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The next Chipotle?

Emerging fast-casual players aim for success by emulating the highly regarded burrito brand

As much of the restaurant industry struggled throughout the Great Recession, Chipotle Mexican Grill churned out quarter after quarter of positive results, ending 2010 with same-store sales up an enviable 9.4 percent and further securing its place as a business model to be imitated.

In fact, many fast-casual startups today describe themselves as the “Chipotle of (fill in the blank).” They aspire to duplicate with another type of cuisine the success of the 1,084-unit chain, which is widely known both for its ethos and unit-level economics: average unit volumes are $1.8 million out of about 2,000 square feet.

Among the current wannabes is Piada Italian Street Food, which debuted last year in Columbus, Ohio, and quickly became dubbed “The Chipotle of Italian food.” The Washington, D.C., area is home to the new Cava Mezze Grill, described
as a “Greek Chipotle.” And in New York, the new concept Hello 
Pasta has been called the “Chipotle of Pasta.”

This summer Chipotle itself plans to unveil an Asian concept designed with the same format as its burrito-focused brand. Recently, Chipotle registered 
the name ShopHouse Southeast Asian Kitchen with the U.S. Patent and Trademark Office.

Chipotle’s carefully burnished image was tarnished recently when it became the target of an ongoing investigation by U.S. Immigration and Customs Enforcement officials. The chain let go hundreds of illegal workers at 50 restaurants in Minnesota and was forced to hire and train replacements quickly. ICE also told Chipotle that it expected to audit another 60 locations in Washington, D.C., and Virginia. This disruption could hike labor costs significantly, at least in the short term, according to investment firm Miller Tabak. But the incident is not likely to affect the chain’s status as one to be emulated.

Following the formula 

Officials with the Denver-based chain, who have long argued that Chipotle’s success is “not about the burritos,” as founder and co-chief executive Steve Ells once put it, say they are flattered by the Chipotle copycats. Still, they doubt most imitators will be able to duplicate all of the pillars of Chipotle’s success.

When most people describe a concept as “Chipotle-like,” they generally refer to the interactive service model of allowing guests to customize their meal as they walk down the line to build their burrito, taco, salad or rice bowl, said Chipotle spokesman Chris Arnold.

Dennis Lombardi, executive vice president of Columbus, Ohio-based consulting firm WD Partners, calls it the “theater” of meal assembly, a concept that has proven successful across categories.

“The brands that do it get great marks for freshness and for order accuracy and variety with the endless possibilities,” he said. “The success of the operation of that kind of model almost guarantees we’ll see variations on the concept for years to come.”

Arnold argues that the service model is only part of what makes Chipotle work. Not to be discounted are the seven years Chipotle was owned by McDonald’s. Although Chipotle operated independently, McDonald’s resources helped to grow the chain from 15 to 500 units, Arnold said.

And then there are other pillars that define and differentiate the Chipotle concept, Arnold said, pointing to the chain’s growing emphasis on Food With Integrity. The use of meats raised humanely without hormones, rBGH-free dairy products from only pasture-raised animals, and the use of organic and local produce where possible is a cornerstone of marketing efforts for 2011.

At the company’s fourth-quarter earnings call with analysts in January, Ells said Chipotle would host a national event this year featuring the company’s farmers, cooking demonstrations and other efforts to communicate the importance of sustainably raised ingredients. 

Chipotle also will launch a loyalty program in April that will reward guests for their understanding of the chain’s Food With Integrity philosophy.

Chipotle’s so-called “people culture” is also an important pillar, said Arnold, noting that the company’s practice of identifying top-performing employees and developing career paths might be harder for startups to emulate.

About 90 percent of Chipotle’s managers come from the chain’s crew ranks, said Arnold. Chipotle ended 2010 with 181 “restaurateurs,” as they are called, or elite managers who can earn bonuses of $10,000 for each crewmember they develop into a general manager.

A restaurateur that eventually “mentors” up to four restaurants can become an apprentice team leader. Chipotle started 2010 without any but ended the year with 15, officials said. Two of those apprentice team leaders have been promoted to a newly created level of team director, overseeing a larger number of restaurants and leadership teams.

Monty Moran, Chipotle co-chief executive, contends that the practice results in more efficiently run restaurants. Ambitious top performers get more done with fewer resources, he said, and empowered managers need less supervision.

“Our restaurateurs and the managers who are working to become restaurateurs run better restaurants, prepare and cook better food, and provide better customer service, all of which result in better customer loyalty and higher sales,” he said.

In addition, he added, “Our top-performing managers allow us to run and operate our own restaurants without having to resort to franchising.”

There are other aspects of Chipotle that contribute, like the hip décor and the focus on A-plus real estate, although officials have developed a smaller prototype with lower opening costs, allowing the concept to enter new trade areas.

Chipotle’s new Asian concept will be developed on the same pillars with a different type of cuisine, said Arnold. Others also are hoping to profit from the Chipotle model. Following are a few copycats worth watching:

SLIDE SHOW: The next Chipotle?

Piada Italian Street Food

Last September Chris Doody, co-founder of the Bravo Brio Restaurant Group Inc., debuted in Columbus, Ohio, a new concept intended to put an American spin on a little-known Italian street food.

Called a piada, the dish could be loosely described as an Italian burrito. A thin dough called a piadina, which is made from organic flour, is grilled to order quickly on a hot stone and filled with the guest’s choice of 
grilled items, including chicken or steak with rosemary, garlic and lemon; salmon; vegetables; calamari with hot peppers; or Italian sausage.

