Biting into the Fast Casual Craze

  • Intro
  • History
  • Universe
  • Chipotle
  • Bulls
  • Bears
  • Conclusion/Recommendation


If you’re a corporate bro or just a casual culinary enthusiast, chances are you have the same handful of food chains you rotate through for lunch. Fast casual restaurants have taken the world by storm during the 21st century. After all, it’s hard to beat the delicious, high-quality food at a reasonable price, and the convenience of a quick-service restaurant. These days it’s hard to walk a block in any major business district during lunch, be it Midtown or the Loop in Chicago, and not see the likes of Sweetgreen and Chipotle lining the streets.

Just when fast-casual restaurants were hitting their stride, the Covid pandemic threw a curveball and changed the game. No longer could these restaurants rely on the steady stream of in-person customers, especially in areas that became deserted ghost towns.

But fast-casual chains adapted and turned to digital platforms, loyalty programs, and other innovative concepts to reach consumers. And while some may have doubted the future of restaurants, it seems these fast-casual chains are proving to be a home run in the game of survival.


While it might seem like it’s been around forever, the fast-casual industry is a relatively new concept. The fast casual industry in the United States has its roots in the early 1990s, when a number of restaurants began to emerge that offered a higher quality of food and service than traditional fast food chains, but at a similar price point and with a similar level of convenience. These restaurants, which came to be known as fast casual, were typically more upscale than traditional fast food chains, and often featured open kitchens, healthier ingredients, and more creative menu offerings.

One of the early pioneers of the fast casual industry in the United States was Chipotle Mexican Grill, which was founded in 1993 in Denver, Colorado. Chipotle was one of the first fast casual chains to focus on using high-quality, fresh ingredients and cooking techniques that emphasized authenticity and flavor.

Other early fast casual chains included Panera Bread, which was founded in 1987 and focused on artisan breads and sandwiches, and Noodles & Company, which was founded in 1995 and specialized in Asian-inspired noodle dishes.

As the fast casual industry began to grow in the late 1990s and early 2000s, many other restaurants began to enter the market, including Five Guys Burgers and Fries, Shake Shack, and Qdoba Mexican Grill. These chains, along with Chipotle, Panera, and Noodles & Company, became some of the most popular and successful fast casual chains in the United States.

In recent years, the fast casual industry has continued to evolve and expand, with new chains and concepts emerging that focus on everything from organic and locally sourced ingredients to global cuisines and plant-based options. Today, the fast-casual industry is a significant and growing segment of the restaurant industry in the United States, with many popular chains and thousands of locations throughout the country.


Here is a quick rundown of some of the most popular fast casual chains in the United States.

  1. Chipotle Mexican Grill ($CMG): Known for its burritos, bowls, and tacos made with fresh, organic ingredients. The chain prides itself on using high-quality meats and produce, and it has a strong commitment to sustainability and environmental responsibility.
  2. Panera Bread (Private-Equity Owned): This chain is known for its artisan breads, sandwiches, salads, and soups. Panera is popular among health-conscious consumers, as it offers a wide variety of menu options that are made with whole grains and fresh, natural ingredients.
  3. Shake Shack ($SHAK): This chain is known for its premium burgers, hot dogs, and milkshakes. Shake Shack is popular among young adults and millennials, and it has a casual, laid-back atmosphere.
  4. Five Guys (Privately Owned): Five Guys is a popular fast casual chain known for its burgers, fries, and hot dogs. The chain is known for its simple menu and focus on quality ingredients, including fresh beef and hand-cut fries.
  5. Subway (Privately Owned): Subway is the largest fast-food restaurant chain in the world. Subway is known for its sandwiches, salads, and subs made with fresh ingredients. The chain is popular among health-conscious consumers, as it offers a wide variety of menu options that are low in calories and fat. Subway also offers a variety of vegetarian and vegan options.
  6. Sweetgreen ($SG) is a fast-casual restaurant chain that specializes in serving healthy, farm-to-table salads, bowls, and grain bowls. They source their ingredients from local farmers and use sustainable practices, such as composting and recycling, in their restaurants. Sweetgreen offers a variety of options, including vegetarian, vegan, and gluten-free options.
  7. Cava (Privately Owned): is a Mediterranean fast-casual restaurant chain that specializes in serving customizable bowls, salads, and pitas. They use high-quality, fresh ingredients and offer a variety of options, including vegetarian, vegan, and gluten-free options.
  8. El Pollo Loco ($LOCO) is a fast casual restaurant chain that specializes in Mexican-style grilled chicken. They offer a variety of menu items such as chicken burritos, tacos, salads, and quesadillas.
  9. Noodles & Co. ($NDLS) is a fast casual restaurant chain that serves a variety of noodle-based dishes from around the world. They offer menu items such as spaghetti, mac and cheese, pad thai, and zucchini noodles. They also offer a variety of soups, sandwiches, and salads.


