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Analysts give ShopHouse a thumbs up

Analysts give ShopHouse a thumbs up

As the new ShopHouse Southeast Asian Kitchen concept settles into its first full-week of operation, analysts that follow parent company Chipotle Mexican Grill are weighing in with enthusiastic reports of the brand’s growth potential.

Chipotle officials insist there are no immediate plans for a second location for the long-awaited ShopHouse, which opened in Washington, D.C., last week.

However, Jeff Omohundro, senior analyst with Wells Fargo Securities, said in a report the day after the concept’s Sept. 15 opening that he visited and “came away with a positive feeling about the brand and its growth potential for the company.”

Analyst Mark Kalinowski of Janney Capital Markets agreed in a report Tuesday, offering an “enthusiastic thumbs up” after his visit.

Kalinowski argued that the quality of experience and speedy service at ShopHouse could lead to market share gains for the brand, as well as a continuation of “enviable” same-store sales expansion for Chipotle.

ShopHouse is designed with the same create-your-meal format of the fast-casual Chipotle chain, with a menu based on the flavors of Thailand, Vietnam and Malaysia.

Bowls, ranging in price from $6.59 to $7.50, might include noodles, brown or jasmine rice topped with a choice of proteins, vegetables, fresh herbs and sauces. Guests also can build a meal based on a banh mi sandwich, ranging in price from $6.14 to $7.05.

“We were very impressed with the flavor profiles and menu choices, as well as the attractive price points, which we think can be particularly important in the continued challenging economic environment,” Omohundro wrote.

Kalinowski said he thought the quality of food was “simply outstanding,” noting that dishes were a bit spicier than at Chipotle.

“In general, we believe that ShopHouse’s food will appeal to the more-affluent-than-average customer that typically frequents fast-casual restaurants,” he wrote. “We believe that Chipotle’s customer base in general would appreciate the quality of ShopHouse’s food, a factor that should help ShopHouse in the long run as it eventually moves beyond (and potentially far, far beyond) one unit.”

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The analysts noted the early-days presence of Chipotle executives, such as co-chief executives Steve Ells and Montgomery Moran, as well as Nate Appleman, a fine-dining chef who has been intimately involved with ShopHouse’s development.

The restaurant, however, makes no mention of its ties to Chipotle in signage or on the menu.

Although not a concern going forward, Kalinowski pointed to the unit’s narrow rectangular shape, which makes it somewhat difficult for customers to exit easily. However, the high-volume Dupont Circle location may have been too attractive to turn down.

A Chipotle unit down the street generates about $4 million in annual sales, he said, citing unnamed industry sources. Typically, Chipotle locations have an average unit volume of about $1.9 million annually.

Both analysts also praised the new concept’s emphasis on organic ingredients and sustainable meats raised without the use of antibiotics or added hormones, following Chipotle’s “food with integrity” message.

RELATED: Chipotle debuts short film on sustainable farming

Although Chipotle officials have said little about the new ShopHouse, Ells made some comments about the new concept at an appearance in Santa Monica, Calif., on Friday at the Good Food Festival & Conference, an event organized to promote sustainable farming, healthful eating and environmentally sound food policy.

The conference was sponsored in part by Chipotle.

Telling the story of how the 1,100-unit Chipotle chain has shifted over the past decade to the use of sustainably raised meats and organic produce, a process still in the works, ShopHouse was designed from the beginning to uphold ideals of more healthful eating, correcting all the “mistakes” the company wished it could do over.

“It’s really, really cool” with brown rice, and “lots of veggies and not as much meat,” Ells told the approving audience at Santa Monica College, who cheered when he said the line out the door at ShopHouse was 50-people deep.

“I’d like to show the industry that you can cook the right way,” Ells said. “We hope others will look at our business model and adopt those practices.”

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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