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

March 16, 2017

By Becky Krystal

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.

The remarkable rise of the sushi burrito

March 7, 2016

By Becky Krystal
The Washington Post
March 4th, 2016


Has your sushi been a bit different lately? Maybe longer, pudgier and rolled up with rice, protein and vegetables? You know, kind of like a burrito?

Actually, let’s call a spade a spade. Your sushi isn’t just like a burrito. At an increasing number of eateries, it is, in fact, a burrito. The sushi burrito has officially joined the ranks of such culinary chimeras as the Cronut and the ramen burger, seducing both eager customers and the restaurateurs who want to feed them.

Even as diners eat fewer Chipotle burritos, sushi burritos are gaining traction around the country and in the Washington area. The latest purveyor joined the D.C. scene last week: Seoulspice in NoMa, which sells what it calls the Korrito, a Korean-style burrito wrapped in seaweed and filled with sushi-grade rice, plus a variety of meats, vegetables and sauces.

Eric Shin, a percussionist for the National Symphony Orchestra, said he hit upon the burrito concept almost by accident about two years ago. He’d originally planned to offer kimbap, Korean rolls sliced into bite-sized pieces. Unfortunately — or perhaps fortunately — the machine he bought to cut them destroyed the food. “It was a huge mess,” he said. Amid the disappointment, Shin’s wife was so hungry she just picked up an uncut roll and started eating it like a burrito.

“It just sort of stuck,” Shin said.

Darren Tristano would tell you that the popularity of the sushi burrito is no accident. The president of Technomic, a Chicago-based firm that specializes in food industry analysis, said a number of factors are at play. Primary among them is the form itself. Four years ago, a Technomic concept study predicted “burrito-inspired” would be a common industry trend. Good call.

Sushi burritos have also been propelled by the growth in fast-casual dining and its build-your-own mentality, Tristano said. And with sushi available at almost every grocery store these days, it’s become an accessible and familiar food.

Like so many food innovations, sushi burritos gained traction on the West Coast and are continuing their march across the country. Sushirrito, a five-location California chain that bills itself as “the original sushi burrito concept” debuted in San Francisco in 2011, the same year the Jogasaki food truck hit the streets of Los Angeles; the Kome truck peddles sushi burritos in San Francisco.

“The concept for Sushirrito came to be since we love sushi and wanted it to be more accessible and portable. Burrito-sizing sushi makes a lot of sense given the handheld aspect of it,” said Sushirrito founder Peter Yen. “We weren’t trying to start a trend. We simply wanted to create a new type of food that we like to eat. Hybrid foods only make sense when the foods belong together — just because you can do a mash-up, doesn’t mean you should.”

Even given the wave of sushi burritos in California, lifelong friends and first-time restaurateurs Mike Haddad and Travis Elton weren’t quite sure what to expect when they debuted Buredo in downtown D.C. last summer.

[There’s no way we couldn’t try Buredo’s burrito-size sushi rolls]

“We didn’t know how it would be perceived,” Haddad said. When the doors opened and curious diners snaked down the block, “I said, ‘I think we have something here.'” Something big enough that the duo is close to opening a second location, near Dupont Circle.

Haddad and Elton think they’ve hit on customers’ interest in food that is fresh and healthful.

Darren Norris knows he’s tapped into that market at his almost year-old Maki Shop on 14th Street NW, where evenings will see diners trickling in from CrossFit and other nearby gyms. The owner of the late Kushi in Mount Vernon Triangle — whose six-ounce maki fall somewhere between the size of smaller sushi and sushi burritos — said his “sushi hand rolls” are “a lifestlye product” for on-the-go diners. “I want to be that thing that you could eat three days a week and not feel guilty about it,” Norris said.

Kaz Okochi, the proprietor of Kaz Sushi Bistro near Foggy Bottom, said he thinks size is what attracts people to sushi burritos — “too much rice,” he opined — and worries that diners who eat them will come to his restaurant and wonder why his food isn’t bigger. “They might get disappointed,” the Japanese native said. (Okochi’s own fast-casual, design-your-own sushi endeavor, Oh Fish!, lasted about two years downtown.)

Their size and torpedo shape notwithstanding, sushi burritos have forced us to reconsider what we think of as sushi, especially when it comes to fillings. At Buredo, nori is wrapped around everything from yellowfin tuna or salmon sashimi to tofu and pulled pork shoulder. Seoulspice’s Korean-accented items include bulgogi beef, pickled radish and, of course, kimchi. At Burrito San in Miami, you can have your sushi burrito by way of the Philippines (braised pork, banana ketchup) or India (spiced chicken, potatoes, curry). Denver’s Komotodo not only sells rolls such as the Bee’s Knees (fried chicken, asparagus, bacon, Monterey Jack cheese) and Fish n’ Chips (white fish, slaw, potato chips), but also gives you the $2 option to have your burrito deep-fried. Really, the question these days is not what can you put in a sushi burrito, but what can’t you?

