Chipotle Imitator IPOs Leave Investors Starving for the Real Thing

If I had a time machine, the first thing I would do would be to go back in time and remember to fill up the car's wiper fluid. After that, I might want to travel back to 2006 to drop $66,000 into Chipotle Mexican Grill's (CMG 0.17%) opening day on the market. When I got back to 2014, I'd be sitting on a cool million in the company's stock.

If you, for some reason, are lacking that time machine, you might be better served just finding the next Chipotle. Or if you're the kind to get caught up in trends, you might just throw your cash at anything that looks even vaguely like Chipotle.

Over the last year and change, Potbelly (PBPB 1.88%), Noodles & Co. (NDLS -5.60%), and El Pollo Loco (LOCO 0.73%) have all gone public with great fanfare. That doesn't mean that they've all done well, though. Take a look at the table below to see what I'm talking about.

In chasing the success of Chipotle, it turns out you would usually have been better of just investing in Chipotle. El Pollo Loco is the one exception, although even that has lost 9% of its value since the beginning of August.

Looking beyond the stock price
Of course, falling stock prices aren't enough to tell us if a business is fundamentally bad. Sometimes companies are victims of market hype. With all three brands here, for instance, the stock took a huge jump before shares hit the public market due to hype. That they've now fallen doesn't mean that they are bad businesses, just that the market thinks they were overpriced.

Comparing the brands on a sales per square foot basis is revealing. Chipotle tops the charts, with sales per square foot over $800. Noodles & Co. and Potbelly both come in near that $450 mark, putting them at the bottom of the four chains. In the middle, but closer to Chipotle's result, is El Pollo Loco, with sales around $675.

On that basis, El Pollo Loco, once again, looks like the best option of the three new challengers. Sales per square foot should continue to grow in the near future, as well, as El Pollo Loco has forecast comparable store sales growth of 5.5% to 6% for the full fiscal year.

Looking at the other chains, Potbelly is forecasting comparable sales to be flat -- at best -- for the year. The company got hit hard by weather in the first quarter. Noodles & Co. is also looking at flat comparable sale. Then, standing off in the distance, Chipotle is staring down mid-teen comparable sales growth for its fiscal year, putting the upstarts to shame.

What does it all mean?
The bottom line is twofold. First, if you want to invest in the next Chipotle, you might be better served by just investing the in the existing Chipotle. It's still a strong business, it still has room for growth, and it's still better than its imitators. Second, there isn't a simple formula to re-create the success of Chipotle, and it certainly isn't as easy as "be a publicly traded restaurant."

El Pollo Loco is looking like the best of the new breed, but it's also the youngest stock. There's plenty of time for bad weather, a bad run, or bad publicity to hurt the chain. On the other hand, there could be a great run that pushes it even further up the line. Maybe "Crazy You Can Taste" -- whatever that means -- is the next Atkins diet.

The main thing to remember is not to get caught up in hype. Sometimes good businesses come along and make investors rich, but more often than not, we get caught up in hopes and dreams instead of paying attention to the facts in front of us. Keep reason on your side next time you want to imitate success.