Is Chipotle's Vegan Menu Expansion A Smart Move?

Chipotle Mexican Grill, Inc. CMG announced recently that it planned to expand its vegan “Sofritas” option to nine additional states.

The move would make the braised and shredded tofu item a permanent menu offering in those new areas.

Related Link: Chipotle Mexican Grill Beats Q3 Estimates, Sees Slowing Growth For 2015

Going Nationwide

With the expansion, Chipotle would be adding its “Sofritas” to Texas, Louisiana, Arkansas, Alabama, Tennessee, Florida, Georgia and the Carolinas.

Previously Chipotle’s vegan menu has been available in California, Colorado, the Pacific Northwest, Chicago and select East Coast cities.

According to the company, by the end of the year, tofu burritos would be available as a permanent menu item nationwide.

Vegan Fast Food Is A 'Thing'

Chipotle is not the only fast casual or fast food restaurant to offer a vegan menu. VeganRestaurants Hub listed more than 60 chains with vegan menus.

In addition to Chipotle, the site features links to vegan menu offerings from Burger King Worldwide Inc. BKW, Yum! Brands, Inc.’s YUM Taco Bell, Domino’s Pizza Inc DPZ, Panera Bread Company PNRA and many more.

With about five percent of the population of the U.S., according to Gallup, saying they were vegetarian and only two percent declaring a vegan lifestyle, why do so many chains include a vegan menu?

Good For The Bottom Line

Wedbush Securities, Inc. analyst, Nick Setyan may have hit on possible reasons when he told Benzinga that Chipotle’s vegan expansion move would be good for the company’s bottom line.

According to Setyan, the move would help Chipotle accomplish two important revenue-based goals for any fast casual chain – bringing in new customers and helping to contain costs.

New Customers

Expanding Chipotle’s vegan footprint, Setyan said, “Helps lift sales incrementally by allowing them to incorporate new customers that previously would not have considered Chipotle an option.”

According to Setyan, in stores where "Sofritas" were currently available, the vegan menu item accounted for 3.5 percent of sales.

Related Link: Is McDonald's Going Fast Casual?

The Protein Problem

In addition, Setyan said, the move would allow Chipotle “to diversify their food basket away from proteins.”

Setyan pointed out that protein costs “have and will likely continue to be a headwind.”

Anything Chipotle could do, he said, to “lower the overall mix of proteins should help with food cost inflation on the margin.”

At the time of this writing, Jim Probasco  had no position in any mentioned securities.