Chipotle, With Chopsticks

In a surprising move, Chipotle Mexican Grill (NYSE: CMG  ) revealed this week that it's itching to go Asian with a new concept.

The fast-growing burrito roller will test out a quick-service eatery next summer in one of its markets, specializing in cuisine from the Far East. Sushi? Noodle shop? Korean BBQ? Panda Express "with integrity"?

Chipotle isn't telling just yet. A spokesman told Nation's Restaurant News that the new concept will be similar in price to its flagship chain.

This new move won't be as easy as trading cilantro for bok choy. Chipotle will face an uphill challenge, even if it opens in a Chipotle-fanatical market.

Asian cuisine used to be a hard niche to build a chain around.

Darden Restaurants (NYSE: DRI  ) tried to give it a go with China Coast in the 1990s. It has an Italian hit in Olive Garden and a seafood classic in Red Lobster. Surely, domestic diners were ready for a casual dining chain serving up moo goo gai pan and pork lo mein. Nope. The chain closed down after five years, peaking with 51 locations.

It's a kinder climate these days. Benihana (Nasdaq: BNHNA  ) (Nasdaq: BNHN  ) is holding up well with its Japanese teppanyaki. P.F. Chang's (Nasdaq: PFCB  ) has fared so well with its namesake chain that it eventually began rolling out a more casual Pei Wei Asian Diner concept. There's also Pick Up Stix, Panda Express, and several other quick-service eateries making waves.

Worrywarts will argue that Chipotle doesn't need to lose its focus on the one chain that has defied gravity by posting positive comps during the recession. I disagree. When do you want Chipotle to cook up a new concept? You surely don't want that phase of development to kick in after Chipotle saturates the domestic market.

Successful quick-service operators can juggle concepts. You'll never hear Yum! Brands (NYSE: YUM  ) blame the weakness at Pizza Hut on the need to concentrate on Taco Bell or KFC.

Chipotle is doing the right thing. Specializing in Asian fast casual will prevent the new concept from cannibalizing sales at its original concept. It also makes more sense to key-in on similar operations where Chipotle excels at mowing down long queues quickly at attractive price points. This move makes a lot more sense than simply going upscale to open a chain of Mexican table service restaurants.

Many people forget that Chipotle wasn't always a one-concept operator. It was owned -- and eventually spun off -- by McDonald's (NYSE: MCD  ) . Who knows? The new concept may go so well that it may be Chipotle doing the spinning off in a few years.

Can Chipotle make a second concept in an unrelated niche pan out or is it a dim sum? Check in on either side of the argument in the comment box below.

Chipotle is a Motley Fool Rule Breakers choice. Chipotle is a Motley Fool Hidden Gems selection. The Fool owns shares of Chipotle and Yum! Brands. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz is glad to be living a couple of miles from a Chipotle. He does not own shares in any of the stocks in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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