Chipotle Considers Opening Chain Under 'Better Burger' Name

Bloomberg
Bloomberg
(Bloomberg)

Chipotle Mexican Grill Inc. may be getting into the burger business.

Chipotle, which has already invested in two smaller chains, is considering opening another restaurant concept focused on hamburgers, said Chris Arnold, a spokesman for the Denver-based company. The company filed a trademark application this month for the name “Better Burger,” according to the U.S. Patent and Trademark Office website.

“It’s a growth seed idea we are exploring,” Arnold said in an e-mail. “We have two non-Chipotle growth seeds open now -- ShopHouse and Pizzeria Locale -- and have noted before that the Chipotle model could be applied to a wide variety of foods.”

Even as it mulls expansion, the burrito seller is trying to recover from a food-safety crisis that erupted last year. The company suffered a series of E. coli and norovirus outbreaks, driving away customers and spurring an investigation by the Centers for Disease Control and Prevention. The fallout is ongoing: Same-store sales tumbled 26 percent in February, and the company expects to report a loss in the first quarter.

Fresh Direction?

A burger chain would give Chipotle a way to expand under a fresh banner. It also would continue its efforts to apply the fast-casual model -- fresh ingredients and customized menu items -- to other cuisines. Chipotle opened its first ShopHouse Southeast Asian Kitchen in Washington in 2011. The noodle-selling chain has since expanded to Los Angeles and Chicago. Chipotle also has invested in Pizzeria Locale, a fast-casual restaurant that started in Colorado.

Burgers would be a potentially profitable area for Chipotle. Beef prices are falling and Americans are projected to eat more of the meat this year, according to U.S. Department of Agriculture. And the hamburger industry is far larger than the Mexican-food business. U.S. sales at limited-service burger chains -- restaurants without wait staff -- rose to $76.9 billion in 2014, compared with $19.7 billion for Mexican fare, according to research firm Technomic Inc.

A new fast-casual burger chain would bring fresh competition to Five Guys Burgers & Fries, Smashburger and Shake Shack Inc. News of Chipotle’s “Better Burger” concept hurt shares of Shake Shack on Wednesday. After rising as much as 6.3 percent to $37.08, the stock retreated to $35.77 by the close. Chipotle rose 1.3 percent to $466.15.

For now, the U.S. market probably isn’t saturated with too many burger chains, said Darren Tristano, Technomic’s president.

“The category continues to grow, and the opportunity continues to be very big,” he said. “If you’re Chipotle, you’re kind of looking at it saying, ‘Wow, look at Shake Shack -- they went from one to such a large volume of sales.’"

 

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