Chipotle’s Ells: Noodle Binge Inspired New Eatery

(Corrects spelling of location in third paragraph.)

Chipotle Mexican Grill Inc. (CMG) Chief Executive Officer Steve Ells said his new restaurant, ShopHouse Southeast Asian Kitchen, was born during the two weeks he spent eating his way through Thailand and Singapore last year.

“I was very inspired by Southeast Asian food and the fact that it would lend itself to the Chipotle format,” Ells, 46, said in an interview today.

Along with Tim Wildin, Chipotle’s concept developer, Ells sampled noodle soups and curries at family-run storefronts, took cooking classes and visited local markets during the two-week food spree. Last week, Denver-based Chipotle opened the first ShopHouse in Washington’s Dupont Circle, and optimism the restaurant may grow into a successful chain has contributed to a seven-day climb for the company’s shares.

Ells, a classically trained chef who opened the first Chipotle in 1993, spent more than a year cooking and fiddling with the ShopHouse menu. The restaurant expands Chipotle beyond burritos and guacamole, yet sticks to the chain’s serving-line set-up where diners customize their meals.

At ShopHouse, customers choose between rice and noodles topped with ingredients such as grilled chicken satay, organic tofu, pork meatballs, Chinese broccoli and eggplant. The bowls go for $6.50 to $7.50, compared with $7 to $8 for a Chipotle burrito. They’re also hawking traditional banh mi Vietnamese sandwiches with green papaya slaw and crushed peanuts, which were added to the menu in the final hour -- six weeks from open, Wildin said in an interview yesterday.

‘Tweaking Things’

“Right up to opening we were tweaking things,” he said. The day before the grand opening, Wildin said he had to reprint the burlap-sack-like paper menus after they decided to serve the spicy charred corn hot instead of cold.

While the first restaurant came together relatively quickly, don’t expect ShopHouse stores to start springing up across the U.S. -- there are no more locations planned now, Ells said.

“It’s too early to talk about what the next steps are,” he said.

Still, investors are betting Chipotle may duplicate its namesake chain’s success with ShopHouse. The company advanced 3.2 percent to a record $346.78 in New York Stock Exchange composite trading, before paring its gains to $339.05 at 2:43 p.m. after CNBC’s Jim Cramer said the stock was up “too much.” Chipotle has climbed 7.3 percent since Sept. 14, before ShopHouse opened.

‘More Optimistic’

“People are getting more optimistic about” the new restaurant, Bart Glenn, an analyst at D.A. Davidson & Co. in Lake Oswego, Oregon, said today in an interview.

Investors also may be flocking to the company for its overall domestic growth potential, he said. Revenue at Chipotle, which operates more than 1,100 U.S. stores, 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.

“Even with just the core Chipotle U.S. stores, there’s an awful lot of runway ahead,” said Glenn, who advises buying the shares.

A ShopHouse expansion wouldn’t be without challenges, said Peter Saleh, an analyst at Telsey Advisory Group in New York who estimates ShopHouse may grow to 50 stores in five years.

While Americans are “looking for something different, something unique,” ShopHouse would compete with fast-casual restaurants, such as Smashburger, Five Guys Burgers and Fries and Panera Bread Co. (PNRA), for prime real estate, he said.

‘Bare Bones’

ShopHouse, which seats about 45 customers, was inspired by stores in Thailand, Malaysia and Vietnam where families live upstairs and run restaurants on the ground floor.

Traditional shophouses are not “known for their accouterments,” said Thaddeus Briner, an architect at New York- based Architecture Outfit who designed ShopHouse. “They’re kind of bare bones.”

At ShopHouse, a lineup of about 50 hot-sauce bottles is the only wall decoration -- most of the color comes from the bright food and sauces such as spicy red curry or tamarind vinaigrette. Briner said he considered lining the walls with rice paper and installing bamboo floors before deciding both were too cliche.

“You want to bring something that is kind of memorable without relying on a sort of caricature of Southeast Asian food,” he said.

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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