Why Chipotle’s Southeast Asian chain couldn’t make it work

March 16, 2017

By Becky Krystal
https://www.washingtonpost.com/news/going-out-guide/wp/2017/03/11/why-chipotles-southeast-asian-chain-couldnt-make-it-work/?utm_term=.7c03019833f5

All 15 locations of ShopHouse, the Southeast Asian fast-casual restaurant owned by Chipotle, will close on March 17. The closings, first reported by Nation’s Restaurant News on Thursday, left fans distraught.

But it was easy to see the move coming after Chipotle announced in October that it was halting investments in the brand. Instead, the burrito giant’s spinoff aspirations will focus on two other endeavors: Pizzeria Locale and Tasty Made, a pizza joint and a burger place, respectively. “We just didn’t believe that ShopHouse warranted continued investment,” Chris Arnold, a spokesperson for Chipotle, said in an email.

ShopHouse, which opened its first location in 2011 in Dupont Circle, offered customizable rice, noodle and salad bowls inspired by the cuisines of Thailand, Vietnam, Malaysia and Singapore. It represented a glimmer of hope for diners interested in something different and at least marginally more nutritious than what was served at most fast-casual chains.

But selling Southeast Asian cuisine proved to be a losing gamble in an industry dominated by burgers and sandwiches. The top 10 quick-service and fast-casual brands, as ranked by U.S. sales in 2016’s QSR 50, an annual list published by industry publication QSR magazine, don’t include any restaurants serving Asian cuisine. The list is topped by the likes of McDonald’s, Starbucks, Subway, Burger King and Taco Bell.

Even when QSR broke out supposed “ethnic” brands — the label is a bit of a stretch — the results aren’t that impressive. Taco Bell was ranked at No. 5; further down the list are Chipotle (12), Panda Express (22), Qdoba (34), Del Taco (37) and Moe’s Southwest Grill (43). Only one Asian concept made the top 50: Panda Express, a chain perhaps best known for its fried, sticky orange chicken, which is a far cry from ShopHouse’s grilled steak seasoned with fish sauce, or its sweet and sour tamarind vinaigrette.

Those Southeast Asian flavors were unfamiliar to many Americans. Darren Tristano, president of market research firm Technomic, said that when the brand launched, he believed the biggest challenge would be getting consumers to see that Southeast Asian cuisine wasn’t outside the norm. “When your core focus is on that, it just makes it very, very difficult,” he said. He points to Mexican, Italian and Chinese as the big three when it comes to popular international flavors, while Japanese and Greek make the cut to a lesser extent.

In an interview last year with The Post, ShopHouse brand director and co-founder Tim Wildin said he wanted to work with traditional Asian ingredients, noting that Thai flavors in particular had a universal appeal. He acknowledged there was a bit of a learning curve when customers complained the food was too spicy. But there wasn’t necessarily a need to “Americanize” the food, he said, just a need to communicate better.

ShopHouse probably could have improved its communication in at least one other way, said Sam Oches, editorial director of Food News Media, which produces QSR magazine. He said the brand didn’t do enough to promote itself as innovative and unique, which is ironic given the way Chipotle was able to establish a reputation as a trailblazer in the industry.

ShopHouse was “pretty ahead of the curve,” Oches said, adding that Asian fast-casual restaurants are now increasingly popular with millennials.

In the last five years, several have opened in Washington, including Buredo, SeoulSpice, Maki Shop and Four Sisters Grill. Had ShopHouse debuted now, or even just a few years later than it did, it would have entered a market still lacking immediate competitors but perhaps one more receptive to its food. Oches expects that 10 or 15 years from now, the top 10 quick-service brands may not look too different from today, but the rest of the list will likely include more concepts serving Asian cuisine, which are just now scaling up to compete.

ShopHouse may also have partially been a victim of Chipotle’s greater struggles. Following outbreaks of food-borne illness at its restaurants, the company has seen a sharp decline in sales. From 2015 to 2016, revenue dropped more than 13 percent, to $3.9 billion, according to the company’s most recent earnings report, released last month. The decrease in net income was staggering, from about $476 million in 2015 to around $23 million in 2016. “It’s startling how far their fall from grace has been,” Oches said of the brand he described as once being the most bankable restaurant company in America.

[A year after food safety scares, Chipotle has a new set of problems]

Jettisoning ShopHouse may be at least one way the burrito chain is attempting to trim the fat and refocus on its core business, especially considering that, at the time the company announced it was pulling back on ShopHouse, Chipotle chairman and chief executive Steve Ells said that the concept “was not able to attract sufficient customer loyalty and visit frequency to make it a viable growth strategy.”

While ShopHouse only launched a small family of locations, the expansion might have actually made success more difficult to achieve, Technomic’s Tristano said. ShopHouse may have worked best as a single location or limited regional chain, he said, especially as the fast-casual market matures, with possibly not enough customers to go around.

Instead, the brand was diluted between two coasts, with eight locations in the Washington area, five locations in California and another two around Chicago. Had it been able to establish itself as a major player with good recognition in one region, it could have performed better, Tristano said.

But the locations also speak to the demographics that prompted Wildin to pick Washington for the first ShopHouse: urban, diverse, young professionals. Limited appeal, in other words, was baked into the concept before it was barely off the ground.


