Chipotle Founder Tries New Asian Format With ShopHouse

WASHINGTON -- Suppose Chipotle took its wildly popular Mexican concept and gave it an Asian twist.

You can stop supposing — and start waiting in line.

The lunch-hour line to enter the newly opened ShopHouse Southeast Asian Kitchen curves out the door, around the corner and down the block on a recent Monday here in the nation's capital, where the eclectic-but-electric restaurant is attracting far more buzz than any political candidate.

It's no exaggeration to say that the restaurant world is salivating to see whether Steve Ells, the food-centric, bespectacled fellow who founded Chipotle 18 years ago with a single shop in Denver, can successfully expand his company beyond the burrito to the Asian noodle. If he can turn this repeat performance, Ells will accomplish something that even mega-giant McDonald's (which briefly owned a big stake in Chipotle) couldn't: excel in two restaurant concepts at once.

"Chipotle is the most successful restaurant concept of the past decade," says John Glass, analyst at Morgan Stanley. He compares it to nothing less than what Starbucks did in the 1990s. "Chipotle transformed the way people think about Mexican food. ShopHouse can do the same for Asian."

Or not. If ShopHouse succeeds, it could ultimately play a central role in turning the very definition of fast food on its head by keeping the service fast yet making most of the ingredients sustainable, better-for-you — and tasty. Or, if it's a flop, it puts serious egg on the face of not only Ells, but the many industry analysts who already are christening ShopHouse a success and the many investors who are buying into it as Chipotle's stock reached record highs the week ShopHouse opened before moderating this week.

Just days after the "soft" opening of ShopHouse, Ells, 46, and co-CEO Monty Moran, 45, spent nearly two hours with a USA TODAY reporter — their very first media interview to take place inside the tiny but bustling restaurant. While ShopHouse has had zero advertising, the buzz has gone utterly viral. Executives have given up trying to keep a lid on the hype and soaring expectations for the chain whose name is derived from ShopHouse style architecture popular in Southeast Asia where the family typically lives upstairs and the restaurant or retailer is on the ground floor.

"We have more potential than anyone else to change the food culture in a positive way," says Ells, speaking for both ShopHouse and Chipotle, while noshing on a ShopHouse bowl of grilled steak, brown rice and veggies. "The act of eating shouldn't be based on any form of exploitation," says the rail-thin CEO. Both Chipotle and ShopHouse, he says, are about treating customers, employees, farmers and even animals with respect. "I'd like to change the way Americans think about and eat fast food."

Going all-natural

At ShopHouse — like Chipotle — all ingredients are natural, some are organic and the meats have no antibiotics or added hormones. Ells stops in mid-bite and stares down at his bowl. "Gee, this is delicious," he says to no one in particular.

These are the best-of-times for Chipotle. In Chicago on Saturday, the company is hosting its first-ever food festival, bringing together celebrity chefs, artisan food producers and musicians who all embrace the same cause: food with integrity. (If you recognize that, it's Chipotle's slogan.)

ShopHouse could help expand this vision even further into the fast-food arena. The deep desire that Ells has for the success of ShopHouse is, perhaps, best evidenced by the fact that he spent much of this same morning interviewing applicants for crew work. Everyone from line workers to dishwashers had to get a thumbs up from Ells. That's the kind of minutia he hasn't worried about since Chipotle opened its fifth or sixth restaurant, he concedes. "I'd be sad if the ShopHouse concept doesn't work," he understates.

So would some key industry analysts. In a report, analyst Mark Kalinowski of Janney Capital Markets offered an "enthusiastic thumbs up" to the concept, following a visit there. Morgan Stanley's Glass effuses, "If anyone can crack the code on Asian fast casual it's Steve Ells."

Not the usual Chinese fare

Traditional Chinese takeout, it's not. No sweet-and-sour anything. No wonton soup. No chow mein. The menu is about as simple as Chipotle's, but considerably more spicy. Bowls of beef, pork or chicken (or even organic tofu) are served with veggies, toppings, garnish and sauce for about $7. Sandwiches with one meat choice also are served with green papaya slaw, herbs and crushed peanuts for slightly over $6.

A customer can read through the entire menu quicker than the cocktail list at many casual-dining joints. That's the way they want it. "We didn't want a biblically long menu like at most Asian restaurants," says Tim Wildin, the Thai-born Chipotle executive who conceived the ShopHouse concept.

Like Chipotle, customers wait in a cafeteria-style line and then are offered customized choices by servers decked in orange shirts and black aprons. This particular location, in the heart of D.C.'s vibrant Dupont Circle area, has environmentally friendly LED lighting, a service counter made of compressed paper and the only real decorations in sight are bottles of Sriracha Hot Chili sauce that line one wall with an eye-opening orange glow.

