Why big brands like Chipotle are heading to Small Town, U.S.A.

Chipotle is expanding to Small Town, USA. The burrito chain says it will open one-fifth of its new restaurants in places with 40,000 people or fewer.

Tim Powell still remembers when he was younger and a Starbucks finally opened near his hometown in Ohio. 

“We were so happy. We were like, ‘Ah I didn’t care it was, like, 30 minutes away. Ah sweet, I gotta have that coffee,” Powell said.

Powell is a consultant at Foodservice IP. And even today, he said, some chains create this kind of buzz, especially among younger people. He said Chipotle is one of them.

“It’s almost like a lightning rod. You know, it’s not Taco Bell. It’s not the dudes living with their parents in the basement. I mean, this is Chipotle. I’ve got a 15-year-old daughter that spends our money, a lot of it, at Chipotle,” Powell said.

Trendy chains like Chipotle, Domino’s and Cava have been expanding into smaller suburbs and even rural towns, says Morningstar analyst Sean Dunlop.

“To some extent, a lot of restaurants are just following consumers to wherever the consumers are,” he said.

Where they are is increasingly away from cities since the pandemic and hybrid work came into play. That’s created a lot of communities where per-capita the number of restaurants is low. Plus, for businesses, labor and rent cost less in small towns.

“And so on balance, the economics for a lot of these stores are competitive,” Dunlop said.

But it doesn’t mean it’s easy. Alex Susskind, a professor of food and beverage management at Cornell, said hiring is still pretty difficult. And managing supply chains is tricky.

“You need to make sure your trucks can reach those remote locations. And so that takes a lot of planning and rerouting, and you might need additional warehousing,” Susskind said.

Which is especially hard for chains that make most of their food fresh on site.

As for communities? Susskind said chains moving in is a mixed bag. It boosts jobs and brings in more revenue, but takes away from independent businesses.

“It really is a fixed pie. You can’t eat in two restaurants at the same time,” he said.

And with rewards points and other perks, consumers are incentivized to pick the brand name.