Chipotle Mexican Grill, Red Robin Gourmet Burgers Inc., El Pollo Loco and Carrols Restaurant Group Inc. were among restaurant chains to make news on day two of the annual ICR XChange consumer conference in Orlando this week. The announcements during their presentations to Wall Street analysts included expansion into new markets, food as theater, acquisition plans and the spread of technology in restaurants.
Chipotle Mexican Grill plans to take its ShopHouse Southeast Asian Kitchen and Pizzeria Locale concepts to new markets this year, company executives said at the conference.
The executives, however, didn’t say to which markets they would move Chipotle’s closely watched emerging concepts.
Steve Ells, Chipotle’s founder and co-CEO, said that they have “a lease or two signed” for ShopHouse in a new market. The “Asian-inspired” concept has nine locations in California and the Washington, D.C. area and a 10th opening in Rockville, Md., according to the company’s website.
Analyst Mark Kalinowski, managing director, restaurants, at Janney Capital Markets, suggested in a note Wednesday that “odds favor” the Indianapolis area as a new ShopHouse market.
And Pizzeria Locale, a customizable pizza concept, which has two fast-casual locations in Denver, will be expanded to two new markets – also not identified.
ShopHouse and Pizzeria Locale have been closely watched in large part because of Chipotle’s popularity — the Denver-based company’s stock price has soared past $700 a share this year after same-store sales rose 17 percent on average in 2014.
Company executives said their average unit volumes have reached $2.4 million, by far the largest among fast-casual chains and nearly as much as McDonald’s, Chipotle’s former owner.
Jack Hartung, Chipotle’s chief financial officer, however, indicated that the company has plenty of room for further same-store sales growth, noting that some locations have volumes exceeding $5 million.
“Nothing says our volumes can’t go up,” he said.
Chipotle executives also took some shots at its closest rival in the fast-casual Mexican sector, Qdoba Mexican Grill — which has boasted stronger same-store sales of late, including 6 percent in the last fiscal year. Qdoba is operated and franchised by San Diego-based Jack in the Box Inc.
Hartung said Chipotle’s sales growth is not a sign that the chain is benefitting from growing interest in Mexican food.
“There’s always been a difference between Chipotle (in terms of same-store sales) and Qdoba,” Hartung said. “We’ve always been higher by several percentage points. Our volumes are more than double. We don’t think the results we’re doing are because of Mexican. We think Chipotle is a special place.
“I would say they’re on our coattails a little bit,” he added. “Some research we’ve seen supports that.”
Here are some other tidbits from the conference:
Red Robin in the movie-picking game
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Want to know how Red Robin Gourmet Burgers’ sales are doing? Pay attention to Hollywood.
Eighty percent of the Greenwood Village, Colo.-based casual dining chain’s 400 locations are near movie theaters, CEO Steve Carley said at ICR.
Half are in the same development as a movie theater, and the chain’s customers frequently come in before seeing a show.
So in recent years, the company had promotions offering a free movie ticket with the purchase of a $25 gift card. But that promotion gets the company into the business of picking winners.
“When you get into the movie-picking business, it gets a little bit dicier,” Carley said.
The 2013 film “The Wolverine” was a winner for the brand because it came out in July and marketing for that movie began a month earlier. Red Robin got a big benefit from that. Wolverine ultimately earned $132.6 million in domestic box office receipts, according to the website Box Office Mojo.
Red Robin’s pick in 2014 was “Hercules.” It didn’t do nearly as well, with a domestic box office of $72.7 million.
Still, Carley said, “Our brand is well positioned for this burger-and-a-movie thought process.”
The chicken show
El Pollo Loco has enjoyed 13 consecutive quarters of same-store sales growth. Average unit volumes are now nearly $1.9 million and restaurant margins are 21.8 percent.
One of the reasons for that growth: The chain started showing off its grilled chicken.
Steve Sather, El Pollo Loco’s CEO, said that the chain’s 20-foot grill, with a grillmaster grilling the citrus-marinated chicken that is the brand’s signature protein, are front and center in newly remodeled locations. And at most locations, the grill is at least visible, and often featured in advertisements.
“A lot of consumer research showed the relationship consumers have with chicken on the grill,” Sather said. “They get it. When we did research, we saw the importance of chicken on the grill and we took it to our design firm. They designed a theater around that.”
How many Carrols?
After acquiring more than 400 locations since 2012, Burger King franchisee Carrols Restaurant Group now has more than 600 units.
But don’t think it’ll stop there. The company said at ICR that it’s prepared to expand to 1,000 locations.
But even that might not be the limit. The chain has the right to first refusal in 20 eastern states from Georgia to Maine — meaning it has the ability to buy any Burger King put up for sale in those states.
There are 2,000 locations in those states.
“We’re not saying we’re going to buy them all,” said Carrols CFO Paul Flanders. “But certainly it’s a large pool from which to generate opportunities.”
More on technology
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Numerous brands talked at ICR about using more technology in their restaurants, either through tabletop tablets, smartphones or online ordering.
But such efforts are not a panacea, says Eric Dzwonczyk, managing director of consulting firm AlixPartners. He says companies shouldn’t just add more technology for the sake of it; they should have a strategy in place and a business problem they want to solve.
“They need to have some level of involvement,” he said, “especially if part of their strategy is re-engaging with Millennials. Technology has to be part of that.”
Contact Jonathan Maze at [email protected].
Follow him on Twitter at @jonathanmaze
