It's funny what a hot tamale of an IPO will do for a sector. Last month's wildly successful market debut of Chipotle Mexican Grill (NYSE:CMG) left investors scrambling for sympathy plays.

They won't get any sympathy from me.

Chipotle does have rival concepts in the fresh-Mex space; Wendy's (NYSE:WEN) owns Baja Fresh, while CKE Restaurants (NYSE:CKR) operates La Salsa. You can get a tasty burrito at all three places -- made fresh to order -- but the similarities end there. Chipotle is a fast-growing chain with 480 stores and bulging comps to boot. Through the first nine months of 2005, the company's sales surged 33% higher, and the bottom line grew even faster.

In contrast, La Salsa has 101 units open. A year ago it was 100, and the year before, that the count stood at 98. CKE has had too much relative success managing its Hardee's and Carl's Jr. chains to worry about a smallish segment that added just three new units over the past two years.

Baja Fresh is faring even worse. Wendy's is too focused on its flagship chain and its Tim Horton's IPO. Through the first nine months of 2005, comps at Baja Fresh were off by 3.9%, and the company has been closing stores. Over the past year, the store count has gone from 305 to 302.

Lessons from 1993
By doubling its offering price on its first day of trading, Chipotle became the best-performing eatery IPO since Boston Chicken soared 143% higher on when it went public on Nov. 9, 1993.

That was a pretty spectacular year for restaurant speculation. Half of the biggest first-day winners in the eatery space took place in 1993. Let's take a quick look to see how those four companies panned out.

Offer Price First-Day Gain
Boston Chicken $20 143%
Back Yard Burgers $6 71%
HomeTown Buffet $15 53%
Papa John's $13 52%
Source: Thomson Financial

  • Boston Chicken was supposed to revolutionize the world of home meal replacement, but a shaky structure of franchisee financing sent the stock to the henhouse. It was ultimately picked up for chicken feed by McDonald's (NYSE:MCD) -- the same Mickey D's that just took Chipotle public.
  • Back Yard Burgers (NASDAQ:BYBI) is still around. It has more than 160 units now and has usually been profitable. However, investors have moved on, with the stock currently trading for less than its $6 IPO price.
  • HomeTown Buffet eventually merged with Old Country Buffet. Things haven't been going so well lately; last month, the all-you-can-eat chain announced store closures and revealed that it is exploring "strategic alternatives" as a possible exit strategy.
  • Papa John's (NASDAQ:PZZA), on the other hand, really made some dough for its investors. The delivery chain has grown briskly, and its stock has nearly doubled over the past year alone.

Buying the hot stock didn't pay off in three of these four cases. That doesn't mean that Chipotle will fail -- or succeed -- but it should certainly awaken investors who are looking to ride the burrito chain even higher, or profit from other companies riding its coattails.

Look before you bite in
I'm not trying to depress you. I've just seen too many casual steakhouses falter after setting out to be the next Outback, and too many coffee chains amount to a whole latte nothing by imitating Starbucks.

That's how you make money when investing in restaurateurs. Just because McDonald's has turned it around over the past few years and Wendy's is trading at an all-time high, that doesn't mean you should be diving sight unseen into Burger King later this year.

Just make sure you know what you're getting yourself into. Tim Horton's is a quality chain, and I'm really looking forward to Wendy's rolling it out as a standalone company. But until I see the numbers -- and the mania behind the opening-day price -- I'm not moving a muscle.

In the active community board set up for subscribers of the Rule Breakers newsletter service, Chipotle was a hot topic in the days, weeks, and months leading up to its January IPO. The offering was priced at $22, but anyone who had placed an order to buy blindly at the outset wound up with an opening price of $45. That kind of insanity didn't work out well for HomeTown Buffet or Boston Chicken investors.

However, it worked just fine for P.F. Chang's China Bistro (NASDAQ:PFCB). The Asian fusion cuisine concept went public at $12 a pop in December 1998. The stock closed 48% higher on the day of its market debut, and the casual upscale operator has continued to reward shareholders with gains that are more sweet than sour.

That's why my gut tells me that Chipotle will be just fine in the long run. It has that special something. P.F. Chang's succeeded with a high-end concept after other proven operators like Darden had failed to grow more laid-back Chinese concepts. P.F. Chang's did it right, just as Chipotle must be doing something right to grow in a niche where its largest competitors are scrambling to regroup.

Despite the fickle history of restaurant longevity, I can see Chipotle -- or P.F. Chang's -- one day becoming an actual ultimate growth stock pick on the Motley Fool Rule Breakers roster.

After all, why chase the next Chipotle when you have the real deal right in front of you? Isn't that how it worked out for Starbucks? Isn't that how it worked out for Outback? Imitation may be the sincerest form of flattery, but I'd rather invest in the company that broke the rules than the ones that simply followed later.

Longtime Fool contributor Rick Munarriz could go for a Chipotle burrito about now. He does not own shares in any of the companies in this story. T he Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.