Okochi, though, doesn’t take umbrage with the burrito entrepreneurs’ use of the word “sushi.”

“I’m not saying burrito sushi isn’t true sushi. Sushi is vinegared rice,” he said. Sticklers could even contest whether Okochi’s food is “true” sushi, since the chef said he’s developed his own style at his restaurant.

As long as sushi burritos don’t take over the entire sushi market, he’s fine living side-by-side with them, he said.

In fact, self-professed sushi lovers Haddad and Elton view themselves as “introducing sushi to a new audience,” Elton said.

“It is definitely opening up people’s minds,” Haddad said.

Seoulspice’s Shin said he’d like his Korritos to similarly encourage diners to seek out the kind of traditional Korean food he grew up eating.

Even with more people like Haddad, Elton and Shin getting in on the sushi burrito game, Technomic’s Tristano said there’s still room to grow in the genre. He said reasons why sushi burrito establishments are still less common than their popularity might indicate include food safety issues with sourcing and serving raw fish (although many burritos rely on cooked, fried or even vegetarian fillings) and the fact that the concept is hard to replicate.

“A good sushi burrito can be tricky and sometimes challenging to get the flavors to blend together well in a larger roll,” said Mauricio Fraga-Rosenfeld of Rolls by U in Arlington, which opened in the fall with sushi “ritos” such as the Frida (with roast beef and kimchi) and the Van Gogh (a more traditional pairing of tuna and avocado). “Also, price point may play a part in why others don’t want to risk it. It’s cheaper to do tacos or Mexican burritos. It takes creativity and great quality in product and recipe to get it right, as well as extremely fresh ingredients.”

“I think it’s really difficult to pull off,” Shin said. “Most of the restaurants that open up are afraid to do something different.” Shin said he had to battle through questions and skepticism from his own family (his parents ran a Korean restaurant in Atlanta), some of whose recipes he’s using at Seoulspice. “I caught a lot of s— from my grandma,” he laughed.

When other sushi burrito spots do inevitably open, Shin won’t be too worried. “The more, the merrier,” he said. “I’m so proud of D.C. for embracing ethnic foods and creative ethnic foods in general.”

The Buredo duo was slightly more measured.

“Time,” Haddad said, “will tell on who will last.”

Correction: A previous version of this story misidentified the geographical origins of Jogasaki and the Kome truck. This version has been updated.

Is Chipotle really America’s ’emotionally abusive boyfriend?’

February 25, 2016

Grace E. Cutler
February 18, 2016


Chipotle has been the brunt of jokes and hit by lawsuits, but some experts are predicting positive growth figures as early as the end of the year. (AP)

Chipotle has been the brunt of jokes and hit by lawsuits, but some experts are predicting positive growth figures as early as the end of the year. (AP)

On Sunday, TV host and comedian John Oliver skewered Chipotle over its food safety problems.

The host of HBO’s “Last Week Tonight,” called Chipotle “America’s preferred over-the-counter laxative.”

He ran down a list of Chipotle’s problems over the past months, including E. Coli, salmonella and norovirus outbreaks. He also had a mock promo showing mice scurrying over food and cited a fake report about a live bird living in a Florida Chipotle as recently as January.

About America’s continued love of the chain, Oliver quips:

“They know it’s bad and they want it even more: Chipotle is now officially America’s emotionally abusive boyfriend.”

“That’s harsh,” Darren Tristano, president of Technomic, a Chicago-based food research firm said about Oliver’s comment. “They shouldn’t be left off the hook, but they deserve the chance to really get back on track.”

Over the weeks, Chipotle has been the target of jokes and critics alike –and rightly so.

The Food and Drug Administration reports 55 people were infected with E. Coli alone across the U.S., which resulted in 21 reported hospitalizations. The chain is now the focus of a criminal investigation by the FDA and it has been slapped with a slew of lawsuits. The latest one –this week–is from a shareholder suing Chipotle, alleging the fast food chain made false and misleading statements about its business to investors.

Chipotle isn’t the only food supplier to have a major outbreak of food-poisoning. In the 1993, Jack in the Box had an E.Coli crisis stemming from undercooked beef patties. More recently, Blue Bell ice cream experienced a listeria outbreak, which forced the tubs off of store shelves. Both companies were able to fix their problems and turn their image around.