Industry Bulls:

  1. Mobile platforms: The Covid-19 pandemic changed the way customers interact with fast-casual restaurants. With more and more customers able to place orders from their homes or offices, the rise of online ordering favors fast-casual chains and strives to build a more consistent customer base. 
  2. Growing demand: The fast casual restaurant industry is growing rapidly, driven by consumer demand for convenient, high-quality food at a reasonable price.
  3. Demographic shifts: The rise of the millennial generation, with its preference for healthy, convenient and customizable options, is driving the industry's growth.
  4. Low barriers to entry: Fast casual restaurants typically require less capital investment and have lower overhead costs than traditional full-service restaurants, making them a more accessible option for entrepreneurs.
  5. Online ordering and delivery: The growth of online food delivery platforms such as GrubHub, DoorDash and Uber Eats, has made it easier for fast casual restaurants to reach new customers and expand their market.
  6. Brand loyalty: Fast casual restaurants are able to build a loyal customer base through consistent quality, good customer service and unique menu offerings.

Industry Bears

  1. High competition: The fast-casual restaurant industry is highly competitive, with many established players and new entrants vying for market share. This can make it difficult for new businesses to gain a foothold and generate significant returns on investment.
  2. Rising labor costs: The fast-casual restaurant industry is labor-intensive, and labor costs are on the rise due to minimum wage increases and increased pressure to provide benefits to employees. This can put pressure on profit margins and make it more difficult for businesses to generate returns on investment.
  3. Volatility in consumer demand: The fast-casual restaurant industry is highly dependent on consumer demand, which can be unpredictable and subject to fluctuations. Economic downturns or changes in consumer preferences can have a significant impact on sales and profitability.
  4. High startup costs: Starting a fast-casual restaurant requires significant capital, including costs for equipment, inventory, and real estate. These costs can make it difficult for new businesses to generate returns on investment in the short term.
  5. Difficulties in scaling: The fast casual restaurant industry is highly dependent on location and foot traffic. This can make it difficult for businesses to expand and scale their operations, which can limit potential returns on investment.

Chipotle Mexican Grill, Inc. ($CMG)

When Americans think of fast-casual, Chipotle is almost always near the top of the list. Chipotle is a great case study to examine how fast-casual restaurants have come to dominate the restaurant scene over the past 25 years, as well as provide a lens for where fast-casual chains may be headed.

Chipotle is an ideal model for the fast-casual industry for a few key reasons. First and foremost, Chipotle has the scale and brand recognition that has provided a great model for other fast-casual chains to follow. Chipotle’s large scale also provides protection against any industry trends. For example, while Sweetgreen’s stock was down 60% as its locations in central business districts took a hit with remote work, Chipotle emerged relatively unscathed.

The first Chipotle restaurant opened in Denver, Colorado in 1993. Chipotle was founded by a chef who wanted to create a fast-casual concept that combined high-quality ingredients with a unique dining experience. The restaurant quickly became popular for its fresh, flavorful food and its commitment to using natural and organic ingredients.

Over the next several years, Chipotle expanded rapidly, opening new locations across the United States. In 1998, the company went public, and by 2005, it had more than 500 locations.

Today, Chipotle has over 2,700 locations worldwide, and it remains a popular destination for those looking for fresh, flavorful Mexican-inspired food.

Chipotle changed the fast casual industry in several ways:

  1. Focus on quality ingredients: Chipotle was one of the first fast casual restaurants to focus on using high-quality, fresh ingredients and sourcing them from sustainable and responsible sources. This set a new standard for the industry and led to more restaurants emphasizing their use of fresh, natural ingredients.
  2. Transparency in food preparation: Chipotle was also one of the first fast casual restaurants to be transparent about their food preparation methods, with ingredients and cooking processes visible to customers. This helped to establish trust and build a loyal customer base.
  3. Customization: Chipotle allowed customers to customize their meals, which was unusual for fast casual restaurants at the time. This made the experience more personal and allowed customers to tailor their meals to their preferences.
  4. Marketing: Chipotle’s marketing campaigns were also innovative and effective in reaching a wide audience. Their “Food with Integrity” campaign, which emphasized their commitment to using high-quality, sustainable ingredients, resonated with customers and helped to establish the brand as a leader in the fast casual industry.
  5. Expansion: Chipotle's expansion was rapid and successful. Chipotle was able to open more than 2,000 locations in the United States, making it one of the largest fast-casual chains in the world.

