Sink-o de Mayo

Fresh Mex has proven stale for some of the country's leading fast-food chains. CKE Restaurants (NYSE: CKR  ) announced that it was selling off its La Salsa quick-service chain Wednesday morning, a year after Wendy's (NYSE: WEN  ) unloaded its Baja Fresh concept.

There's irony in the guacamole. La Salsa is being snapped up by the same company that took advantage of the Baja Fresh fire sale last year. The buyer also happens to be a former franchisee of CKE's flagship Carl's Jr. chain.

La Salsa and Baja Fresh have been stagnant concepts in recent years, so the mutual no mas is not a surprise. What is surprising is that the two chains failed just as Chipotle Mexican Grill (NYSE: CMG  ) and Jack in the Box's (NYSE: JBX  ) Qdoba are expanding and doing ridiculously well.

Chipotle has lapped Wall Street's profit targets in its first six quarters as a public company. Comps are also climbing at the rapidly growing Qdoba. The wide disparity within such a narrow niche may be puzzling to consumers, but it's an opportunity for investors who can spot the difference between the leaders and the laggards.

CKE won't dwell in the past. It has its more productive Carl's Jr. and Hardee's chains to watch over. Bailing on La Salsa isn't something that the company is shouting from the rooftops. Terms of the deal weren't disclosed, and the press release was issued at 10:03 p.m. ET last night (which is still late, even by the company's California time zone standards, and a great way to keep the story out of the paper this morning).

With La Salsa out of the picture, it's pretty easy to spot the leaders now. It starts with Chipotle. It ends with Jack in the Box.

More of Montezuma's Revenge:

Chipotle has been one of the many fast-growing recommendations out of the Motley Fool Rule Breakers newsletter service. The stock also got the nod from theMotley Fool Hidden Gems team. What makes Chipotle so special? You can dig into any of its burritos for a taste test, then give either newsletter a taste test with a 30-day free trial.

Longtime Fool contributor Rick Munarriz believes that privately held Moe's is also a potential winner in this space. His taste buds have a soft spot for Salsarita's. He does not own shares in any of the stocks in this story. Rick 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.


Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 528752, ~/Articles/ArticleHandler.aspx, 10/25/2014 7:55:41 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement