According to Business First, the restaurant will open sometime mid-2013 at 315 S. Fourth St.—a mere stroll across the ring from a Qdoba store at 300 S. Fourth St.
Calling this heavyweight title Mexican food fight would be a bit much since Taco Bell throws away more food than Qdoba and Chipotle purposely make any given day.
But these are two of the most formidable fast-casual fighters in the restaurant business, and Chipotle’s move into this ring—even though it’s the largest of the two chains (1,350 v. 614)—is significant, despite the chain’s perpetual dismissals of why it’s delayed coming here.
Each time I’ve talked to Chipotle spokesman Chris Arnold for unrelated stories, I’ve asked: Why does the chain have multiple stores in Erlanger, Falmouth and Lexington, but none in Louisville?
His response was the typical, “We’ll get there when we get there. It’s on our radar,” sidestep.
But when I asked if the company was concerned about going burrito to burrito with Qdoba (which has more than two dozen successful stores here), he always insisted competition is not a concern.
Nonsense. You don’t delay coming to the hottest and largest restaurant market in Kentucky without good reason. Compared to big cities where Chipotle has significant footholds, real estate here is practically free, so that couldn’t have been a deterrent.
While a small segment of Louisvillians pride themselves on the city’s thriving independent restaurant market, the fact is chains still rule the day, which makes for exceptionally good opportunities for a chain like Chipotle.
But at the end of the day, the boss of that segment of the industry chooses where his chain goes and when. And trust me, the boss of Chipotle is completely his own boss.
You’ll find no entrepreneur more focused than Chipotle founder Steve Ells. He understands his brand better than anyone and has cast his vision for it masterfully.
Its growth has been rock solid and sales have followed. Wall Street actually gets nervous when Chipotle doesn’t turn in ridiculously high comparable-store sales numbers; its rocky quarter tallies are the envy of the entire U.S. restaurant industry. (Its stock, which is hovering near $300 a share now, has traded as high as $442 in the past 52 weeks.)
You will, however, find entrepreneurs much more friendly. I’ve never gotten to interview Ells, but every writer I’ve spoken to who has says he’s no charmer. One told me, “He talked to me like I was a child wasting his time with my questions. I couldn’t get out of there fast enough.” Not that charm is the essential key to success, but read any article where the guy is quoted and you’ll see what I mean.
Where Ells excels is in his focus on food. He’s a quality fanatic, a perfectionistic culinary school grad who founded Chipotle in Denver in 1993 as a means of accumulating money to open a fine dining restaurant.
Lines out the door told him he was onto something, and doubtless the dollars lining his cash drawer triggered the epiphany he could make a killing off great burritos while avoiding the headaches of white tablecloth finery.
Two years later, another burrito-centered concept, ZTeca (which later became Qdoba) sprang up in Wheat Ridge, Colo., a bedroom community of Denver. It’s done well, but unlike Chipotle (which holds the title of being the only brand McDonald’s ever bought without harming), it didn’t get a wad of growth cash from Ronald McDonald.
The burger giant helped it expand from 16 to 500 units before divesting it to the public market in 2006. Apart from the Clown, it’s gone like gangbusters, growing at a pace of about 150 stores a year. (Chipotle has yet to close a store, but it’s still far behind KFC’s record of at least 3,500 units opened with no closures.)
Last year it grossed $2.6 billion in revenue and $274 million in net income. (For the sake of comparison, that’s more than four times what Papa John’s netted with three times the number of units 2012.)
Its debt is laughably low ($3.6 million) and its operating cash flow admirably high ($414 million) for a company its size. Ells, whose net worth is more than $200 million, could pay off that $3.6 million debt just scraping lose money out of his car console.
Which brings us back to its looming brawl with Qdoba here. I say timing is everything, and here’s why the time is now:
I don’t find it ironic that Chipotle announced its entry into Louisville just months after a pair of Qdoba’s star franchisees, locals Don Doyle and Michael Grisanti, sold their Louisville and Southern Indiana units back to Qdoba corporate.
Not only were Doyle and Grisanti’s stores some of the chain’s best performers, Qdoba bought them back at a time when it’s selling many of its company stores to franchisees. That should tell you how well run they are.
But the inverse also could be true. Chipotle could be—and some would say, should be—coming precisely because Qdoba has done so well. When your competition has done all the legwork teaching the market what a quality fast-casual burrito tastes like, why not ride in on its coattails and steal some biz?
Granted, each chain’s menu is different from its competitor’s: Chipotle’s is nearly all burritos, while Qdoba has multiple offerings, though burritos make up the core. Yet while they’re not mirror images, they are similar, so any market intrusion by Chipotle likely will come at the expense of Qdoba.
This also can’t be overlooked: Steve Ells loves to scrap. Take one look at him and you’d wrongly assume he’s 2012’s Casper Milquetoast poster boy. His build may be slight, but when it comes to restaurant challenges, he likes a fight and he knows how to win.
Chipotle will never say this, but its actions imply it: We’re not coming to share the market, we’re coming for our share and Qdoba’s.
We’ll be there, forks in hand, when the battle begins next year.