But Chipotle’s marketing has centered on the idea that it makes a high quality food. These outbreaks, and Chipotle’s problems in tracing the source, puts that question.

As way help its tarnished image, Chipotle earlier this month closed more than 2,000 locations to get employees up to speed on changes to its food safety measures. It also announced a $10 million investment in local farmers that supply ingredients to the food company. To help build some media buzz around these efforts, chains gave away free burritos.

The give-away was “clearly part of a much larger plan to rebuild trust with the customers,” Bruce Hennes, managing partner of Hennes Communications, a crisis communications firm based in Cleveland, told the Cleveland Plain Dealer.

Just how long it will take for the company turn around public opinion is still unclear, but some experts are predicting positive growth figures as early as the end of the year.

Is that’s hard to believe? Tristano says not really, given the “overwhelming” loyalty they have with some customer groups, especially the 18-35 male demographic.

“Our research indicates that American consumers are very forgiving with restaurant brands they are loyal to and have developed both an affinity and frequency with,” said Tristano.

So is Chipotle America’s “emotionally abusive boyfriend?” Sounds like for some, it’s more like a relationship on the mend.

The chips are down for Chipotle, but not for long

February 11, 2016

by Todd Wasserman

In 2013, Chipotle released a haunting animated video featuring a scarecrow that observes the horrors of automated farming. Set to Fiona Apple’s rendition of “Pure Imagination,” the ad went on to win CAA Marketing a Grand Prix at Cannes the following year.

Before the Cannes judges weighed in, though, Funny or Die did with a damning parody changing the tune to “Pure Manipulation” and offering a cynical analysis of Chipotle’s marketing. “We can say what we want. In our world of pure imagination,” went the lyrics. “Just pretend we’re your friends. It’s what we want you to believe.”

Funny or Die’s blistering critique did little to hurt Chipotle’s appeal. Instead, several incidents of food-borne illnesses over the past few months have exposed the chasm between the chain’s brand promise and the realities of running a large-scale restaurant operation. It’s safe to say, at least, that Chipotle won’t be trumpeting its “food with integrity” mantra for a while or criticizing rivals for their factory farming practices.

Because of its healthy financials and sheer size — the company’s market cap is around $14 billion — few expect Chipotle to go the way of Chi-Chi’s, another Mexican chain that closed its doors in 2004 after it unknowingly perpetuated a hepatitis A outbreak that killed four people.

That prognosis for Chipotle, however, assumes that the worst of the crisis is over. Going forward, Chipotle will source more of its food from major suppliers, mooting a prime differentiator from other fast-food chains. The company is also planning to launch a new branding and PR campaign to woo back its Millennial base. Already, a burrito giveaway designed to appease customers after the chain closed its doors briefly Monday for companywide safety meeting has overshadowed concerns about food-borne illnesses, at least on social media. (Reps from Chipotle and agency GSD&M could not be reached for comment.)  Experts predict that Chipotle will likely end up in the clear.

The damage so far
Almost 500 people have gotten sick from Chipotle food since last June, 20 of whom were ill enough to be hospitalized. One such customer, Chris Collins of Portland, Ore., experienced bloody stools and excruciating pain after ingesting E. coli 026 from one of Chipotle’s chicken bowls. At one point, his doctors feared kidney failure. Though that never came to pass, Collins was still weak and “emotionally shaky” in December, according to a cover story in Bloomberg Businessweek.

Such stories have hurt Chipotle’s bottom line and brand image. In early February, the chain said sales at established restaurants fell by a third in January. That news followed a 15% drop in the fourth quarter of 2015. At this writing, the company’s stock price was down about 42% from its 52-week high.

On the brand side, Chipotle’s image has gone from positive to negative. YouGov’s BrandIndex, which surveys 5,000 consumers online every day, rates brands on a buzz score that ranges from -100 to +100, with zero being a neutral position. For most of 2015, Chipotle’s buzz score was around +10, but in January, that sunk to -29 and was at -27 at this writing.

“Chipotle has been playing catch up on this crisis from the start,” says Ted Marzilli, CEO of BrandIndex. “The brand was slow to respond to the initial incident. [It has] just not been able to get out ahead of this crisis, and fairly or unfairly, is paying the price in both public perception and decreased sales.”

The six-month rule
Despite the challenges though, few people see this as a fatal blow to the chain. In a research note to clients, Wells Fargo analyst Jeff Farmer cited previous incidents of food-borne illnesses at other national chains to demonstrate same-store sale declines can be cut in half six months after the incidents occur (assuming that there are no more incidents). Farmer added that same-store sales of such affected companies can also rise 12-15 months after the incident.

