Moe’s vs Chipotle vs Qdoba & Others: Where People Are Eating?

Remember those fun times when Donald Trump wasn’t President and the world thought that it was impossible for someone who promotes hatred and brags about the size of his hands (and other body parts) to be elected the President of the greatest democracy in the world? Let’s take another stroll down memory lane and remember Marco Gutierrez, a Trump supporter, who said on TV that if nothing is done to U.S immigration policy, there will be “taco trucks on every corner”, a “threat” that was rejoiced on social media, because America likes tacos. And not just tacos, but Mexican food in general. Even President Trump likes it, as long as it’s made in a building that has his name in big gold letters on it.

Happy #CincoDeMayo! The best taco bowls are made in Trump Tower Grill. I love Hispanics! https://t.co/ufoTeQd8yA pic.twitter.com/k01Mc6CuDI

— Donald J. Trump (@realDonaldTrump) May 5, 2016

Now, even though the fate of Mexicans in the U.S. is uncertain, Mexican food is here to stay due to its popularity. Just to give an idea of how much Americans like Mexican food, it’s enough to mention that there are more Mexican restaurants in the U.S than there are Hamburger restaurants. More specifically, in 2014, there were 54,000 Mexican restaurants in the U.S. compared to around 50,000 Hamburger restaurants, according to CHD.  Mexican restaurants in the U.S employ around 880,000 people and the industry is projected to continue it’s growth until at least 2020. In addition, Statista estimated that nearly 234 million Americans used Mexican food and ingredients last year.

One factor that is contributing to the success of Mexican restaurants in the U.S, particularly fast food restaurants, is the large size of the Hispanic minority group in the country. Their median household income is generally below average across the country, which is likely to affect their dining decisions and preferences. In turn, this had a positive impact on Mexican chain restaurants, many of which are operated by large publicly-traded companies like Chipotle Mexican Grill, Inc. (NYSE:CMG), Jack in the Box Inc. (NASDAQ:JACK), Del Taco Restaurants Inc (NASDAQ:TACO), and Yum! Brands, Inc. (NYSE:YUM).

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Having this in mind, we have selected five Mexican-style restaurant chains and their operators: Chipotle Mexican Grill, Inc. (NYSE:CMG), Qdoba, owned by Jack in the Box Inc. (NASDAQ:JACK), Moe’s Southwest Grill, held by private company Focus Brands, Del Taco Restaurants Inc (NASDAQ:TACO), and Taco Bell, owned by Yum! Brands, Inc. (NYSE:YUM). However, the companies that own the brands operate only a portion of the restaurants, while a significant number are held under franchise agreements, even though none of them are considered to be as profitable as other fast-food franchised restaurants like McDonald’s or Subway, which were included in our 14 Most Profitable Franchises compilation.

Chipotle Mexican Grill, Inc. (NYSE:CMG) operates a chain of restaurants located mainly in the U.S, but also has several locations in Canada, as well as Europe. More specifically, according to its latest 10-K report, there were 1,971 restaurants throughout the U.S, 11 in Canada, seven in England, four in France, and one restaurant in Germany. In addition, the company owns some restaurants which serve Asian-inspired cuisine, as well as has an investment in a company that owns some fast casual pizza restaurants. In 2015, the company was in the spotlight for all the wrong reasons, following an E. coli outbreak that affected dozens of people in the U.S and put into question the company’s food safety. The scandal resulted in a huge loss in comparable restaurant sales, which declined by 14.6% in the fourth quarter of 2015. The company is currently trying to restore customers’ faith in the brand, having launched a number of marketing campaigns, including giving away free food. The impact of this campaign on the company’s sales is unclear, but in the third quarter of 2016, Chipotle Mexican Grill, Inc. (NYSE:CMG)’s comparable restaurant sales declined by 21.9%.

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Qdoba Mexican Eats represents a wholly-owned subsidiary of Jack in the Box Inc. (NASDAQ:JACK), which also operates another chain of restaurants under the same name. Jack in the Box acquired Qdoba in 2003 in order to expand its growth and hedge its exposure to the hamburger segment. As of October 2, 2016 (the end of the company’s 2016 fiscal year), Jack in the Box owns 699 Qdoba restaurants in 47 states, the District of Columbia and Canada. Of these, 367 are operated by the company and 332 are franchise-owned. By comparison, the company also has 2,555 Jack in the Box restaurants, including 417 company-operated. For its fiscal 2016, Jack in the Box restaurants registered sales of $789.04 million, while Qdoba restaurants posted sales of $415.50 million.

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Moe’s Southwest Grill is operated by Focus Brands, an affiliate of private equity firm Roark Capital Group. Moe’s was acquired in 2007 from Raving Brands, which founded the company in 2000. At the end of 2015, there were around 600 restaurants in 38 states. Even though it has far fewer restaurants than its larger competitor, Chipotle Mexican Grill, The 2016 Harris Poll EquiTrend named Moe’s Southwest Grill the Restaurant Brand of the Year in the Fast Casual Mexican Restaurant category. According to The Harris Poll, Moe’s registered the highest equity* increase (13%) among all restaurants measured. According to Lisa Recoussine, vice president, Client Solutions at Nielsen, the owner of The Harris Poll, Moe’s success can be attributed to its strategy of aggressive expansion and growth. Moreover, Moe’s is an example of a restaurant that “[has] listened to their customers and responded to their needs,” according to Recoussine.

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*The Harris Polls calculates a brand’s equity by taking into account Familiriaty, Quality, and Purchase Considerations and it is based on surveys across 97,120 U.S consumers.

Del Taco Restaurants Inc (NASDAQ:TACO) operates 544 restaurants in the U.S as of the end of 2015, the majority being located in the Pacific Southwest according to the company’s last 10-K report with the Securities and Exchange Commission. This number includes 297 company-operated and 247 franchised locations. The restaurants offer a dual menu, which includes both Mexican-inspired dishes like tacos and burritos, as well as traditional American dishes like cheeseburgers and fries.

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Taco Bell represents the Mexican-style restaurants that are part of Yum! Brands, Inc. (NYSE:YUM), the company that also owns the Pizza Hut and KFC brands. At the end of 2015, there were 6,400 Taco Bell restaurants, mainly located in the U.S. Out of this amount, Yum! Brands, Inc. (NYSE:YUM) owns 894 locations, while 5,506 restaurants are franchised. Even though the Taco Bell division lags behind Pizza Hut in terms of the number of restaurants, with the latter having a total of 13,600 restaurants (12,969 franchised), it managed to outrank it in terms of revenue, with a figure of $1.99 billion, versus $1.15 billion registered by Pizza Hut. Moreover, the Taco Bell division registered 5% same-store sales growth in 2015, which was the highest across all of the company’s brands for the year. Earlier this year, Taco Bell announced a new product, “Naked Chicken Chalupa”, which replaces a taco shell with fried chicken.

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Disclosure: None