We learned today that CMG has been awarded a US Trademark for Shophouse Southeast Asian Kitchen with the description Restaurant services, take-out restaurant services. CMG first announced on November 3, 2010 that co-CEO Steve Ells was working on an Asian restaurant concept that follows the Chipotle model. At that time, the company revealed its plans to open one Asian inspired concept in 2011.
Just recently, Ells stated at the ICR conference, “I would argue that different kinds of cuisine could be applied to this Chipotle model, that it’s the model that we’re best in the world at not necessarily burritos and tacos. And so in order to prove that theory, we’re going to open an Asian concept this year. It’s very exciting. It’s completely different from the stuff that you see out there today. And we’ll open one and we’ll see how it goes and see what kind of opportunities come from that.”
CMG’s move into the Asian food segment will be interesting to watch but is certainly not a guarantee of accretion to shareholder value. Many good operators have lost focus in the past by “diversifying” and have, ultimately, ended up failing.
For now, they have said it will only be one restaurant in 2011, but as I have said before, there is likely so much more behind the company’s decision to move into the Asian segment. Just ask any management team that has tried to take share in a new category; there are plenty of them.
The key reasons usually are:
- More capital than they know what to do with
- Need another growth vehicle
Both reasons lead to management being distracted and to lower returns for shareholders - never a good combination.