In an interview with Campaign, Darren Tristano, president of Technomic, food industry consultancy, cited the same rule. “Our research indicates that in six months, most consumers forget about these food-poisoning issues that come up,” he said.

The Blue Bell Effect
In Chipotle’s case, that’s a pretty safe bet. Jonathan Bernstein, a crisis PR expert, says that Chipotle has built up so much good will with its branding efforts that it can withstand this major PR setback. He compared Chipotle to Blue Bell, the ice cream brand that is so beloved by its fans that many were able to overlook a recent outbreak of listeria linked to the brand.

“Customers’ loyalty to a brand can make a huge difference in overcoming even food illness-related crises and people really stuck with Blue Bell a long time after many would have done the same — given a choice of other ice creams,” he said. “With Chipotle, they created such good will before these problems that although that’s been eroded, it’s not terminal at this point.”

Rebeca Arbona, executive director at Interbrand, unconsciously echoing Funny or Die’s critique, noted that brand loyalty is based on a relationship that mimics real friendship. “You have many impressions and interactions,” she said. “That works in your brain like knowing a person. If you know a person really well and you like them, you’re going to forgive them a lot.” Arbona said that she was surprised, for instance, that Toyota not only weathered its 2009-2010 slew of recalls — issues that were linked to the deaths of some consumers — but has nearly doubled its brand value since then.

That said, Tristano said that it’s likely that some customers will never return to Chipotle. Most will though. “Younger customers will return,” he said. “They tend to be more trusting and more brand loyal. If we look at this, it is clearly a setback for a brand that has had nothing but success in the industry.” The fact that this happened to a brand whose credo is “food with integrity” is ironic, Tristano said, but won’t prompt the masses to label it hypocritical.

Fixing the brand
As Marzilli noted, Chipotle didn’t deal with the crisis effectively at first. Though the company closed 43 restaurants in the Northwest after the E. coli outbreak that affected Chris Collins became public, some 234 customers and employees contracted norovirus at a Simi Valley, Calif., location in August. That same month, some 64 people in Minnesota fell ill from salmonella-tainted tomatoes.

It wasn’t until Dec. 10 that Chipotle CEO and founder Steve Ells appeared on the “Today” show to apologize to customers who had gotten sick from eating at the chain. On the operations side, Chipotle hiredMansour Samadpour, head of IEH Laboratories & Consulting Group in Seattle, to overhaul the company’s food safety efforts. Among the changes: More food will be prepared at commissaries, rather than on site, undercutting Chipotle’s “food with integrity” mantra since often the food won’t be local and fresh. Food will also be given high-resolution DNA-based tests, a measure that will weed out smaller suppliers who can’t afford that expense. On the PR side, Arbona said closing all the stores for a few hours was a good move. “It was a symbolic act,” she said. “They were hitting reset.”

Allen Adamson, a branding consultant, said that Chipotle will have to ditch its previous brand communication, which struck a lighthearted tone and presented a somewhat holier-than-thou image related to food quality. “You want to see the CEO on screen talking about what they’re doing, not an actor saying ‘Trust us,’ ” Adamson said.

Bernstein said Chipotle should focus on transparency, training its personnel in the new food safety protocol and setting realistic expectations “that they’ll do their best to prevent illness, but particularly with norovirus, it’s not always possible.”

What might be fatal, aside from more outbreaks, is any communication that smacks of arrogance. As we’ve seen in recent years, consumers will overlook safety issues, even ones that result in deaths, as long as the company doesn’t talk down to them. As a counter example, Arthur Andersen, the financial consultant, was drummed out of existence after it got caught up in the Enron scandal in 2002. While that was a huge blow, execs at the company exacerbated the damage by behaving arrogantly during a Justice Department grilling. “They got tried in the court of public opinion,” Bernstein said.

Chipotle is unlikely to make the same mistake. “Ultimately it comes down to humility,” Bernstein said. “If they can express sufficient humility, people will forgive them.”

Read more at http://www.campaignlive.com/article/chips-down-chipotle-not-long/1383083#AVGB4yq6reisiIhh.99

Consumer Reports: McDonald’s burger ranked worst in the U.S.

July 8, 2014

McDonalds Sales.JPEG-054a3By Jiaxi Lu  

Copyright 2014, The Washington Post Co.  All Rights Reserved.  

Some major fast-food chains—McDonald’s, KFC, Taco Bell—may find the latest Consumer Reports fast-food survey hard to swallow.

