Chipotle to expand its menu

by Monica Watrous
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 CMG
Earlier this month, Chipotle rolled out chorizo. 
 

DENVER — Chipotle Mexican Grill, Inc. is testing new menu items in an effort to attract new and lapsed consumers following the food safety crisis late last year that crippled the Mexican fast-casual chain.

Earlier this month, Chipotle rolled out chorizo, which now accounts for roughly 7 percent of entree sales nationwide, and is currently testing two dessert options with plans to select one to offer nationally in the near future, said Steve Ells, founder, chairman and co-CEO. (The company declined to provide additional details on the test items.)

Steve Ells
Steve Ells, founder, chairman and Co-CEO of Chipotle 

“Any time we consider new menu items, it is important to us that they remain consistent with our food culture, both in terms of the ingredients we use and how the new items are prepared,” Ells said during an Oct. 25 earnings call with financial analysts. “We believe that there is an opportunity to excite current customers and to attract new customers with thoughtful menu development, and we are exploring these options.”

Net income in the third quarter ended Sept. 30 was $7,799,000, equal to 27 cents per share on the common stock, which compared with $144,863,000, or $4.65 per share, in the prior-year period. Revenue totaled $1,036,982,000, down nearly 15 percent from $1,216,890,000.

 Chipotle
Comparable restaurant sales for Chipotle declined 22 percent in the quarter. 
 

Comparable restaurant sales declined 22 percent in the quarter, which was an improvement over a 24 percent decline in the second quarter and a 30 percent drop in comparable restaurant sales in the first quarter.

“We are beginning to emerge from the most difficult year in our history and are seeing many reasons to be optimistic that we are headed in the right direction to restore our business to a place our many shareholders will be proud of,” Ells said. “But please know that, while we are still on the road to recovery, we are not satisfied, and we will continue to work extremely hard to make the adjustments necessary to restore our business and deliver results as quickly as possible.”

In addition to discussing plans for the Chipotle brand, Ells said the company is exploring strategic options for its ShopHouse Southeast Asian Kitchen business, a fast-casual noodle chain operating 15 units in three markets.

 Shophouse
Chipotle has decided not to invest further in developing or growing its ShopHouse brand. 
 

“We’ve fully impaired the assets related to ShopHouse, which totaled approximately $14.5 million on a pre-tax basis,” Ells said. “We are proud of the ShopHouse team, the delicious food they have created, and the excellent customer service they have delivered. But after operating in three distinct markets and opening in a variety of trade areas, ShopHouse simply has not demonstrated the ability to support an attractive unit economic model. As a result, we have decided not to invest further in developing or growing the ShopHouse brand and will pursue strategic alternatives.

“Although the exotic ShopHouse cuisine was not able to attract sufficient customer loyalty and visit frequency to make it a viable growth strategy for us, we continue to believe that our approach to food, people and unit economics with the right cuisine with the right concept can lead to a compelling growth strategy. And we are optimistic that our other growth seeds serving pizza and soon burgers, both of which have broad customer appeal, can become further growth strategies for us.” 

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