Restaurant growth stories offer investors some of the market’s most promising investment opportunities. Naturally Starbucks (NASDAQ: SBUX) can be singled out as one of the restaurants best growth stories over the years as the company has expanded to close to 20,000 locations today when it only had 3,501 locations in 2000. Today many investors want to jump in on the next big thing and hope to catch the wave of a similar return over a multi-year period.
In a sweet spot for growth
Chipotle Mexican Grill (NYSE: CMG) generates some of the most attractive returns in the restaurant industry. The company has one of the best-in-class store volumes, generating an average of $2.1 million in sales per unit, which results in a 27% store margin. Investment costs are modest relative to revenue — less than $1 million on a cash basis.
Part of the low cost of opening a new unit is due to the lack of necessary inventory, as well as the plain look of the restaurants. Additionally, restaurants use a format where food is cooked in advance and a production line is formed at extremely high traffic areas so that all food resources during peak volume hours are dedicated to throughput and higher sales.