One customer, on her first visit, is utterly enamored. "How do we get one of these in Dallas?" asks Paula Blackmon, chief of staff to Dallas Mayor Mike Rawlings. She stumbled upon ShopHouse while attending a national conference of mayors in D.C. "I don't consider this fast food," says Blackmon, who polished off a tofu bowl, even though she doesn't usually order tofu.

But Joe Toohey, a network researcher visiting on his day off in Washington, says he is both bemused and confused by ShopHouse. "At Chipotle, I know what I'm doing," he says. But at ShopHouse, he adds, he is perplexed by how and what to order and put off by the high prices (about $9.75 for a sandwich and drink after tax) and a lack of side dishes. "Can't they at least throw in a side of edamame beans?" he asks.

Then there's Ray House, a D.C. accountant who likes the food so much he's back for his second visit in four days. "I like the simple menu," he says. But he doesn't like the fact that he has to bring his own chopsticks, which he holds in his hand. "Any self-respecting Asian restaurant should provide chopsticks," he says.

Not really, responds Ells, who strives for authenticity. "You won't find them in Bangkok," he says. That's where he traveled last year with a small team; as well as to Singapore, Kuala Lumpur, Malaysia and Vietnam, to come up with the ShopHouse concept — and recipes. Many of the original recipes, he says, they scrawled on the backs of napkins while at their hotel.

Also along on that trip was Wildin, the concept creator. "We didn't do any market surveys or focus groups to find out what's the big thing in food," he jokes. "We did it because we love good food."

Ells is coy about expansion plans for ShopHouse. "I think it would be great if we opened more," says Ells, but he declines to say where, when or how many. "Chipotle is where all our energy is going."

Glass, the analyst, expects to see just two to four more over the next two years. But even if ShopHouse is a hit, he says, it would take at least a decade before it was any kind of "player" in fast-casual dining, which can require at least 500 units.

Watching with particularly keen interest is Jeff Darden, general manager of the burger joint BGR, which is right next door to ShopHouse. The ShopHouse line all but blocked the entrance to his store at lunch hour. Darden points to the line and shrugs, "We get the spillover from people who don't want to wait so long."

There are critics

CNBC's stock picker Jim Cramer, who for years has been an outspoken fan of Chipotle, says the stock's recent run-up following the single ShopHouse store opening is simply too much. "These are unsustainable numbers," the Mad Money host advised viewers this month.

What's more, the typical American diner hasn't a clue what the ShopHouse name means, says Valerie Killifer, editor of FastCasual.com, a site and blog covering the industry. "There could be a consumer disconnect," she says. And while restaurants such as Panda Express and Pei Wei Asian Diner, owned by P.F. Chang's China Bistro, have had some success, "The Asian model of fast-casual dining is untested," she says.

Then there's the calorie question. The starch in ShopHouse dishes, in the form of rice, noodles and oversized banh mi breads, can potentially load meals with "too many empty calories," warns David Zinczenko, author of Eat This, Not That! Even then, he suggests, it's a better calorie bet than some of the 1,000-calorie-plus burritos that can be found at Chipotle.

But the numbers are compelling. At $18.4 billion annually, the Asian dining segment in the U.S. is just an eyelash less than the Mexican segment, reports research firm Technomic. Most of that, however, is full-service Asian dining, Glass notes. That leaves ShopHouse with an enormous opportunity, he says, "because Americans already have the Asian food habit."

The Chipotle juggernaut

Never mind that Chipotle is the engine that has driven all this. Its stock, which sold for $22 a share the day the company went public in January 2006, reached a high of $346 last week before closing just over $313 on Thursday. Its revenue climbed from $628 million in 2005 to more than $1.8 billion last year. The company went from 80 restaurants in 2005 to nearly 1,200 today.

Chipotle will open up to 145 restaurants in the U.S. this year. And there's easily room for another 3,000 in the U.S., says Moran. Beyond that, he says, there's room for about half that number in Europe, where Chipotle has a handful of locations. "There's tons of runway," he says.

There's even more runway, of course, for ShopHouse.

While posing for a picture for this story, Ells suddenly spots a sandwich wrapper on the floor of his new restaurant. He pounces on it and deposits it in a trash can, seemingly in a single, fluid movement. A look of relief fills his face with the task done.

So what, exactly, does Ells — who is leapfrogging from Mexican to Asian cuisine — have against plain ol' American food?

"I love burgers, meatloaf and fried chicken," he says, defensively. He ponders for another moment, then adds, "I just want to make sure it's all raised by farmers who respect the land, the animals and the consumer."

That's his mantra. Respect — and authenticity.

Which is why a nation of lottery hopefuls might need to take special note: At ShopHouse there are no fortune cookies.

Perhaps, for Chipotle, just more fortune.