According to the survey, released on Wednesday, more than 30,000 Consumer Reports subscribers say these restaurants’ signature items are the worst in their categories: McDonald’s has the worst burger; KFC has the worst chicken; and Taco Bell has the worst burrito.

Consumer Reports surveyed 32,405 subscribers about their experiences at 65 fast-food and fast-casual chains. This is what they were asked: “On a scale of  1 to 10, from least delicious to most delicious you’ve ever eaten, how would you rate the taste” of their signature dishes?

Habit Burger Grill, In-n-Out and Five Guys Burgers received the highest rating for their burgers, 8.1, 8.0 and 7.9 respectively.  Meanwhile, McDonald’s scored a paltry 5.8 rating.

McDonald’s: Changing menu adds pressure to prep kitchen

McDonald’s has been busy changing its menu in an effort to attract more customers. But despite the novelty items the company promoted in 2013 — Fish McBites in February, McWraps in March, Mighty Wings in September, etc. — the company’s U.S. sales dropped 0.2 percent last year.

During a conference call with investors, McDonald’s chief financial officer Peter Bensen said the company “probably did things a little bit too quickly” in terms of introducing those new menu items. The constant changes and bold experiments with the menu put pressure to the restaurants’ kitchens, which sometimes took too long to fill orders. But new items introduced this year will be welcomed by the chain’s new kitchen equipment. Prep tables will be replaced with larger surfaces that are able to hold more sauces and ingredients.

In 2014, Bensen said, the company will “refocus the core,”  including tried-and-true favorites such as the Big Mac, Chicken McNuggets and the Quarter Pounder, as well as breakfast.

Consumer searches for healthier choices

Research shows Americans are spending $683.4 billion a year dining out, and they are also demanding better food quality and greater variety from restaurants to make sure their money is well spent.

When deciding where to dine, consumers are giving more consideration to food quality, according to the Consumer Reports survey. The restaurant’s location is less important than it was in 2011, when the group last conducted the survey. Diners today are more willing to go out of their way and find tasty meals that can be customized.

“Fast-casual dining in places like Chipotle and Panda Express lets the consumer guide the staff to prepare their meal just the way they like it,” Darren Tristano, executive vice president of Technomic, a food-service consulting firm, said in the report.

While many of the traditional chains have lagged in offering higher-quality ingredients, he said, some food chains — including Chipotle, Noodles & Company and Panera — have been offering meat raised without using antibiotics in animal feed, a feature that attracts consumers searching for healthier options.

Fast-food alternatives: fast-casual restaurants

Chipotle was rated by readers as their top fast-casual restaurant. (Fast-casual restaurants usually serve higher-quality, higher-priced fast food.) According to the survey, McAlister’s Deli gets the award for most improved as the chain’s score increased significantly since the 2011 report.

Top fast-casual restaurants: 

Chipotle Mexican Grill Firehouse Subs Five Guys Burgers and Fries Jason’s Deli Jersey Mike’s Subs Jimmy John’s Gourmet Sandwiches McAlister’s Deli Panera Bread Schlotzsky’s 

Chipotle takes on craft beer with addition of 5 Rabbit

January 14, 2013

CT  biz-5-rabbits-cover 1030 kmFor years, Chicago’s Chipotle restaurants have offered the beers you might expect at a Mexican fast-food place, including Corona, Pacifico and, to satisfy the most American of palates, Miller Lite.

However, in an experiment that could reveal just how far craft beer has moved into the mainstream, a small Chicago craft brewery with a Latin theme is being added to the roster.

Fifteen Chicago Chipotles will carry two beers from 5 Rabbit brewery in the coming week: a simple golden ale called 5 Rabbit that is reminiscent of Corona, and 5 Vulture, a dark ale brewed with chiles and spices that is akin to Negra Modelo.

If sales are brisk, Chipotle said, it could expand 5 Rabbit to its approximately 75 Chicagoland stores, as well as add other craft brands. Chipotle’s foray into craft beer underscores a growing mainstream interest in the craft industry that was perhaps best highlighted by Anheuser-Busch’s 2010 acquisition of Goose Island.

That sale came more than 20 years after Goose Island started as a small brew pub on Clybourn Avenue and spent years building its name and reputation. With interest and sales in craft beer booming, small breweries needn’t wait so long to jump into the mainstream anymore.

 Darren Tristano, executive vice president with Chicago-based research firm Technomic, Inc., said that’s because matchups such as 5 Rabbit and Chipotle have become easy wins for both parties. For 5 Rabbit, the deal means an expanded audience, while Chipotle solidifies its position as an upscale casual restaurant with an edgy product, Tristano said.

