NEW YORK (TheStreet) -- While Chipotle(CMG) - Get Report shares plunged 6% Tuesday on worries about slowing sales growth, the Mexican fast-food chain is making a major bet on an entirely different cuisine: Asian fast food.
Chipotle, which opened the first of its Asian themed restaurants--called ShopHouse--in 2011, is planning a major expansion of the little-known chain. ShopHouse offers an upscale take on Asian-themed food that includes rice bowls and sandwiches. From the first restaurant in Washington, D.C., ShopHouse has since only expanded to eight locations, including Los Angeles, and now represents Chipotle's second-largest business segment.
Chipotle did not release results for ShopHouse in its latest earnings report Monday evening, but the company has said it's "pleased with how the restaurants are doing."
Chipotle plans to open 190 to 205 new restaurants next year--including a small number of ShopHouse and pizza-maker Pizzeria Locale outlets--after 180 to 195 openings set for this year. In an email, Chipotle declined to provide details on the openings.
Chipotle's methodical, if not secretive approach, to introducing ShopHouse to a generation of folks that have grown up imbibing on cheap white rice from local Chinese food joints reflects executives' focus on proper site selection, getting the right people to run the restaurants, and on fine-tuning the menu.
In a late August
, Chipotle's co-CEO Monty Moran remarked that ShopHouse is already well-integrated into Chipotle's structure. "[W]ith ShopHouse, there are already a couple of restaurants that have become restaurateur restaurants -- there are four that have become restaurateurs already out of seven total restaurants." Restaurateurs at Chipotle are one of the company's most senior positions, responsible for overseeing the operations at numerous restaurants, and usually are individuals who started out on the front line serving food and interacting closely with customers.
More recently, a Chipotle spokesperson shared with TheStreet on the topic of ShopHouse that, "right now, we are focused on introducing the brand, developing teams we will need to accommodate growth, and perfecting the experience." He added, "pushing the pace of growth simply for the sake of growth isn't something we have done at Chipotle, and we aren't going to do it with ShopHouse."
Doing to Asian fast food what Chipotle has done for Mexican fast food will require a broader and more diverse menu, which likely falls primarily on founder and co-CEO Steve Ells, who actively oversees menu decisions.
The necessary push to diversify the ShopHouse menu appears to have been met with a few challenges. "We are tweaking the menu a bit, playing with some things right now like seasonal veggies," said the spokesperson. Further, per the spokesperson, "really the only thing we haven't been pleased with is the banh mi sandwiches we had at the beginning, as we never had bread for those that we were thoroughly happy with and they didn't fit the model all that well in that you just ordered it and it was made." Chipotle has dropped the sandwiches, leaving opportunities for menu innovation in Asian-themed alcoholic and non-alcoholic drinks and portable options in the spirit of the mothership's burritos.
Whatever the number of ShopHouses that open in 2015 and beyond they will have a tough time replicating the sales and profit growth of the core Chipotle chain. Chipotle noted "very little price resistance and trade down" following a nationwide price increase averaging 6.3% that was fully rolled out by the end of the second-quarter. Demand so far in the September to October period has been "very consistent" to that achieved in the second quarter, pointed out Chipotle executives on the earnings call yesterday evening.