Chipotle Mexican Grill, Inc. (CMG): One Vital Clue in the Hunt for the Next 18-Bagger

The program, according to co-CEO Monty Moran, recognizes and empowers high performers, and in turn, provides them incentives to form teams of like-minded people. Successful burrito rollers who demonstrate this ability are selected to the position of Restaurateur, where they are given further incentives to build more high-performance teams. Restaurateurs are also given a $10,000 bonus whenever one of their staff becomes a store manager.

The program has proven to be a huge success. According to Chipotle, 97% of store managers are hired internally. The benefits of the program are also clear. In the last six years, Chipotle Mexican Grill, Inc. (NYSE:CMG)’s employee and restaurant count may have increased by almost three times, but its revenue grew by almost five times.

In contrast, its competitor Qdoba, a subsidiary of Jack in the Box Inc. (NASDAQ:JACK), only managed to double its stores during the same period. Recently, Qdoba announced the closure of 67 underperforming stores, putting it further behind Chipotle.

In other words, this elegant approach to managing Packard’s Law has been one of the keys of Chipotle Mexican Grill, Inc. (NYSE:CMG)’s sustained growth. With its Restaurateur Program in place, Chipotle looks to further build on it for its international expansion and new concepts such as ShopHouse.

Does Your High-Growth Company Solve Packard’s Law?

Multibagging returns often require companies to have years of sustained innovation and growth in earnings. You should remember that behind the innovation and growth in earnings for each successful company lies the sustained hiring of good people. Arguably, every company which desires sustained profitable growth over the long term has to solve Packard’s Law.

Looking for it may just give you the vital clue for the hunt for the next multibagger. And in doing so, it may just lead you to the next 18 bagger.

The article 1 Vital Clue in the Hunt for the Next 18-Bagger originally appeared on Fool.com and is written by HL Chin.

HL Chin owns shares of Chipotle Mexican Grill. The Motley Fool recommends Chipotle Mexican Grill. The Motley Fool owns shares of Chipotle Mexican Grill. HL is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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