Many investors have debated whether the better fast-casual restaurant stock Cava Group (CAVA -1.99%) or Chipotle Mexican Grill (CMG -1.33%)Considering that Cava follows Chipotle’s playbook in the Mediterranean cuisine space and is a much smaller company, it’s a debate worth having.

However, the calculation changed after the announcement last week that CEO Brian Niccol would leave Chipotle to take the top job at Starbucks. Niccol was the company’s first successful CEO since the departure of founder Steve Ellis, which brings significant uncertainty to the fast-casual giant now that he’s leaving. Does all this mean investors should ignore Chipotle in favor of Cava?

Cava’s Advantage

Cava remains a founder-led company. Brett Schulman co-founded Cava in 2010, rebranded it from a previously existing full-service restaurant, and opened the first Cava in its current form in Bethesda, Maryland in 2011.

In many ways, Cava seems like a “second chance for Chipotle,” copying the fast-casual concept and emphasis on healthier foods to launch a Mediterranean restaurant chain.

In addition, Cava had only 323 restaurants in the entire U.S. as of April. That’s less than a tenth of Chipotle’s footprint, which included more than 3,500 locations at the end of the second quarter of 2024. Since smaller companies can more easily achieve high percentage growth, this factor seems to play into Cava’s hands.

In addition, when Cava announced its IPO, it unveiled a plan to have 1,000 restaurants by 2032, tripling the current number. I expect rapid growth in the coming years.

Why investors might still consider Chipotle

Still, Chipotle is an established and proven business model with more than 3,500 locations. Additionally, Chipotle plans to expand to 7,000 locations in North America. Although the company doesn’t emphasize its presence outside North America, replicating its success in other countries could push the number of restaurants well over 7,000. In contrast, Cava has not outlined any international plans.

Even though the future leadership of the company is not known in the long term, Niccol has left his successor a strong position. (Scott BoatwrightChipotle’s COO, will serve as interim CEO.) Niccol innovated with Chipotlane and improved the company’s processes, ending the E. coli outbreaks that damaged Chipotle’s reputation and stock price, so the transition to new leadership is very likely to be successful.

Although Chipotle is more established, its stock trades at a lower price than Cava’s. Since it is a newly profitable company, Cava’s P/E ratio will not adequately reflect its valuation. Cava stock trades at a price-to-sales (P/S) ratio of nearly 12. In contrast, Chipotle stock trades at less than 7 times its sales. This factor alone will likely convince some investors that Chipotle has higher return potential.

Ignore Chipotle; buy Cava?

After weighing several factors, Chipotle appears to be the better choice despite the sudden CEO change.

Although Niccol’s departure means uncertainty for Chipotle, he has left the company in the best position for continued growth. In addition, the business model is a proven force with a large footprint and plenty of opportunities to open more locations. In contrast, Cava is earlier in its growth phase, which means there is a higher risk that something could go wrong.

As for the two companies’ stated goals, Cava’s intention to triple its restaurant count to 1,000 is a higher percentage growth rate than Chipotle’s plan of 7,000 North American locations. However, Cava has no stated plan for international expansion. Although Chipotle has not emphasized its small overseas presence, it has locations in CanadaThe United Kingdom, France, GermanyAnd Kuwait, and that speaks for a Potential for major expansion.

Combining this potential with Chipotle’s lower valuation creates a more direct path to profits for investors.