Chipotle Jumps Into Fast-Casual Pizza

This week Chipotle Mexican Grill  (NYSE: CMG  ) announced it is partnering with Denver restaurateurs Bobby Stuckey and Lachlan Mackinnon-Patterson to launch a new fast-casual pizza concept: Pizzeria Locale. Pizzeria Locale is Chipotle's latest addition to its growing portfolio of fast-casual restaurant concepts; ShopHouse, Chipotle's fast-casual Southeast Asian concept, recently opened its third location.

Earlier this year, Buffalo Wild Wings  (NASDAQ: BWLD  )  also entered the fast-casual pizza world by investing in PizzaRev, a Los Angeles-based fast-casual pizza joint. Investors should take notice when two restaurant stars, within months of one another, invest in fast-casual pizza concepts. 

Pizzeria Locale vs. PizzaRev
Like Chipotle, Pizzeria Locale offers customers a menu of high-quality ingredients that can be ordered as customer-created combinations in an interactive service line. It then takes less than two minutes for the pizzas to bake in a high-temperature oven. Pizzeria Locale also offers red or white Italian wine, taking another move from Chipotle's playbook to offer select alcoholic beverages within a fast-casual-restaurant environment. 

Photo from http://www.pizzerialocale.com/denver.html

Buffalo Wild Wings' PizzaRev describes itself as a 'craft your own' establishment, empowering customers to "craft your own artisan pizza, using only the freshest ingredients and PizzaRev's delicious homemade pizza dough." Once ingredients are selected and prepared, PizzaRev fires up the oven and bakes the pizza in three minutes. Sounds pretty similar to Pizzeria Locale, doesn't it?  

PizzaRev currently has six locations open, with seven more on the way in the coming months in Southern California. Buffalo Wild Wings' CEO Sally Smith intends to open two PizzaRev locations in Minnesota in the first quarter of 2014, and PizzaRev has filed to franchise in all 50 states.

Photo from PizzaRev Facebook page

Pizzeria Locale's concept is still in a developmental stage; its first location was just opened this May in Denver, also the birthplace of Chipotle. According to Chipotle's press release, second and third locations in the Denver area are being investigated.

Both pizza joints have focused on establishing their brands locally before venturing into new territories. Chipotle invested in Pizzeria Locale at an earlier stage of growth than Buffalo Wild Wings did with PizzaRev, which makes it difficult to directly compare the success of the two pizza joints at this point in time. 

Neither pizza joint is directly competing with the other at the moment, but as the respective brands develop and expand, competition between the two is likely to occur. 

What Chipotle and Buffalo Wild Wings are saying 
Steve Ells, Chipotle's founder and CEO, has nothing but praise for Stuckey and Patterson, the founders of Pizzeria Locale. Ells calls the two "extraordinary restaurateurs who truly understand what it takes to provide an exceptional dining experience," and Ells jumped on the opportunity to collaborate with the new fast-casual pizza concept.

"Opening Pizzeria Locale using a model similar to Chipotle," says Ells, "allows us to make extraordinary pizza, made with high-quality ingredients accessible to everyone."

When Buffalo Wild Wings announced its investment in PizzaRev in March, the chicken wing company's executive vice president of global marketing, Kathy Benning, offered some insights into the company's interest in the pizza market. "Over the past year," says Benning, "Buffalo Wild Wings has been investigating emerging restaurant concepts with high growth potential."

The reasoning behind investing in PizzaRev is fairly simple for Buffalo Wild Wings: "Along with chicken wings, pizza is one of America's most popular foods and we believe that PizzaRev has great potential for continued growth and success."

Both Buffalo Wild Wings and Chipotle have been interested in expanding beyond their core concepts over the past two years. Chipotle opened its first ShopHouse location in 2011, and for the better part of 2012 Buffalo Wild Wings was looking to invest in a fast-casual concept. This year, both companies entered fast-casual pizza.

What this means going forward 
Pizzeria Locale and PizzaRev will not grow to massive chains overnight. However, with respective backing and involvement from Chipotle and Buffalo Wild Wings, two of the most successful restaurant growth stories of the past decade, both pizza joints could become national chains within the next 10-15 years. 

While Chipotle's ShopHouse and Pizzeria Locale concepts show promise, Steve Ells is quick to point out that Chipotle's growth "will continue to be driven for the foreseeable future by expanding the Chipotle brand within the U.S." With regard to Pizzeria Locale, Chipotle is also focused on "slow, measured expansion that allows the restaurant to perfect the concept and service model."

PizzaRev's expansion is ramping-up quickly, with its locations slated to double within the first several months of 2014. Time will tell if Pizzeria Locale can begin expanding at a similar rate once the concept has been further developed and refined. 

Foolish bottom line
Chipotle and Buffalo Wild Wings see a bright future in the field of fast-casual pizza, as evidenced by investments into Pizzeria Locale and PizzaRev. The impact fast-casual pizza will have on traditional pizza-delivery outlets remains to be seen, but restaurant investors would be wise to watch these concepts and trends in the coming years. 

Chipotle is building a diversified concept portfolio consisting of its Chipotle, ShopHouse, and Pizzeria Locale concepts. Over the next two decades, Chipotle may very well become to fast-casual dining what Yum! Brands is to fast food today with its Taco Bell, Pizza Hut, and KFC concepts. Should this be the case, Chipotle has extensive untapped growth potential which could continue to reward patient long-term investors with market-beating returns.

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  • Report this Comment On December 22, 2013, at 7:29 PM, ozwilly wrote:

    BIG fan of Chipotle however was not very impressed with ShopHouse. Two out of their three sauces are curry based. I do like their business model and plan on purchasing more stocks.

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