TenQ

The Chipotle story

Chipotle runs a largely company-owned burrito chain, with expansion through Chipotlanes testing whether more restaurants and returning customer traffic can offset rising food and labor costs.

Written from Chipotle's own filings with the SEC, and rewritten when it publishes a new earnings release. Updated 2026-09-30.

  • $31.85share price, last close
  • $40.3Bmarket value
  • 21/36TenQ Score checks passed
  • 12.1%growth a year the price assumes

The story in brief

  • Expansion leads growth. In the quarter to June 2026, revenue rose 9.3% to $3.3 billion, driven primarily by new restaurants rather than comparable restaurant sales.
  • Traffic improves, margins shrink. Transactions increased 1.0% in the quarter to June 2026, but restaurant level operating margin fell to 25.2% from 27.4% in the same period of 2025.
  • Repurchases exceed cash generation. Over the last twelve months, shareholder distributions equaled 177.4% of free cash flow, despite Chipotle generating $1.6 billion of free cash flow.

What drives the business

  • Chipotle owns and operates its restaurants throughout the United States, Canada and Europe, earning revenue directly from a menu centered on burritos, bowls, quesadillas, tacos and salads rather than relying on franchise fees.
  • Its Recipe for Growth strategy combines restaurant expansion with menu innovation, Chipotle Rewards, improved hospitality and technology for guests and restaurant teams.
  • At the end of June 2026, Chipotle had 4,186 company-owned restaurants and 15 partner-operated restaurants, with 100 company-owned openings during the quarter.
  • Chipotlanes provide pickup lanes for digital orders and featured in 80 of those openings, while digital sales reached 38.3% of food and beverage revenue from 35.5% in the quarter to June 2025.
  • Comparable restaurant sales increased 2.2% in the quarter to June 2026, combining a 1.2% increase in average check with a 1.0% increase in transactions.

What the price assumes

At $31.85, the reverse DCF implies that free cash flow after stock pay grows 12.1% a year for ten years, using a 10.2% discount rate.

Chipotle delivered 14.7% annual growth in that measure over the last 10 years, but the TenQ check sets a lower bar of 9.3%, reflecting the historical pace slowing halfway to 4%.

The implied growth exceeds that check's bar even as revenue growth over the last twelve months slowed to 7.3% from an annual pace of 11.4% over the last three years.

Value CMG on your own assumptions

What could change the story

  • Food, beverage and packaging costs rose to 29.7% of revenue in the quarter to June 2026 from 28.9% in the same period of 2025, while labor costs increased to 25.0% from 24.7%, showing that menu price increases did not fully offset cost pressures.
  • General and administrative expenses increased to $190.5 million from $172.2 million over those periods, reflecting legal reserves, performance bonuses, wages and restructuring costs.
  • Certain key ingredients come from a small number of suppliers, and in August 2026 Chipotle disclosed that public health authorities were investigating a supply-chain salmonella outbreak affecting several food service retailers in Minnesota and other states.
  • Despite $0 total debt and $678 million in cash and short-term investments, Chipotle failed TenQ's near-term liquidity check at 0.72 against a 1.50 bar, while distributions exceeded free cash flow.
  • Net income declined to $403.5 million in the quarter to June 2026 from $436.1 million in the same period of 2025, even though diluted earnings per share remained flat at $0.32.

What to watch next

  • Management expects comparable restaurant sales growth in the low single digit range for 2026, with transaction growth showing whether gains extend beyond higher average checks.
  • The opening plan calls for 350 to 370 restaurants in 2026, including 10 to 15 international partner-operated restaurants, with around 80% of new company-owned locations featuring a Chipotlane.
  • Subsequent restaurant level operating margins and food and labor cost ratios will show whether improving sales are translating into better restaurant economics.
  • Repurchase spending relative to free cash flow and cash balances remains a key measure after $630.7 million of repurchases in the quarter to June 2026, with $1.7 billion remaining under authorizations at the end of June 2026.

Sources

Back to the CMG report