Analysis: Chipotle under attack by noodles and clones

Thu Jul 18, 2013 7:43pm EDT
 
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By Lisa Baertlein

LOS ANGELES (Reuters) - Chipotle Mexican Grill (CMG.N: Quote) is one of the restaurant industry's hottest stocks, but fickle diners and an ever-expanding selection of entrepreneurial eateries threaten to make it harder for the upscale burrito seller to keep delivering the explosive growth investors savor.

After two decades without significant direct challenges in the "fast-casual" category, Chipotle is bumping up against a bevy of new rivals that also sell $10 meals made right before diners' eyes in the open assembly-line kitchens it popularized.

Contrary to popular belief, the biggest threat to Denver-based Chipotle may not be big, publicly traded Mexican food chains like Yum Brands Inc's (YUM.N: Quote) Taco Bell or Jack in the Box Inc's (JACK.O: Quote) Qdoba Mexican Grill, analysts said.

"It's all these little, new concepts that are springing up everywhere. There is a mad rush into fast-casual," Bob Goldin, an executive vice president at consulting firm Technomic, said.

"Not only do you have Chipotle clones, you have the expansion of other cuisines," said Morningstar restaurant analyst RJ Hottovy.

Some of the fastest-growing fast-casual names include established players like Chipotle "clone" Freebirds World Burrito, "better" burger seller Five Guys Burgers and Fries, and sandwich seller Jimmy John's, Technomic said.

Other new ethnic-inspired eateries specialize in everything from falafel to Vietnamese banh mi sandwiches.

Newly public Noodles & Co NDLS.O, a roughly 345-unit chain, dubs itself "your world kitchen" and offers dishes such as Japanese pan noodles, Wisconsin Mac & Cheese and Pad Thai.   Continued...

 
A ShopHouse Southeast Asian Kitchen is pictured in Hollywood, California July 16, 2013. REUTERS/Fred Prouser