Americans sure love their nachos and burritos
In almost every town in America, you’re likely to find the same handful of shops and restaurants. Among them are a hardware store, a Walmart, a gas station or two, a few fast-food restaurants like McDonald’s or Wendy’s, and a Mexican restaurant.
Mexican food is as American as apple pie. And like a bag of tortilla chips, U.S. consumers just can’t seem to stop eating it, racking up billions of dollars of sales every year.
In fact, there are roughly 60,000 Mexican restaurants in the U.S., representing approximately 9% of all the restaurants in the country. The big national fast-food spots include Taco Bell, Chipotle, Taco John’s, and Del Taco. And there are regional sit-down restaurants, like Chevy’s, Azteca, and Dos Caminos. And then there are the thousands of small, local, mom-and-pop Mexican places scattered all across the country.
The point is, you don’t need to go far to find a place serving up tacos, nachos, and burritos.
Don’t “Mex” with the business model
There’s a simple reason why there are so many Mexican restaurants in the U.S.—while people really like Mexican food, tens of millions of people either immigrated from Mexico, or are the descendants of Mexican people, and they’ve brought their cuisine with them. Of the estimated 55 million Hispanic people in the U.S., about two thirds, or 36 million people, are Mexican American.
Of equal importance, Mexican food is delicious, nutritious, and relatively inexpensive, especially when you compare dining in a Mexican restaurant with dining at steakhouses or seafood restaurants
At Taco Bell, for example, you can get a taco, a burrito, or even a quesadilla for less than $1. Which may be what helped the chain win enough hearts and minds to be crowned America’s “favorite Mexican restaurant”—though there are many who would dispute the brand’s classification.
Prices and selection vary wildly, of course, from restaurant to restaurant, but that’s yet another element of the Mexican restaurant business which makes it attractive to restaurateurs. Consumers will spend their pocket change on a burrito, or hundreds of dollars—Mexican food can be served as a fine dining dish, or as fast-food.
All told, Mexican restaurants drove $45 billion in sales in 2017 in the U.S., according to industry data. That’s a lot of beans and salsa.
Guac is extra
For American consumers, there’s no shortage of choice when it comes to Mexican food. And while you can always opt for the sub-$1 menu items, much of the industry’s growth in recent years has been in the “fast-casual” segment.
“Fast-casual” restaurants fit somewhere between fast-food and sit-down joints, and typically offer higher-quality food than a fast-food place, but lack full table service. They’re generally a nice place to eat, and consumers are happier to pay more for wood veneers and relaxed atmosphere.
When it comes to fast-casual Mexican restaurants, the list includes chains like Chipotle, Moe’s, and Qdoba—restaurants that have found a sweet spot where customers are willing to spend more for an upgraded product and a setting where they can eat it.
Chipotle is the poster child for this type of restaurant. It started out as a single restaurant in Denver in 1993. McDonald’s purchased a 90% stake in the chain in 1998 when Chipotle had 16 stores, but later divested—or got rid of the shares it owned in the company—in 2006. Now, 25 years later, the company has roughly 2,500 U.S. restaurants and generated $1.27 billion in revenue during the second-quarter of 2018.
But Chipotle’s growth didn’t come easy. The company has had its issues with foodborne illnesses, resulting in crashing stock prices. At one point, the chain had to give away free food to try and win customers over.
While Chipotle has had an up-and-down ride, Americans’ love Mexican food has persevered. In fact, between 2016 and 2017, nearly 700 new Mexican restaurants opened across the country, according to industry data.
And spending on Mexican food continues to increase. The percentage of people spending between $15 and $20 per meal on Mexican food increased to 38% from 26% between 2016 and 2018.
In “queso” you’re interested
You can invest in companies involved in Mexican cuisine—from fast-food to fast-casual—like Chipotle on Stash.