Chipotle's focus on quality ingredients, transparency, customization, marketing, and expansion led to a shift in the fast-casual industry towards more emphasis on quality, sustainability, and personalization.

Chipotle revolutionized online ordering in the fast-casual industry by introducing a seamless and user-friendly online ordering platform. The company made it easy for customers to order food online, customize their meals, and pay for their orders through the company's website or mobile app. This made the ordering process quick and efficient, allowing customers to skip long lines and wait times at the restaurant.

Additionally, Chipotle's online ordering system allowed for easy integration with third-party delivery services, such as Grubhub and Uber Eats, which made it even more convenient for customers to order food from Chipotle without ever having to leave their homes.

Chipotle's online ordering system also allowed for easy tracking of orders, providing customers with real-time updates on the status of their orders and estimated delivery times. This helped to ensure that orders were delivered on time and to the correct location.

Chipotle's online ordering system has set a new standard for fast-casual restaurants, and many other companies have since followed in Chipotle's footsteps, introducing similar online ordering platforms to improve the customer experience.

Chipotle Bulls

  1. Strong brand recognition: Chipotle has a strong brand reputation and is well-known for its high-quality, responsibly-sourced ingredients.
  2. Growing demand for fast-casual dining: The fast-casual dining segment is growing in popularity, and Chipotle is well-positioned to capitalize on this trend.
  3. Digital innovation: Chipotle has been investing heavily in digital innovation, including online ordering and delivery, which has helped to drive sales and increase customer loyalty.
  4. Diversified revenue streams: Chipotle has diversified its revenue streams by expanding into new markets, such as international locations, and by introducing new products, such as queso and chorizo.
  5. Strong financials: Chipotle has a strong financial position, with consistent revenue growth and a solid balance sheet. This gives investors confidence in the company's ability to continue to grow and succeed in the long-term.
  6. Social Responsibilities: Chipotle is known for its commitment to sustainable and socially responsible practices, which can appeal to socially conscious investors.

Chipotle Bears

  1. High Valuation: Chipotle's stock is currently trading at a high valuation, which means that there is a lot of expectation built into the stock price. For example, Chipotle's P/E ratio is above 40, which is multiple times higher than its peers. Chipotle also has an expected annual growth rate of free cash flow per share of 17%, which seems aggressive to some analysts. This means that there is a higher risk of a price drop if the company doesn't meet those expectations.
  2. Food Safety Concerns: Chipotle has had multiple food safety incidents in the past, which has led to a loss of customers and a hit to the company's reputation. This could lead to long-term damage to the company's brand and financials.
  3. Increased Competition: Chipotle faces increasing competition from other fast-casual restaurants (like Dos Toros in NYC, Qdoba, etc.), which could lead to a decline in sales and market share.
  4. Dependence on a Single Concept: Chipotle is heavily reliant on its Mexican-inspired menu, which makes the company vulnerable to changes in consumer preferences.
  5. Labor Shortages: Chipotle may face labor shortages which could lead to higher labor costs and potential operational disruptions.


Chipotle's stock is down 20% from its September 2021 high (the S&P 500 down 8% during the same time). But over the past few years, Chipotle has been fine-tuning its online ordering system and bringing in more stable revenue. 

There’s no doubt Chipotle has the brand recognition to weather any storm - but some analysts are starting to wonder if too much growth is built into the stock. Chipotle's P/E ratio above 40, and expected annual growth rate of free cash flow per share of 17% is significantly higher than some of its peers. 

Chipotle has executed very well over the past several years and has typically had a strong growth rate - Chipotle's EPS in Q3 2022 was a 28% increase year-over-year, and its 2021 EPS was an 83% increase. The company rebounded well from its E. coli scandal in 2015 as well as the Covid pandemic. 

While some think Chipotle’s stock has too much growth built in, the company announced on January 20th that it plans to hire 15,000 new employees. Chipotle is betting on itself to an extent and believes it is preparing for its next stage of growth.

Chipotle ticks a lot of the key qualitative boxes investors are looking for (1) brand recognition; (2) sound management; (3) consumer demand, etc. But while some metrics may point to it being overvalued, perhaps the new trends in online ordering will allow Chipotle to outgrow some of its overvaluation. Investing in Chipotle is slightly riskier in the short-term, but we are fairly bullish that the company will remain a major player in the industry for years to come.

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