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The Choking McDonald’s Corporation (MCD) vs. the Rising Chipotle Mexican Grill, Inc. (CMG)

McDonald’s Corporation (NYSE:MCD)‘s stock just hit a 52-week low today in light of its disappointing earnings report whereas Chipotle Mexican Grill, Inc. (NYSE:CMG) seems to be dancing around its all time high. CNBC‘s Jim Cramer reported today on the changing fates of the two companies.

Coca-Cola KO McDonalds MCD

The difference in the business models of Chipotle Mexican Grill, Inc. (NYSE:CMG)  and McDonald’s Corporation (NYSE:MCD) are stark at the very least. Apart from the fact that Chipotle Mexican Grill, Inc. (NYSE:CMG)  is a spinoff of the struggling Golden Arches and operates in the same fast food industry, there are no similarities between the two.

While McDonald’s Corporation (NYSE:MCD) has fallen under the weight of margin pressure and declining sales in Asia of around 14.5% due to corruption in the food chain, Chipotle Mexican Grill, Inc. (NYSE:CMG) has seen margin expansion, shown an abhorrence for food chain and sky seems to be the limit for the Mexican grill Restaurants who seem to be raising prices at will, explained Cramer.

“In fact, if McDonald’s didn’t offer a 3.5% yield or didn’t have an excellent balance sheet, I believe the would be a heck of a lot lower today,” said Cramer.

There are two salient features of Chipotle Mexican Grill, Inc. (NYSE:CMG)’s business model that make it such a growth success story despite price increases and organic beef shortages. Firstly, it’s the controlled growth that its management has decided to pursue. It has opened about 1,700 stores at a multiyear pace instead of opening hundreds simultaneously like McDonald’s Corporation (NYSE:MCD).

Secondly, it’s the knowledgable consumers today who want to eat healthy and will even prefer water at Chipotle Mexican Grill, Inc. (NYSE:CMG)’s restaurants to a calories-ridden soda at McDonald’s Corporation (NYSE:MCD)’s place. This new breed of Internet informed health conscious individuals is only going to grow more as the older generation continues to fade away with time.

On top of all this, Chipotle Restaurants offer their customers a friendly atmosphere and an enthusiastic staff which can’t be said of its ex-parent company. However, given the size of its balance sheet, McDonald’s Corporation (NYSE:MCD can definitely turn around if it focuses its resources in the right direction.

Disclosure: none

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