Will Chipotle’s New Diversification Model Prove Tasty to Investors?
On Chipotle’s bleak, third-quarter earnings call, CEO and Co-founder Steve Ells announced the company was pursuing “strategic alternatives” for five-year-old ShopHouse Southeast Asian Kitchen. The 15-unit chain “has not demonstrated the ability to support an attractive unit economic model” across the three markets it’s in, he remarked.
Enter Tasty Made, a premium burger brand the burrito chain launched on November 3 in Lancaster, Ohio, about 30 miles southeast of Columbus. A second unit is planned for next year in Pickerington, Ohio, a few miles northwest.
Why burgers? Tasty Made’s Director Dave Chrisman, a longtime employee, told Restaurant Finance Monitor that Ells has said the Chipotle model, which is focused on speed of service, can fit almost any type of menu. He pointed to the dual-grill set up in the white-tile-lined open kitchen and said they could produce hundreds of burgers, toasted buns and french fries an hour. During this particular Friday lunch, business was steady but not heavy at the week-old eatery.
In any case, he added, central Ohio is a strong market for the burrito chain—though there was no intention of co-branding. Chrisman, who lives in Columbus, noted that Lancaster was picked among several Ohio towns because city officials there were eager and quick to get things done. Talks began in April.
Joining Chrisman is Chef Nate Appleman, a James Beard Award-winning chef who developed Tasty Made's limited menu. OSI Group, a major foodservice vendor, supplies the fresh, unprocessed patties. Chipotle’s Supply Chain Director Tim Spong, who was also at the unit while we were, said Tasty Made will increase the size of the patty by 1 ounce.
Customers have complained the burger was pink, he explained; the larger burger will remain moist but no longer show pink. No price increase is expected. Milkshakes, Coke and french fries round out the menu. Chrisman declined to offer projected sales and ROI for the week-old eatery, open seven days a week.
Chipotle has invested in another emerging brand, five-unit Pizzeria Locale. Expansion has been slow.