Chipotle Opens Asian Eatery in Challenge to Panda Express

Chipotle Mexican Grill Inc. (CMG) opens its first Asian-themed restaurant today in Washington as the company moves to expand beyond burritos.

ShopHouse Southeast Asian Kitchen will open to the public in the city’s DuPont Circle, Chris Arnold, a Chipotle spokesman, said in an interview yesterday. ShopHouse customers will move along a line and customize their food in a format similar to a Chipotle store, he said.

It will take a “substantial amount of time” for ShopHouse to rival Chipotle, said Bart Glenn, an analyst at D.A. Davidson & Co. in Lake Oswego, Oregon. “There’s never a sure thing with a restaurant concept, but I wouldn’t bet against them.” Glenn advises buying the shares.

Instead of beans and tortillas, diners will choose between rice and noodles topped with ingredients such as chicken satay, tofu, pork meatballs, Chinese broccoli and eggplant, Arnold said. The bowls will sell for $6.50 to $7.50, compared with $7 to $8 for a Chipotle burrito. The chain also will have traditional banh mi Vietnamese sandwiches with green papaya slaw and chopped peanuts.

Chipotle’s new Asian concept will be taking on the likes of Panda Express and Pei Wei Asian Diner, which last year accounted for the biggest share of U.S. dollars spent at limited-service Asian chains. Panda Restaurant Group Inc., which operates about 1,400 Panda Express locations in the U.S. and Puerto Rico, had $1.4 billion in sales last year, according to Chicago-based researcher Technomic Inc. Pei Wei, with about 173 U.S. stores, is owned by P.F. Chang’s China Bistro Inc.

Menu Fiddling

Co-Chief Executive Officer Steve Ells, a classically trained chef, opened the first Chipotle in 1993. He has been cooking and fiddling with the ShopHouse menu for about a year, Arnold said. At the chain, diners can top off noodle bowls with several different curry sauces, a tamarind vinaigrette or Asian pickles.

The first ShopHouse will have a rustic appearance, with earth tones and a few splashes of bright colors mimicking Southeast Asian spices, Arnold said. The decor -- exposed-bulb lights and teak-like seating -- is “very minimal” he said. The company also imported a Coca-Cola Co. machine from Thailand for the store.

“We always design restaurants in a way that says something about the food,” Arnold said. The shop was inspired by stores in Thailand, Malaysia and Vietnam where families live upstairs and run their restaurants or markets on the ground level, Chipotle said earlier this year.

Asian Dining

Sales at limited-service Asian restaurants grew 5.9 percent last year, faster than any other menu category, according to Technomic. This year, sales at Asian dining spots are expected to rise 5 percent, compared with 4 percent for all limited- service restaurants.

Chipotle operates more than 1,100 U.S. stores. Revenue climbed 22 percent to $571.6 million in the quarter ended June 30, the Denver-based company said in July, marking the fifth straight quarter in which sales increased at least 20 percent.

Chipotle rose 24 cents to $316.15 at 4:07 p.m. in New York Stock Exchange composite trading. Last year, the shares more than doubled and were the best performing in the Standard & Poor’s 500 Restaurant Index, topping McDonald’s Corp. (MCD), Starbucks Corp. (SBUX) and Yum! Brands Inc.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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