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Einhorn's CMG short


compoundinglife
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http://www.marketwatch.com/story/einhorn-short-orders-chipotle-on-taco-bells-rise-2012-10-02

 

So I agree that CMG is in the nose bleeds and I know David Einhorn does very in depth DD before entering these positions. But one thing that stuck out to me was that he said Taco Bell's new strategy was going to eat CMG's lunch. Not sure I can buy that. The Chipotle I go to in downtown Seattle is full of a bunch people that would not IMO go to Taco Bell for lunch. They are there because CMG uses locally sourced ingredients and is perceived to be very healthy and high quality. I think its going to take alot for Taco Bell to get the same perception. Thoughts? Anyone seen or chowed on the new taco bell menus?

 

 

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Agreed. Taco Bell has no effect on CMG's business and I don't see that changing. I think CMG is a very good company, but it is trading at a pretty steep valuation.

 

CMG's market cap is a 3rd the size of Yum Brands. Yum has over 38,000 total locations & $1.3B in annual profit, while CMG has around 1,316 locations, and $214M in annual profit.

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I was not impressed by Chipotle Mexican Grill here in Toronto.  There are local joints with comparable food (e.g. Quesada) or better food (Burrito Boyz / Burrito Bandidos) at same or lower prices.

 

But, you may not need to be the best.  Look at MTY Food Group (MTY.TO), which owns many second/third-rate restaurant franchises:  Tiki Ming, Sukiyaki, La Cremiere, Au Vieux Duluth Express, Carrefour Oriental, Panini Pizza Pasta, Chick ‘N’ Chick, Franx Supreme, Croissant Plus, Villa Madina, Cultures, Thai Express, Mrs. Vanelli's, Kim Chi, TCBY, Yogen Fruz, Sushi Shop, Koya Japan, Vie & Nam, Tandori, O’Burger, Tutti Frutti, Taco Time, Country Style, Bunsmaster, Valentine, Jugo Juice, Mr. Sub and Koryo Korean BBQ.

 

That stock has gone up like crazy.  Taco Time is so pathetic compared to Taco Bell.  But apparently this company makes a lot of money.  Go figure.

 

2- To be fair, Canada is sometimes an awful proxy for the US.  Restaurant food in the US is much cheaper ($1 chicken mcnuggets... I long for thee...).  Many US companies fail here in Canada (e.g. Sam's Club)... I don't know why that is.

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I think companies like Qdoba and Moe's Soutwest Grill have a better chance to take away business from CMG than Taco Bell. CMG has build a strong brand, but it's a pretty easy business to clone on a local level. We have a Chipotle, Moes and a local company called Burrito Loco in my town, and they're all essentially the same thing.

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There are competitors popping up every day.  Not the Taco Bell's of the world, but here in Cincy, we've had at least three to four gourmet burrito joints open up lately.  Hot Heads, Moe's Southwest, Curritos have all opened up all across the city.

It's these copy cat restaurants that will potentially lead to CMG's troubles, not Taco Bell.

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To follow up on this, I stopped by the Chipotle restaurant near my office today for lunch.  What is usually a line of at least 30 people was about 8. 

Just an interesting note.  I'll be paying more attention to this in the future.

 

The burrito still tasted damn fine to me though.

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  • 2 years later...
  • 4 months later...

CMG expansion with Shophouse and Pizzeria Locale continues.

 

Pizzeria Locale adding locations to Cincinnati and Kansas City.

I love how methodical they've been with teaming up with famed restaurateurs Bobby Stuckey and Lachlan Mackinnon-Patterson

www.pizzerialocale.com

 

Good article for anyone interested:

 

http://www.eater.com/2014/3/20/6260963/how-chipotle-and-pizzeria-locale-pulled-off-their-secret-partnership

 

It's crazy to think about Chipotle's potential. They've barely expanded into International markets. And Shophouse and Pizzeria Locale expansion has only begun.

 

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