home-grown second restaurant chain is an even smarter move. Perhaps it is here I shall cite what all Chipotle bulls cite: Chipotle is debt free. By going with a home-grown product, rather than a buyout, they stay debt free and still can experience the joys of being parents of two healthy and growing kids.
Chipotle 2. Jack 0.
Revenue Growth
This is a very simple point to make, so I'll put it simply: Chipotle is growing revenue. Jack is not.
CMG Revenue data by YCharts
Just in case you think I'm playing games with numbers by citing revenues, just take a glance at what these revenue numbers mean for the overall bottom line of the company.
CMG Net Income data by YCharts
Chipotle has seen revenues skyrocket over 140% and net income increase four-fold in the last 5 years. Jack has been barely maintaining in the revenue category, and net income has actually been cut in half over the same 5 year period.
Jack's management is working hard. Don't get me wrong. They are doing a lot of things right. But irregardless of any other factor: Jack's revenue and net income are decreasing, while Chipotle is increasing in both.
Chipotle 3. Jack 0.
Conclusion
The point of this article was not to show what a bad investment Jack in the Box is. Perhaps the case could be made for investing in Jack. But if you could only buy one company, then why not just buy the better one? Chipotle wins the head to head competition. They are proving to be a fantastic investment for the long haul.
thequast has no positions in the stocks mentioned above. The Motley Fool owns shares of Chipotle Mexican Grill. Motley Fool newsletter services recommend Chipotle Mexican Grill and Jack in the Box. 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.If you have questions about this post or the Fool’s blog network, click here for information.
