As a general rule, when a large restaurant chain makes changes to its menu, there's little discernible impact on the bottom line. But importantly, there are exceptions to this rule.
It's for this reason that investors should watch closely to see how customers respond to a recent addition to the menu at Chipotle Mexican Grill's (CMG 2.55%) public test kitchen in New York City.
Image source: Chipotle Mexican Grill.
Dominos Pizza (DPZ 0.67%) offers a case study in how menu changes can transform a restaurant chain's performance. After reinventing its pizza recipe in 2009, and publicizing the change with a self-deprecating marketing campaign, sales at Dominos have been on a steady upward climb. Since 2010, Domino's net income has tripled.
You can see a similar trend at Taco Bell, a subsidiary of Yum! Brands (YUM 2.55%). In the year after launching its line of Doritos Loco tacos in early 2012, the company sold more than 450 million of them. It later added additional flavors to ride the same wave.
"We had to hire about 15,000 people last year -- two to three per restaurant -- in order to handle the sales growth and demand of the Doritos Locos Tacos business," Taco Bell's then-CEO Greg Creed told Fast Company in 2013. Creed is now CEO of Yum! Brands.
To a certain extent, one could say the same for McDonald's (MCD 1.03%), which saw its same-store sales improve after rolling out its all-day breakfast menu two years ago.
This is why a recent headline about Chipotle's decision to add queso dip to the menu at its test restaurant in New York City caught my eye. It hit the menu this week.
Here's an early review by Buster Coen of The Street:
Queso fans will not be disappointed by this thick and cheesy dip. It makes for a savory flavor that carries a little bit of a kick ... The viscid texture will be appealing to people who don't like their dips processed, and you can tell that this queso is authentically made with a cheddar base given the density and richness of flavor.
Here's another by Dan Myers of Huffington Post:
Because of Chipotle's commitment to using natural ingredients, it doesn't have that Velveeta-like, gooey texture you may be used to, but we still found it to be pretty good. The flavor is primarily that of sharp Cheddar, with a slight bite from jalapenos and Mexican spices. According to Quartz, it also contains roasted tomatillos, tomatoes, cumin, oregano, and other chiles, and we have a feeling that some starch -- possibly potato -- has also been added. No complaints in the flavor department.
And another by Michelle No and Natalie Brown of BuzzFeed:
General consensus? It was slightly spicy, gritty, and lacked the gooeyness of standard queso, but still -- pretty tasty!
One shouldn't over-hype this, because again, as a general rule, something like this isn't likely to be a game changer for Chipotle.
Yet, I eat Dominos more frequently since it reinvented its recipes. The same is true with Taco Bell. And I've even been known to (not infrequently) get a breakfast sandwich at McDonald's when it's not breakfast.
All of these things pale in comparison to good queso when it comes to the hearts and stomachs of Americans. Speaking for myself alone, I can tell you that good queso would cause me to visit Chipotle more often.
Here's my point: If Chipotle nails this, which is far from certain, the potential addition of queso to its permanent menu could act as a meaningful catalyst for the chain's bottom line.