 “Craft beer has become a pretty big driver, and especially for a more affluent crowd,” he said. “It’s very well in their customer base to add these beverages.”

Chipotle and 5 Rabbit are a natural fit in several ways: Founded by a Mexican and Costa Rican who moved to Chicago, 5 Rabbit has positioned itself as the nation’s first Latin-themed craft brewery. For the last 18 months, its beer has been made under contract at six breweries in Illinois, Wisconsin and Michigan. But sales were so brisk that 5 Rabbit sped up construction of its brewery in Bedford Park, which should be in production by year’s end. It produced about 2,000 barrels in its first year and aims to make about 6,000 in 2013.

Chipotle will present the small brewery with its largest and most mainstream audience yet. With the added production from the new facility, brewery co-founder Isaac Showaki said they will have no problem keeping up with demand.

Showaki said he spent eight months trying to get the deal done, highlighted by a meeting in mid-July with a company executive at a downtown Chipotle for which Showaki arrived with bottles of 5 Rabbit to pair with the food. He said he was confident going into the meeting — “They spend all this money on liquor licenses, but the stuff on the shelves is boring. Why not bring in more exciting stuff?” — but also amazed to get the attention of a large chain.

“At a place like McDonald’s, it would be almost impossible,” Showaki said. “The first people they would talk to is Anheuser-Busch and Miller.”

That said, Showaki said, “They want to see results. It’s a go, but it’s a trial period.”

Scott Robinson, a Chipotle marketing strategist for national events, said Chipotle restaurants have carried regional craft beer, but that 5 Rabbit will be the first in Chicago.

“I was impressed with their non-traditional approach of taking these Mexican-style beers and adding a whole lot of personality to them,” Robinson said. “We think the downtown Chicago folks will recognize the beers, and that it will bring some excitement.”

Julia Herz, of the Colorado-based Brewers Association, noted that “in the recent past most craft brewers have not had the interest of the chains.”

“It’s a wonderful sign of the times that businesses update their models to include local brands beyond the mass produced,” she said by email.

Showaki said he has no concerns about being perceived as a “sellout” for taking his beer mainstream.

“To go mainstream is nothing negative,” he said. “We embrace it. The more people that enjoy your product, the better for everyone.”

Laura Blasingame, owner of The Map Room who was an early champion of 5 Rabbit, agreed.

“It says a lot when a big firm like Chipotle knows well enough to serve a good beer with its supposedly good food,” she said. “I think it says they’re waking up and the American palate is changing.”

Blasingame said she has no concerns about pouring the same product available at a fast-food Mexican restaurant. In fact, she said, a keg of 5 Rabbit beer sits in The Map Room cooler, waiting to be tapped.

What’s for Lunch? Taco Bell’s New Cantina Bell Menu

October 25, 2012

Business First by Andrew Robinson

I purchased a chicken cantina bowl and a steak cantina burrito. Both were priced below $5, and the location I visited was running a buy-one-get-one-free promotion for the cantina items.

Both the bowl and burrito were comparable in size to what one could purchase at Qdoba Mexican Grill or Chipotle Mexican Grill.

The cilantro rice was flavorful, and I found the steak to be delicious. The chicken in the bowl lacked a little in flavor, but it came with a citrus and herb marinade that mixed well with the corn, chicken, guacamole and lettuce in the bowl.

For $2 more, I added chips and salsa and a medium beverage to my meal.

I don’t see Qdoba’s lunch lines getting shorter and Taco Bell’s getting longer with the menu additions, but I agree with food analyst Darren Tristano, who, in an interview with American Public Media’s “Marketplace” program, said he expects Taco Bell’s customers “to move up a rung, spend a little bit more, increase their check average and benefit the chain overall.”

Nancy Luna, a food reporter for The Orange County Register, even gave Taco Bell’s cantina burrito the nod over Chipotle’s.

I wouldn’t go as far as Luna in saying that Taco Bell’s burritos are better than Chipotle’s, but what I had at Taco Bell on Thursday certainly was an upgrade from Taco Bell’s familiar tacos, burritos and other items.

The Cantina Bell menu has been in the works since October 2010, and Taco Bell, a subsidiary of Louisville-based Yum Brands Inc. (NYSE: YUM), has worked with chef Lorena Garcia to develop the menu, which also features guacamole and a number of salsas.

It will be interesting to see how the menu does in the Louisville market. Qdoba already has a strong hold on the market, with 13 locations, according to the company’s Web site, and Chipotle is expected to open a location downtown.

