Chipotle Mexican Grill, Inc. (CMG) & The Mexican Quick Serve Biz

Looking ahead, Fiesta is finally hoping to cash in on the strong popularity of Mexican-style food with its first meaningful expansion of its restaurant network in the past five years. Investors have bid the company’s shares up sharply over the past twelve years, hoping to catch a rising star early in its development. Given Fiesta’s current limited geographic reach beyond Florida and Texas, it has substantial opportunities to increase its base of restaurants across the U.S. While Fiesta’s previous leveraged buyout has saddled the company with relatively high debt levels, strong operating cash flow should allow it to manage its repayments and have ample funds for future growth.

Yum! Brands, Inc. (NYSE:YUM)

Yum! Brands, Inc. (NYSE:YUM)’s Taco Bell unit has long dominated the Mexican-style food category, with a current domestic market share that is estimated at 49%. While the company’s cheap menu options find favor with the value-conscious component of its customer base, people looking for higher quality and healthier choices have moved on to competitors, like Chipotle Mexican Grill, Inc. (NYSE:CMG). In response, Yum! Brands, Inc. (NYSE:YUM) has worked hard to refranchise and rebrand its Taco Bell unit with higher quality ingredients and a chic marketing message. The result has been rising customer counts and profits at Taco Bell, which has offset some of Yum! Brands, Inc. (NYSE:YUM)’s operating weakness in other segments.

The bottom line

Taco Bell launched an industry when Glen Bell opened his first store in 1962. However, the company needs to continue to upgrade its food choices if its wants to keep the portion of its customer base that is looking for good food at a reasonable price. While favorable demographics support a good case for all of the competitors, Chipotle Mexican Grill, Inc. (NYSE:CMG) has the best recipe for success.

The article Taking Stock of the Mexican Quick Serve Biz originally appeared on Fool.com and is written by Robert Hanley.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.