Joseph W. Rogers, a Founder of Waffle House, Dies at 97

March 8, 2017

Joseph W. Rogers, a founder of Waffle House, the restaurant chain that achieved a kind of cultural renown with its no-frills menu, attentive service and round-the-clock hours, died on Friday in Atlanta. He was 97.

The company announced his death on Monday. Joe Rogers Jr., who succeeded his father as chief executive in the late 1970s and remains chairman and controlling owner, said the elder Mr. Rogers died after having dinner with his wife of 74 years, Ruth, earlier in the evening.

Mr. Rogers and an Atlanta neighbor, Tom Forkner, founded the restaurant in 1955. At the time, Mr. Rogers was a senior official at a restaurant chain called Toddle House. Mr. Forkner was a real estate investor. The two were eager to own a restaurant in their neighborhood.

Even after starting the restaurant, Mr. Rogers kept his day job at Toddle House and moved to Memphis when he was promoted to vice president. But in 1961, frustrated that the company did not allow employees to acquire an ownership stake, he returned to Atlanta and devoted himself to Waffle House full time.

“If Toddle House had offered ownership to the management team, there never would have been a Waffle House,” Joe Rogers Jr. said in a phone interview.

Mr. Rogers and Mr. Forkner expanded the chain to about 400 restaurants by the late 1970s. Today, there are nearly 1,900 Waffle Houses in the United States, primarily in the Southeast, often along interstate highways. Of these, about 80 percent are company-owned. The rest are franchises.

Borrowing much from his previous employer — down to the waffle recipe, his son said — Mr. Rogers made Waffle House into a success in part by paying meticulous attention to customers, a management philosophy he imparted throughout the chain.

“I’ve walked into restaurants where workers are on the telephone calling, looking for an elderly customer who hadn’t been in in a while,” Joe Jr. said. “So it was all about the whole personal experience, relationships.”

Famously open 24 hours a day, seven days a week, the restaurants have been used by at least one Federal Emergency Management Agency official to help gauge the severity of natural disasters.

W. Craig Fugate, the FEMA administrator in the Obama administration, applied what he called “the Waffle House test.” If the local restaurant remained open after a hurricane, for example, it meant that power and water were very likely available.

Waffle House, a privately held company, had sales of a little more than $1 billion in 2015, making it the country’s 47th largest restaurant chain, according to estimates by Technomic, a restaurant industry consulting firm in Chicago.

Darren Tristano, Technomic’s president, attributed the chain’s success to its relatively small selection of highly “craveable” offerings and its unpretentious diner-style layout.

Rivals like International House of Pancakes have significantly altered their menus over the years, he said, but Waffle House has remained relatively faithful to its original model, allowing generations of adults to dine in roughly the same setting they did as children.

“This is something that’s very nostalgic,” Mr. Tristano said. “They’re true to their brand.”

Waffle House did not escape the ferment of the civil rights era, and it was the target of discrimination lawsuits in later years.

In an interview with The Atlanta Journal-Constitution in 2004, Mr. Rogers acknowledged that African-Americans had not patronized the restaurants early on.

But when civil rights protesters arrived outside a Waffle House in 1961, he said, he responded by asking them inside to dine.

“We actually accommodated everybody,” said the younger Mr. Rogers, who worked for his father at a nearby Waffle House at the time. “A lot of people have a stereotypical view of the South, that it was total segregation. That wasn’t the case.”

He added that African-American civic leaders expressed gratitude to his father for keeping restaurants open amid the rioting in many cities after the assassination of the Rev. Dr. Martin Luther King Jr. in 1968.

Still, in subsequent decades, workers and customers filed numerous lawsuits alleging sexual harassment and racial discrimination.

“I unearthed a policy of staffing restaurants on the basis of demographics,” said Keenan R. S. Nix, a lawyer who in the 1990s and early 2000s litigated several discrimination cases brought by employees and customers. One client alleged that the company had sought to cut back on the number of black workers in restaurants serving predominantly white customers.

Mr. Nix credited the company with changing its policies after these cases, some of which produced confidential settlements that he said “served the ends of justice.”

Joe Rogers Jr. said any policy changes at the company were not a response to litigation but part of a longer-term evolution. “Our law firm told us when they looked at all these things, ‘You’ve got to design better execution systems,’” he said. “It’s the growing pains of a big business.”

He blamed episodes of bias on “rogue employees” whom the company was not able to sift out when hiring.

Joseph Wilson Rogers was born in Jackson, Tenn., on Nov. 30, 1919, to Frank Hamilton and Ruth Elizabeth DuPoyster Rogers. His father was a railroad worker who lost his job during the Depression.

After high school, Mr. Rogers learned to pilot B-24 aircraft in the Army and trained other pilots.

Besides his wife, the former Ruth Jolley Rogers, and his son Joe, he is survived by another son, Frank; his daughters, Dianne Tuggle and Deborah Rogers; nine grandchildren; 15 great-grandchildren, and one great-great-grandchild.

Mr. Rogers remained involved with Waffle House into at least his late 80s. Most days he would spend several hours at the company’s headquarters in Norcross, Ga.; other times, he would show up at restaurants and mix with the customers.