Chipotle speaks

When Chipotle executives speak, other restaurateurs snap their heads to listen. Here to save them a little neck strain are the pearls from management’s conference call Wednesday with Chipotle investors:

Co-CEO Steve Ells, on the first ShopHouse Southeast Asian Kitchen:

While we're still working to perfect the concept, it reminds me very much of the first Chipotle when it originally opened. Many current customers aren't quite sure how the system works or what to order when they first come in and sometimes have issues with flavor combinations or the level of spice in their food. But they like it and from the very beginning, you see that the customers are coming back, week after week.

Ells, on Obamacare:

We, today, have a limited insurance program that we offer our crew. Most of our crew chose not to pick that up. And so we would go from very few of our crew being involved in the voluntary program to us being required to provide insurance to all of our employees. So it would be pretty significant change to our business

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Co-CEO Monty Moran, on Chipotle’s Restaurateur management development program (where managers get a big bonus for hiring employees who then become managers):

This GM taught all of us a lesson: She came from a Restaurateur store herself and had a strong vision for what a winning team looked like. Weeks before her new store opened, she spent days on the sidewalk in front of her new restaurant, interviewing candidates for crew positions…Once she had selected her team, she trained each of them in an existing Chipotle and then invited all of them to her apartment to explain to them her vision for her restaurant and to watch videos from the 2010 All Managers Conference to be sure that each of these people understood Chipotle's unique culture. She made a commitment to each of them to help them grow and carefully described exactly how they would be able to become managers and future leaders at Chipotle themselves. At the same time, she secured a commitment from each of them to devote themselves fully to becoming part of the Restaurateur store very quickly.

Moran, on seasonal changes in traffic:

Our peak hour transactions are sort of more in the 100 range during the winter months. And during the summer months, it's historically gotten up sort of more in that 110 to 115 range…Obviously, with this coming spring and summer season, we hope to set some new records in those areas because of our new emphasis

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Ells, on menu development:

One of the reasons that we continue to grow so strongly is because we continue to improve our core offerings, which is what people come for. We have experimented here and there with a new menu item. We've tried soup. We've tried chili. We've tried smaller menu items, single taco, things like this. But it seems that people keep coming back for their chicken burrito or their barbacoa tacos or whatever it is that they've landed on.

Bonus tidbit:

Brown rice, one of the chain's most recent menu additions, now accounts for about a third of all rice served by the chain.

Only yawning over new products is coming from the R&D team

Here’s a link that restaurant chains might want to check out for the well being of their menu development staffs. It’s an eBay listing for army cots. Clearly R&D teams have little time to swap chef’s whites for PJs when they’re cooking up new customer draws at the current pace.

Oh, and don’t forget to visit this site, too. It’s an online pharmacy that extends a price break on big tranquilizer orders. The products coming from the big brands’ test kitchens have typically been make-or-break products. Did the team come up with a new menu milestone, or will their handiwork be remembered as the new New Coke?

Burger chains are changing their burgers, pizza chains are reformulating their pizza, coffee chains are re-percolating their core coffee line, Mexican chains are rethinking what they put in a tortilla.

Think about it: With McDonald’s about to add a new chicken finger food called McBites, and Burger King introducing the Chef’s Choice this week as its new premium burger, almost all of the major fast-food chains are fiddling with their menu signatures.

What’s more, the alterations are introduced with direct or implied criticisms of the versions they replaced. Domino’s has made the most noise on that front, all but asking customers, “How could you have eaten what we formerly sold you?”

But Wendy’s isn’t much more discrete in its push of new French fries and burgers. Ditto with KFC and Kentucky Grilled Chicken. The only one showing subtlety is Taco Bell, which is quietly taking some salt out of its signatures.

McDonald’s hasn’t revealed what sort of noise it’ll make about McBites, a chicken version of popcorn shrimp (essentially deep-fried pieces of chicken meat, like the popcorn selections that have long been on the menus of KFC and Popeyes.) You can bet it won’t knock Chicken McNuggets or Chicken Selects in the introduction, but you have to wonder if customers will nonetheless regard McBites as an obvious alternative to McNuggets.

We’ll find out when McDonald’s rolls the new product next year.

The remake of fast-food signatures won’t end there. As RestaurantRealityCheck noted last week, Burger King is trying a new, thicker fry. Its stated goal of appealing to more women and children portends even more changes in products.

Might there even be some riffs on the Whopper?

This isn't the first time that such a thing has happened. In the mid-1980s, BK indeed changed the specs on its holiest of signatures, revamping the size of the Whopper's patty.

McDonald's tried to rejigger its bigger burgers so they could be garnished with lettuce and a tomato slice that wouldn't be rendered unpleasant by the heat of the patty they topped. Later, KFC introduced a bone-in roasted chicken, and Taco Bell tried reduced-calorie versions of its main items.

They all joined the Edsel in the annals of product failures.

But there are different dynamics--and learnings from those misfires--in play this time. Technomic noted in releasing some research yesterday that the fast-casual sector is influencing restaurants of all stripes. No where is that impact more obvious than in the traditional quick-service market, which has the most to lose from fast-casual's rise. Is it really a surprise that former Wendy's CEO Roland Smith publicly compared the chain's new burger line to what's available at Five Guys?

Talk amongst yourselves about it. But try to keep the noise down. The R&D teams need to catch up on their sleep.