There is no question Chipotle Mexican Grill (NYSE:CMG) is currently the undisputed fast-casual king of the burrito that probably single-handedly sparked an industrywide fast-food revolution causing consumers to demand higher quality, more healthful food. Since its 2006 IPO at $22 per share, Chipotle has risen by an eye-popping 3,000%. That type of return makes it all the more tempting to look for the next darling stepping up to the plate.

Why reinvent the wheel?
Part of Chipotle's genius is taking something so simple as a burrito or a burrito bowl and making it highly customizable, fresh, and made in front of you, fast. Chipotle's Achilles' heel may ultimately be the fact that as a concept it isn't very difficult to duplicate.

Inside Qdoba Mexican Grill.  Source:  author

I recently had the pleasure of stopping into Jack in the Box's (NASDAQ:JACK) Qdoba Mexican Grill for the first time. The first thing I was asked when it was my turn in line is if I ever had been to a Qdoba before. After I answered no, the polite man behind the counter next asked if I had ever been to a Chipotle. I said yes, and he replied, "It's basically the same thing."

Same exact conversation happened with the party behind me. And he was right -- very similar simple ordering process, pricing, and delicious quality. Personally I liked my Qdoba burrito better, but that's just one gal's opinion.

Let's face it, no matter how much people love Chipotle, they love variety more and that's where Qdoba has an opportunity to come in and steal some of the show. We know it's not just Chipotle. Fast-casual Mexican chains are growing like weeds all over the country. For example, there is the 100-plus chain Tijuana Flats and the 550 chain Moe's Southwest Grill. They're all a little different but in the same fast-casual Mexican theme with marketing aimed right at millennials.

Qdoba is even bigger with over 632 restaurants. Long term it is aiming for 2,000 restaurants, which is a bit more than Chipotle's current number at over 1,700. The average Chipotle did around $2.2 million in sales last year while the average Qdoba did just over $1 million. Jack in the Box has a long ways to catch up to Chipotle, and it fully plans on doing so.

Inside Qdoba Mexican Grill. Source: author

The plan
For starters, it should be noted that Qdoba is starting to accelerate its sales. First quarter only saw same-store sales nudge 2% higher, but they jumped 7.2% and 7.5% in the second and third quarter, respectively.

The chain has been undertaking much trial and error to see what works in terms of product and marketing and has grown in popularity to the point where it no longer needs discounting to get people in the door, according to the most recent conference call.

Jack in the Box is guiding for fourth-quarter Qdoba same-store sales to jump between 5% and 6%, but if history is any guide that may be a conservative figure. For example, with the second quarter the company guided for between 3% and 4% and instead reported 7.5%, or basically double guidance.

For 2015, the company plans to open 60 restaurants for an increase of 9%-10% but that figure is intentionally low. CFO Jerry Rebel explained in the most recent conference call that management wants to "make sure that we have the right prototype design in place first before we start building a significant number of Qdoba restaurants." And you probably thought 9%-10% unit growth was rapid. Apparently the plan is far more acceleration.

Later during the conference call Q&A, CEO Lenny Comma said the restaurant is looking at "everything from new platforms within the menu to new ingredient selections to also new ways of presenting the value to the consumer. ... I believe that the new news that they'll be bringing to the menu will be much more impactful than even what we did this year and will be much more differentiated than anything Qdoba has done compared to the competition in the past. So I think we'll be able to set ourselves apart, starting in 2015, from the competition."

Get to know Jack...he's free
Let's not forget the Jack in the Box burger chain itself, as it's no slacker. Last year it did almost $1.4 million in sales per unit. which is around 40% higher than the average Qdoba. The burger chain is still around two-thirds of the company's overall sales and restaurant profit. 

Same-store sales of the Jack in the Box chain were no Qdoba, but still up a respectable 2.4% last quarter and 1.7% for the trailing three quarters. While my focus of this article is on the huge opportunity of Qdoba, Jack in the Box is coming along for the ride as well.

At the risk of oversimplifying, let's look at market caps. Jack in the Box has a market cap under $3 billion while Chipotle has a market cap around $20 billion. Qdoba doesn't have to take down Chipotle for JACK to be wildly successful for shareholders. It only needs to be relatively mildly successful while the burger chain continues to hold its own.

You also get a management team that knows this business, especially on the expansion and marketing end. At this stage it's highly speculative where the Qdoba chain will eventually end up, but the potential reward could pay off handsomely.