Taco Bell May be Taking on Chipotle with ‘Cantina Bell’ Menu

July 9, 2012

By Rob Neill, June 8, 2012, 7:43 am

First it was the cola wars, then the beer wars, and then the burger wars (OK, maybe not exactly in that order). Now let the burrito wars begin.

Taco Bell fired a salvo against Chipotle Wednesday, announcing a new “Cantina Bell” menu that seemed to take some cues from its pricier rival. The four new menu items would include ingredients new to Taco bell: Black beans, cilantro rice, citrus and herb marinated chicken, “new” guacamole, fire-roasted corn salsa, creamy cilantro dressing, and Pico de Gallo.

New menu items featuring the ingredients include bowls and burritos. The company is suggesting franchises sell chicken or veggie offerings for $4.79 and $4.99 for steak.

When asked if it was a challenge to Chipotle, company spokesman Rob Poetsch said it had to do with changing customer tastes.

“It’s really based on insights that we learned starting back in 2010,” Poetsch said. Customers were no longer looking “at food as fuel. They are now interested in new tastes and textures. We can offer these great textures and great flavors with the convenience of the Taco Bell drive-through.”

Taco Bell will have a better chance to sell up to current customers rather than take them away from Chipotle, said Darren Tristano, executive vice president of Technomic, a food industry consulting group.

“What they’re trying to do it to move their menu to be more upscale, which will align with their competition like Chipotle,” he said. “I  think because of the number of (Taco Bells) they have a bigger opportunity to move their current customers up to a higher price point rather than take customers from Chipotle.”

Taco Bell is No. 1 in the “limited service Mexican” restaurant segment which takes in $13.5 billion a year in the U.S., with 50.4 percent of the business, Tristano said. Chipotle is second with 16.4 percent. But Taco Bell has slipped about 3 percent in the last year and Chipotle has gained about the same amount.

Taco Bell has about 6,000 restaurants in the U.S., Chipotle has about 1,200.

A Chipotle spokesman said the company didn’t see Taco Bell’s moves as a challenge.

“There’s a lot more to what we do than black beans and corn salsa,” said Chris Arnold. “What makes Chipotle work is more ingredients from sustainable sources with traditional cooking methods in a comfortable environment. There’s a lot of soul behind the menu.”

“It’s encouraging to see restaurants like Taco Bell improve what they’re offering,” he added

Taco Bell is touting that the new items were developed with chef Lorena Garcia, who has been on the reality competition “America’s Next Great Restaurant,” and will appear in Bravo’s upcoming “Top Chef Masters.”

The new items launch nationwide July 5. Poetsch said to expect more Cantina Bell items, since the category would a permanent addition. The company has been test marketing the items in Bakersfield, Calif., and Louisville, Ky., since January.

“You’re going to see a lot of expansion,” he said. “We’re committed to this long term.”

Taco Bell is owned by Yum! brands, which also owns KFC and Pizza Hut. Chipotle is an independent company that received a minority investment from McDonald’s, which has since divested itself of the company.

Chipotle Sales, Earnings Sizzle In First Quarter

April 26, 2012


Burrito chain Chipotle Mexican Grill (CMG) sizzled past earnings forecasts late Thursday, thanks to strong sales and a better handle on food costs.

Earnings surged 35% to $1.97 per share, 4 cents above consensus estimates. Sales climbed 26% to $640.6 million, beating analyst forecasts for $630.9 million.

Sales at restaurants open at least a year grew 12.7%, the seventh straight quarter of double-digit growth.

 Exceptionally mild weather in much of the country boosted sales by 1% to 2% in the quarter, the company said. The extra Leap Year day helped too. Chipotle sees mid-single-digit same-store growth for 2012.

Shares rose 1% in after-hours trading following a 1.7% drop in the regular session.

Chipotle, No. 18 on the current IBD 50 list, has been a top performer in the strong fast-casual dining segment, according to Darren Tristano, executive vice president with restaurant consulting firm Technomic.

he said.

Food costs remain an issue for Chipotle, which missed Q4 2011 earnings forecasts in part on those raw material expenses.

Q1 food costs climbed about 6% or 7%, Chipotle estimated on a conference call with analysts. Those inputs accounted for 32.2% of restaurant operating costs, flat vs. Q4 but up from 32% a year ago, the company said.

Cheaper avocados from Mexico and Chile, and moderating dairy prices helped offset higher chicken and beef costs.

Chipotle expects food costs to climb in the second and third quarters as it returns to pricier California avocados this summer, and shifts to sour cream made from pasture-raised cows. It sees full-year food inflation in the mid-single digits.

