Chipotle Is Serving Burritos in a New Way

By Markets Fool.com

Image source: Chipotle.

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If you're a supplier of flour tortillas toChipotle Mexican Grill (NYSE: CMG), you may not want to assume that your next shipment is automatically going to the namesake chain. ShopHouse Southeast Asian Kitchen -- Chipotle's fast-casual take on Asian cuisine -- is now testing wraps at some of its locations.

Chipotle communications director Chris Arnold explainedthe serendipitous origin of the test at its original location in Washington's Dupont Circle to Nation's Restaurant News. The restaurant noticed that folks were bringing in flour tortillas from a nearby Chipotle, using them to transform the Asian-inspired rice bowls into burritos.

It's the trick that every diehard Chipotle fan knows -- order a bowl with a free flour tortilla on the side so that you can roll your own burrito and get more food than the burrito alone -- applied to a sibling concept.

Chipotle is testing the add-on at Dupont Circle, as well as at a pair of Chicago locations and a fourth outlet in Los Angeles. They're being called wraps, but there's no denying what they are. They are the same flour tortillas served at Chipotle.

A difference-making concept would've come in handy

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Chipotle has been slow to grow ShopHouse. The original store opened five years ago, and the concept has ballooned to 15 locations in that time. That wouldn't be too shabby for an indie operator, but this is Chipotle, with the resources to build out a hot chain a lot faster than that.

Pizzeria Locale, the trendy quick-bake pizza concept that it invested in three years ago, is up to just seven pizzerias. Later this year, Chipotle will enter the gourmet burger market when Tasty Made opens in Ohio. If we're at just seven TastyMade locations in three years -- or 15 in five years -- something's not going right.

Chipotle now has 2,124 locations. None of the other concepts in its arsenal are moving the needle in that revenue mix pie. That has to sting these days. The performance of Chipotle's namesake concept has been atrocious since food-borne illness outbreaks frightened customers away late last year. It has posted three quarters of double-digit declines in comps. The stock has surrendered 45% of its value since peaking just before the bad news hit last year.

It would've been convenient to have a sister eatery generating meaningful business, but that's not in the cards when Chipotleexpects to open at least 220 new burrito joints this year. This brings us back to the burrito -- err, wrap -- trial run at ShopHouse. If that's what it takes to get the multi-concept operator excited enough about this concept to expand it aggressively, the better off Chipotle investors will be. Having all of its burritos in the same basket didn't work out too well this time.

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.