Brian Sozzi Discusses Chipotle's 'Secret' Chinese Brand

Analyst Brian Sozzi commented on Chipotle Mexican Grill, Inc. CMG in an article published on The Street about Chipotle's Asian food concept ShopHouse.

Sozzi noted that, "Chipotle's methodical, if not secretive approach, to introducing ShopHouse to a generation of folks that have grown up imbibing on cheap white rice from local Chinese food joints reflects executives' focus on proper site selection, getting the right people to run the restaurants, and on fine-tuning the menu."

"The first ShopHouse opened its doors in Washington, D.C. in September 2011, offering an upscale take on Asian-themed food that includes rice bowls and sandwiches. It has since only expanded to eight ShopHouse locations, four each in the Los Angeles, California and Washington, D.C. areas, and now represents Chipotle's second-largest business segment. The most recent ShopHouse opened in Columbus Mall in Maryland," according to Sozzi.

Investors may be especially interested in ShopHouse expansion in light of the company's Q3 2014 results, as Chipotle beat estimates but noted that growth will slow in 2015.

The big question is whether or not ShopHouse can replicate the success of Chipotle's Mexican fast-food model with Asian fast food.

Sozzi concluded that "whatever the number of ShopHouses that open in 2015 and beyond they will have a tough time replicating the sales and profit growth of the core Chipotle chain. Chipotle noted "very little price resistance and trade down" following a nationwide price increase averaging 6.3 percent that was fully rolled out by the end of the second-quarter.

Chipotle Mexican Grill, Inc. traded at $627.12 in the premarket, down 3.8 percent.