On the Margin
ICR conference 2016

Among growth chains, Chipotle still resonates

This post is part of the On the Margin blog.

Chipotle Mexican Grill has had an outsized influence on the restaurant industry since long before McDonald’s Corp. spun it off as an independent company in 2006.

The past few weeks haven’t changed that, even though Chipotle’s stock is down by a third amid an unprecedented series of foodborne illness outbreaks. That was evident on Monday, during the first day of the ICR Conference in Orlando.

ICR is the annual event in which public consumer companies make presentations to investors. But the most interesting day of the conference is the private company day, when mostly private growth chains make their own pitches.

Many of these chains in recent years have paid homage to Chipotle, and that didn’t change this year.

The first private company to present, for instance, was the three-unit California chain Tava Kitchen. CEO Jeremy Morgan noted that the chain’s founders were business consultants who decided to go into the restaurant business and spent three months learning that business by working at Chipotle. The concept they developed looked awfully similar, including wraps and bowls but with Indian food rather than Mexican.

“If you were purposefully trying to mimic Chipotle, that’s what they developed,” Morgan said. He said, however, that the chain is now broadening its approach to be more cafeteria style — similar to the Los Angeles chain Lemonade.

Presentations also included two from chains, Blaze Pizza and Mod Pizza, that have brought a customizable, fast-casual business format to the pizza business.

ICR conference
The ICR conference is an annual event in which public consumer companies make presentations to investors. Photo: Jonathan Maze

But it was in the presentations about sourcing in which Chipotle’s influence could truly be seen.

Numerous concepts, even some full-service chains, made note that younger consumers want “real food” that is made fresh and not processed or frozen. The burger chain Zinburger noted that it makes everything from scratch in-house but two products, sweet potato fries and ice cream.

And locally sourced menu items were in full force. The founders of the 33-unit B.Good noted that they “source as much locally as we can.” The company has gone so far as to create a hydroponic farm inside a storage container under a highway overpass in its Boston home. The farm is called “Veggie Jackson,” and enables the company to get fresh kale for its kale-and-grain bowls year-round.

Anthony Pigliacampo, whose 14-unit Denver chain Modern Market boasts scratch-made food, acknowledged that sourcing food locally will be difficult for a chain with nationwide scale.

“If you live in Maine, you’re not growing lettuce in your back yard,” he said, noting that he expects the system to ultimately evolve into one in which chains use select local producers when possible. “We haven’t figured out how to be a national brand without leveraging the distribution system that already exists.”

The talk of using local and sustainable sources comes despite Chipotle’s food safety concerns.

To be sure, it’s important to note that it remains uncertain what caused Chipotle’s E. coli outbreak in multiple states. And many people still believe the size of the outbreak makes it unlikely that the culprit was a locally sourced item, but instead was a nationally sourced item. Still, the problems have led to heavy scrutiny of Chipotle’s supply chain.

Yet those concerns were not in evidence among the presentations. Indeed, food safety wasn’t mentioned once, and no investor or analyst asked about it.

Then again, maybe the days of chains deliberately trying to mimic Chipotle are indeed ending.

“We’re not the Chipotle of something,” Pigliacampo declared.  

Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze

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