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What is Chipotle’s location footprint across the United States?
Where have the been growing over the past 5 years?
Is the location strategy changing and what’s next?
We’ll be touching on location strategy, market segmentation, and growth strategy.
Chipotle is a fast-casual restaurant brand serving burritos, bowls, and other Mexican-inspired dishes. They’re a household name with over 3,000 US locations.
I’ve always been surprised at how they can deliver meals that - to me - are fresher and cleaner than competitors at a lower price point.
Now, in addition to being a customer, I wanted to get into the data to peak under the hood and put words and numbers behind their US market strategy.
This week we’re looking at the analytics behind Chipotle’s location strategy, how it’s been changing, and what it might look like going forward.
Where They Are
Chipotle is a mass-market brand and as such, the concept works across a variety of market segments (compared to, say, a sweetgreen that is primarily geared toward dense cities).
The top 10 markets skew toward the highest population areas, but this doesn’t necessarily tell the full story.
Because Chipotle operates across so many distinct market segments, one categorization like city-centric or suburban can’t fully capture their market profile.
To better understand their footprint, we developed a custom market segmentation by zip code:
Tier 1 Urban: Largest and densest places in US (e.g. NYC)
Tier 2 Urban: Large and dense places but more spread out & less “city walkable” (e.g. Phoenix)
Heavy - Moderate - Light Suburban: Varying levels based on the analyzed factors
Rural: Low density
How does Chipotle’s footprint distribute across these segments? How does the market strategy differ between them?
Below is an example of zip code classifications around Boston and Chipotle locations. Note how Boston proper is Tier 1 Urban, nearby Cambridge is a Tier 2 Urban, and we move into different levels of Suburban further out. The categorization isn’t perfect, but it goes beyond traditional “urban area” Census reporting levels.
Based on this categorization, we found that the most Chipotle locations are in Heavy Suburban areas. This is partially a function of following the population. About 34% of the population lives in these zip codes, the highest of any category.
To me, this chart speaks to the ability of the brand to connect across market segments. Its presence in both urban and suburban areas demonstrates its mass-market price point and appeal.
This classification also has a direct impact on location strategy. When building location density, how far apart do you place stores based on the area around them? People might go a couple blocks in a city but will drive 10 minutes in a suburb.
Efficient and effective market planning will account for this.
We looked at the distance from one location to the next closest location segmented by geography classification. We found that stores are typically less than a mile apart in Tier 1 Urban areas and escalate to almost 25 miles in Rural areas.
Tip: The chart below is interpreted as the median distance from a location in a Tier 1 Urban zip code to the next closest Chipotle location is 0.74 miles.
Consider the area around San Francisco as a tangible example. There are 8 locations in Tier 1 Urban that average 0.65 miles from the next closest location.
Moving across the bay the locations start to spread out in the Tier 2 Urban and Heavy Suburban areas.
Notice how the areas tagged as Moderate Suburban and Light Suburban have nearly no locations in them, and when they do, they’re much further to the next closest store. This points to a targeted and efficient location strategy.
Broadly speaking, Chipotle is everywhere that people are. They’re in both downtown urban areas and neighboring suburban areas.
The location strategy is representative of a mass-market product that emphasizes convenience - people will buy if it’s in the right place but are unlikely to go very far out of the way to get it. In the highly competitive fast-casual market, location strategy is critical to get right.
We know where they are today, but how has the footprint been changing over time? Do new locations look the same as existing ones?
Location Growth
For currently open stores (excluding stores that have closed), we see steady growth throughout the 2000’s and 2010’s. The consistency of location growth is impressive.
Over the past 15 years, growth accelerated, dipped near 2018, and re-accelerated during the pandemic.
Suburban Shift
Stores opened in 2019 or later are shifting more suburban. These stores are much more likely to be in Moderate and Light Suburban areas than stores opened before 2019.
Location growth is happening in newer markets like Roanoke, VA, Greenville, SC, Nashville, and Salt Lake City (>50% of locations are new since 2019 and 6+ total locations) and existing markets like New York City, Cleveland, Chicago, and Los Angeles (20+ new locations since 2019 and 80+ total).
This shift is well-aligned with recent migration patterns and hybrid working norms that are increasing the suburban daytime population. The population moved away from dense cities during the pandemic - and many have stayed away - causing brands to chase growth into the suburbs.
Store Type & Amenities
Moving to the suburbs allows the brand to leverage different store formats. About 50% of locations opened in 2019 or later are Freestanding locations compared to 16% of locations opened before 2019.
Chipotle - like many in the fast-casual space - is leveraging this space and location type to increase its drive-thru availability. It now has 622 US locations (19%) with Chipotlanes, its version of a drive-thru.
This number is rapidly accelerating. The percentage of stores opening with a Chipotlane increased from <1% in 2017 to 41% by 2019 and >80% each of the past 3 years. The brand has stated unequivocally that this is a core part of its locations going forward.
What Comes Next
Chipotle has high growth ambitions - increasing from ~3,100 stores to 7,000 - and has found that communities with a population of 20,000-100,000 have been generating high returns on investment.
Growth in small-to-midsize communities will continue to be a viable path going forward because the number of markets in this segment is high (compared to, say, high-income urban areas that are valuable but limited). Chipotle’s ability to move “down-market” in terms of market size is a key enabler of growth
We’ve written about how sweetgreen’s inability to move down-market will inhibit location growth simply because there aren’t enough high-end locations to support its goals of 1,000 stores.
Chipotle, on the other hand, has the price point, speed of service, brand recognition, and capital to make this expansion.
Chipotle has found the sweet spot in the fast-casual market. Their ingredients are cleaner and fresher than competitors (or, at least, I perceive them to be), their price is cheaper than most other brands, and their locations are convenient.
The brand seems well poised to continue its growth both in terms of densifying urban areas and pushing into new, smaller communities. Their ability to profitably operate in communities of relatively smaller size gives them an advantage over competitors and they may even face less competition in those areas.
I’m a semi-regular customer and will continue to be, and now I’ll also be tracking what their growth looks like to live up to the ambitions of doubling their store count across the country.
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