Chipotle raised prices 4.9% in March in its high-cost California and Pacific region, but says it doesn’t plan more hikes in 2012.

“We’re not compelled to take short-term pricing increases to drive quarterly results,” CFO John Hartung said on the conference call.

Denver-based Chipotle opened 32 restaurants in Q1 for a total of 1,262. It says it’s on pace for 155 to 165 new locations this year. It plans to open its first Paris restaurant this spring. It has two in London now and expects three more to open in the United Kingdom before year-end.

In September Chipotle opened ShopHouse Southeast Asian Kitchen in Washington, D.C., its first non-Mexican-themed eatery. It says it will open a second ShopHouse in D.C. later this year.

McDonald’s (MCD), which once owned a majority stake in Chipotle, reports Q1 results Friday. Analysts expect the fast-food king to post 7% EPS and sales gains. Strong U.S. sales are being offset by weakness in Europe.

Yum Brands (YUM), parent of Taco Bell, Pizza Hut and KFC, late Wednesday reported better-than-expected Q1 profit and sales, but reported slowing growth and higher costs in China. Its shares fell 2.1% Thursday.

Across the S&P 500, companies have been beating modest expectations. About 21% of those firms have reported, with 82% beating forecasts. Typically about 62% of firms beat views.

Chipotle Falls as Food Costs Bite into Q4 Earnings

March 6, 2012

Chipotle Falls

Chipotle Falls as Food Costs Bite into Q4 Earnings

Update: Chipotle Mexican Grill said late Wednesday that fourth-quarter profit rose 23% to $1.81 a share. But Wall Street expected $1.83. It was the second straight quarter that the burrito chain has missed views amid higher food costs. Food costs were 32.2% of sales, up from 31.1%, due to higher commodity costs. Total sales climbed nearly 24% to $596.7 million, slightly above forecasts for $591.2 million.

The company’s shares fell 2% in early after-hours trading after rising 1% to a record high 370.98 ahead of results.

The restaurant chain sees food costs and same-store sales rising in the mid-single digits in 2012. The company expects to add 155-165 stores.


Posted Jan. 29 8:05 a.m. ET

Burrito joint Chipotle Mexican Grill (CMG) has served up double-digit sales and earnings growth, in the face of rising food costs and consumer belt-tightening. On Wednesday afternoon, investors will see if that continued through the fourth quarter.

Analysts expect the chain to post $1.82 per share, up 24% from $1.47 a year ago. They see revenue climbing 22.3% to $590.2 million.

Keys to watch for include sales at stores open more than a year. That grew 11.1% over the first nine months of the year. The company guided for low-single-digit growth for the full year, implying a slowdown in the fourth quarter.

Analysts will also be watching for rising food costs. Ingredients have gone up, but by how much? And was the eatery able to offset that with price hikes? The company raised menu prices earlier in the year and said customers didn’t balk.

Then there’s the restaurant growth. The company implied 52 to 62 new restaurants in the fourth quarter.

It opened 32 in the third, bringing its total to 1,163. That includes its first Asian-theme eatery, ShopHouse Southeast Asian Kitchen, in Washington, D.C.

That ShopHouse concept could provide some future growth, though the company hasn’t announced expansion there yet. Darren Tristano, executive vice president of the restaurant consulting firm Technomic thinks the concept might appeal to existing Chipotle customers though, and possible cannibalize some of that business.

Overall, Tristano says consumers seem to be dining out again, though they don’t welcome menu price increases, they’re expecting and tolerating them.

“Consumer sentiment is starting to shift very slowly toward ‘things are going to get better,'” he said.

But industry growth this year is likely to be modest. Technomic forecasts 3% sales growth industrywide — or about half a percentage after inflation.

Last week, the world’s largest burger Chain, and one-time Chipotle owner McDonald’s (MCD) beat earnings, but guided cautiously on 2012, in part on a weaker euro against the dollar. Europe is McDonald’s top sales region.

Chipotle won’t doesn’t have that problem — yet. It opened its first European restaurant in London in 2010. It’s since opened a second and has plans for several more there and is about to launch it’s first in Paris.

Chipotle shares sit near an all-time high, closing at $366.76 on Friday. That could lead to some profit-taking, if results aren’t stellar.

The company also faced rising fast-food competition from Yum Brands (YUM), parent of Taco Bell, which in December said it would roll out more a more Chipotle-like menu. It’s due to report on Feb. 6.

Chipotle is one of several trendy eateries with top-notch earnings. Buffalo Wild Wings(BWLD), Panera Bread(PNRA) and BJ’s Restaurants(BJRI) report later this month.

View the full article on Investor’s Business Daily