Potbelly (NASDAQ: PBPB ) was another smoking-hot consumer-feeding IPO on Friday. The toasted sandwich shop that got its start at an antiques store more than doubled on Friday after hitting the market at $14. Potbelly shares were moving higher again on Monday.
You're already hearing the Chipotle Mexican Grill (NYSE: CMG ) comparisons. Since Potbelly and Chipotle Mexican Grill are both fast-casual concepts where higher-quality than fast-food meals are prepared as they're ordered and paid for at the counter, it may seem fair to lump the two dissimilar cuisines into the same pot.
However, casting Potbelly as the next Chipotle is missing the essential ingredient of growth. Potbelly sales grew at an 8% clip in 2010 before nearly doubling to 15.5% in 2011. The accelerating growth didn't stick, as Potbelly's revenue climbed just 12% through the first six months of this year. As mature as Chipotle may seem with more than 1,500 locations worldwide, analysts see it growing at a 16% clip this year and again in 2014.
That's fast, but there are a few chains that are growing even faster. Let's go over five chains that primarily through expansion and acquisitions are growing faster than both Chipotle and Potbelly.
|Company||This Year||Next Year|
|Noodles & Co. (NASDAQ: NDLS )||18%||16%|
|Buffalo Wild Wings (NASDAQ: BWLD )||22%||18%|
|Diversified Restaurant Holdings (NASDAQ: SAUC )||44%||25%|
|Ignite Restaurant Group (NASDAQ: IRG )||64%||20%|
|Chuy's Holdings (NASDAQ: CHUY )||19%||20%|
Noodles & Co. stirred up Chipotle comparisons when it went public this summer. Just like Potbelly, the pasta and noodle shop has seen its recent offering more than double since going public in the teens. The rally may not seem fair. Chipotle was growing a lot faster than Noodles at this stage in the burrito roller's life cycle. Noodles has an impressive streak of positive comps going, but the valuation seems a bit wacky at 80 times next year's projected profitability. The appeal of offering noodles across various types of cuisine may make it a safe "no veto" place to eat, but there's a lot of expansion growth priced into Noodles' stock at the moment.
Buffalo Wild Wings is the biggest name on this list. The chain of family-friendly sports bars lives for football season, but it also does a fair deal of business when there aren't any marquee games, given its popular bone-in and boneless chicken wings that it lathers up in its many signature sauces. Some worrywarts feared that Mickey D's was invading the turf of Buffalo Wild Wings with its recent Mighty Wings addition, but any fan of the product line knows that there's no comparison. Ronald McDonald also won't pour you a cold one between commercial breaks.
Diversified Restaurant Holdings is one of the largest franchisees of Buffalo Wild Wings. It watches over 35 different locations, but it also has its proprietary Bagger Dave's Legendary Burger Tavern. There are just a dozen locations of its own casual restaurant concept, but Diversified Restaurant Holdings is rolling. It may not be fair to consider its 44% projected surge in sales this year, or the 61% uptick it reports in its most recent quarter. Diversified Restaurant Holdings snapped up eight Buffalo Wild Wings late last year, padding its tally that's growing at a heady clip on its own. However, analysts still see an impressive 25% in top-line growth on a slightly smoother basis come 2014.
Ignite Restaurant Group operates 350 restaurants under its Joe's Crab Shack, Romano's Macaroni Grill, and Brick House Tavern + Tap concepts. The spectacular 64% pop in sales that Wall Street's eyeing here is nearly entirely the handiwork of the 186-unit Romano's Macaroni Grill that it acquired in April. Yes, that's skewing the growth for both this year and next year, but comps were positive at Ignite Restaurant Group's two other concepts in its latest quarter.
Finally we have Chuy's Holdings. The casual and lively Tex-Mex chain was last year's darling dining IPO. There are now 46 Chuy's restaurants across the country after a summertime opening in Ohio. Despite being the table-service type of restaurant that seems to be losing favor to the speedier fast-casual burrito rollers, Chuy's Holdings has cultivated a loyal following by offering a menu in which nearly every entree sells for less than $10. The Elvis shrines and customer-submitted gallery of pooch portraits are also nice touches in making the concept distinctive from other salsa-flinging chains.
So, yes, Potbelly and Chipolte are the ones making headlines these days, but you can dig deeper to find the meatier growth in this industry.
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