Must-know: Chipotle Mexican Grill’s testing the catering business

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New business model—catering

Chipotle Mexican Grill (CMG) launched its catering service, which is intended to increase the overall sales and improve operating leverage. Restaurants have been looking to increase the operating leverage by boosting sales during nonpeak hours. For instance, McDonald’s (MCD) and Yum! Brands (YUM) introduced breakfast menus.

Catering business performance

Catering service is intended to serve six to 200 guests. The catering service accounted for 1.6% of the revenue compared to 0.3% a year ago in the second quarter of 2013. The catering business, along with chips and guacamole, contributed to the other half of the 5% increase in average check. The company also reported that its online and fax orders for the quarter reached an all-time high of 6%.

Seasonality in the catering business

According to the company, second quarter has been more positive for the catering business due to graduation parties that happen during the quarter. The company also believes that this trend will “taper off” in the coming years.

An investor can gain exposure to the restaurant industry as a whole by investing in ETFs such as the Consumer Discretionary Select Sector SPDR Fund (XLY) and the PowerShares Dynamic Food & Beverage ETF (PBJ).

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