Next comes the choice of sauce, such as diavolo with spicy tomatoes, garlic and chili peppers, or creamy Parmesan. Additional toppings might include artichokes, arugula, olives or mozzarella. 

Guests also can build their meals on a base of salad or pasta, or choose a simple lobster bisque with a pepperoni-spiked piada “stick” and dipping sauce. The menu also includes beer and wine.

Doody said the delivery system is very similar to Chipotle’s, as is the price point. Piada’s average check is below $10, which Doody said is the “sweet spot” in the still-recovering economy.

Piada will also focus on quality ingredients, said Doody, pointing to the use of hormone-free meat and efforts to source local and natural products when seasons permit.

The restaurant is about 2,600 square feet and seats 60. Because the concept appeals to such a broad audience, Doody said, dinner sales are about the same or better than at lunch.

After building and in 2006 selling the Italian casual-dining Bravo Cucina Italiana and Brio Tuscan Grille concepts, Doody said he saw a wide-open niche for Italian food in the fast-casual segment. 

A second Piada Italian Street Food is scheduled to open in April in Columbus. Doody said the concept was designed to have legs under The Piada Group, but it’s too soon to speculate on goals for growth or sales projections.

“I don’t want to be cocky,” he said. “The first store has to work. We’re excited about the reception we’ve gotten so far, and we’ll keep plugging away.”

Cava Mezze Grill

Before launching Cava Mezze Grill in Bethesda, Md., the founders said they studied other successful fast-casual models, including Chipotle, to see what would work best for the cuisine.

Brett Schulman, Cava Mezze Grill’s chief executive, said the fast-casual restaurant was developed as a variant of the full-service Greek restaurants called Cava, with two locations and a third in development in the Washington, D.C., area. Cava was founded by partners Ike Grigoropoulos, Ted Xenohristos and Dimitri Moshovitis.

After establishing brand recognition with Cava, it seemed a natural next step for the partners to offer a limited version of the menu in a faster-service setting at affordable prices.

The group already used a commissary to make Cava’s popular sauces and spreads, which are also sold at Whole Foods in some markets.

So the fast-casual Cava Mezze Grill was born. It opened in January, and the company is already planning to open two more in the D.C. area this year.

Like at Chipotle, guests build their meals, first selecting a base of warm pita bread, basmati rice, salad or mini pitas. Next comes a choice of dip or spread, such as harissa, tzatziki, hummus, eggplant with red pepper, or the signature “Crazy Feta” — a mousse of feta cheese spiked with jalapeños. Customers can choose more than one.

Then comes a selection of proteins, including meats such as braised lamb, grilled chicken, ground sirloin, Greek pork sausage or the non-meat option of falafel. Toppings include a cabbage salad, cucumber and tomato salad, shredded romaine, or feta.

Schulman said the meat choice drives the price, with most meats and falafel priced at $6.90 and lamb priced at $7.50. A vegetable-only option is $6.40. The menu also includes lower-priced, kid-sized options.

The menu is rounded out with sides such as lentil soup and pita chips with dip, and beer and wine is available, said Schulman. The average check is around $10.

The labor efficiencies of the service model allow the company to focus more on quality ingredients, Schulman said. Cava Mezze Grill’s meats are hormone- and antibiotic-free, dips and sauces are all natural, and the restaurant seeks out local produce where possible.

Lunch contributes about 65 percent of sales, and dinner accounts for 35 percent, but Schulman said they are working on building the later-day business.

Schulman declined to project first-year sales, but the concept is designed to be scalable.

“We’ll self-fund two more, maybe three, then we’ll look at other funding sources,” he said. “I can see doing 10 to 15 [in the D.C. area] before trying another region.”

Hello Pasta

The first Hello Pasta opened in New York last July, and the company has already grown to three locations, with a fourth soon to be announced.

The concept was created by partners Laurent Lesort, Nicolas Barthelemy and Gregory Baratte, three Frenchmen who launched the brand with the backing of New York investor Mickey Gooch, who serves as chairman.

Like Doody of Piada, the group saw a void in the fast-casual world, specifically, for pasta, said Baratte, the brand’s chief marketing officer.

Similar pasta concepts are growing in Europe, but not yet in the United States, where the fast-casual segment is dominated by burgers, salads and pizza concepts, he said.

At Hello Pasta, guests select from a variety of pastas, from classic spaghetti to whole-wheat fusilli or gluten-free penne. They also choose from among 10 sauces, such as spicy arrabiata, mac & cheese, or smoky bacon carbonara. One of the top sellers is a creamy, tomato-based sausage and pea sauce, Baratte said.

Guests can add a protein, such as chicken, shrimp or meatballs, or cheese. And side salads and soups are also available.

Baratte said the group initially tried to keep the menu relatively simple, but they have found that guests are so used to customizing their meals that they wanted more options. 

“It’s very American,” said Baratte.

The average check is under $10, and the company is developing the concept with two formats. Existing locations are considered “lifestyle” restaurants at 1,200 to 1,800 square feet. A smaller 600- to 800-square-foot version will also soon debut with the goal of moving into food court locations.

Quality ingredients are a focus, Baratte said, but, like Chipotle, it’s an emphasis the group is easing into. 

“Initially we wanted to do everything organic, but we found it’s very difficult with the cost. Now we do it where possible.”

In a departure from the Chipotle model, Hello Pasta is gearing up to start franchising. 

“But first we want to make sure we perfect the three locations we have in the city,” said Baratte. “We’re still tweaking, getting feedback from customers.”

Contact Lisa Jennings at 
[email protected]

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