Research Report

Tenant Profile – Chipotle

Starting operations in 1993 in Denver, CO, Chipotle has become a titan in the fast-casual sector. With more than 2,500 restaurants in current operation in multiple countries, Chipotle is a model for success in fast-casual. Chipotle staffs over 64,000 employees across all locations, showing they are a major player in the food industry and look to continue expanding, notably sharing that they plan to open 140-155 new restaurants by the end of 2019. Over the past year Chipotle has implemented new ways to improve their customer’s restaurant experience including drive-up pickup lanes, in-store pickup shelves and tech-enabled second make lines ensuring more accurate orders. Chipotle has consistently been on the cutting edge of fast-casual dining and continues to break barriers and set new standards for the industry.


Net Lease Overview

Chipotle has grown into a national powerhouse for the quick service restaurant sector since the turn of the century. They are viewed as a desirable tenant beacuase of their investor friendly leases along with a strong corporate guarantee. Typically, they will sign a long term NNN lease, alleviating the landlord of any responsibility for the building and operations. This passive investment allows the landlord to collect consistent cashflow over an extended amount of time. Taking long-term inflation into account, Chipotle leases usually place increases into the rent terms.

As a company that does not franchise, Chipotle conducts extensive research before choosing a new location and corporately trains the new general managers on how to effectively run every-day operations. Another differentiator is that Chipotle takes pride in how their food is prepared and the partnerships with farms from where the food is sourced. Chipotle has always marketed itself as a health-conscious chain and this continues to draw in more health savvyitself as a health-conscious chain and this continues to draw in more health savvy consumers. Consumers have consistently praised Chipotle for their dedication to health, the environment and industry ethics.

Normally these locations will be located in dense areas on highly visible pads that will generate a lot of consumer traffic for lunch and dinner. These locations include regional centers, popular community shopping centers, malls, and places where there is dense retail. Urban Chipotles are normally found in highly populated neighborhoods surrounded by shopping and other fast-casual concepts. This criteria allows each Chipotle location to maximize their profits. With Chipotle signing long term leases with options and intermediate rent escalations, Chipotle remains a solid investment for investors looking for credit tenants with a long track record of success.


Compared to direct rivals, we see Chipotle in the mix between Taco Bell and Panera, but having the top cap rate for leases with at least 10 years remaining. This could stem from longer term leases being located in premium markets such as Florida and California versus the sales with shorter terms.


Compared to the STNL average, we can see Chipotle having a significantly lower cap rate. This shows the strength of the tenant in the sector and overall market.

Traditionally Chipotle has traded between the STNL average and the 10-Year Treasury Rate, leaning closer to the STNL average. In 2018-2019 we see the first cap rate drop for Chipotle in the past 3 years dropping around 21 basis points while maintaining a 300 spread against the 10-Year rates. This stability and stronger public opinion of Chipotle should assist with finance options.


Amanda WillisTenant Profile – Chipotle

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