Chipotle Mexican Grill, Inc. (NYSE:CMG) has had a remarkable run over the past five years, despite being essentially a one-trick pony. Chipotle has cultivated a loyal customer base who are willing to pay a slight premium for high-quality food (mostly burritos, tacos, and salads) that’s ethically sourced. The company’s rapid growth has led to strong returns for early investors.
Two years ago, Chipotle Mexican Grill, Inc. (NYSE:CMG) began testing a new concept restaurant, ShopHouse Southeast Asian Kitchen, with one location in Washington, D.C. The restaurant offers a “Chipotle-style” take on Asian cuisine. Apparently, Chipotle now thinks the ShopHouse concept is ready for prime time, because the company announced this week that it has signed leases for four new ShopHouse restaurants, in addition to three that are already under construction.
At present, Chipotle still operates just one ShopHouse Southeast Asian Kitchen restaurant, located near Dupont Circle in Washington. A second D.C. location is expected to open soon. Last year, Chipotle Mexican Grill, Inc. (NYSE:CMG) announced plans to bring the concept to Los Angeles as well. The first two L.A. incarnations of ShopHouse will open “in the coming weeks.”
On Monday, Chipotle Mexican Grill, Inc. (NYSE:CMG) announced plans to add four more restaurants within the two test markets of Washington and Los Angeles. One will be in the Westwood neighborhood of Los Angeles (right near the UCLA campus), one will be in D.C. proper, and two will be in suburban D.C. — specifically, Bethesda and Rockville, Md.
Chipotle was careful to state that the announcement doesn’t imply an acceleration of ShopHouse’s growth. While Chipotle will grow the concept from just one operating restaurant today to at least eight by the end of next year, that will still constitute well under 1% of the total store base. Furthermore, Chipotle Mexican Grill, Inc. (NYSE:CMG) plans to open 165 to 180 new restaurants this year, so ShopHouse also represents a small proportion of the company’s growth.
Expanding the addressable market is good
While Chipotle is still adding dozens of new restaurants every quarter in the U.S., at some point, it’s going to start saturating the market. Chipotle has slowly begun to expand internationally, and it operated 11 stores outside the U.S. as of the end of 2012 — five in Canada, five in the U.K., and one in France. However, consumers haven’t caught on to the Chipotle concept as quickly in Europe as they did in North America.