Chipotle Has a Surprising Rival

Chipotle Has a Surprising Rival

Yum! Brands is the latest fast food chain to rip pages out of the Chipotle Mexican Grill playbook.

The parent company of Pizza Hut, KFC, and Taco Bell is finally dusting off its KFC-fueled fast casual concept. The first KFC eleven store in Louisville looks a lot more like Chipotle than your typical KFC. Customers walk along a glass-protected assembly line as their orders are pieced together. The rustic menu boards seem ripped out of Chipotle's walls. There's no Colonel Sanders in the logo, though the name -- KFC eleven -- is a tribute to the original chicken's secret recipe of 11 herbs and spices.

There's naturally plenty of C in the new KFC eleven. The food options center around the boneless fried chicken that the chain introduced earlier this year. However, it kicks things up a notch with bowls, flatbreads, and salads. Forget the seasoned potato wedges at KFC. This place fries up waffle fries, instead.

You won't find a salad topped with boneless chunks of fried chicken, orange ginger dressing, and wonton noodles at your local KFC. Don't even bother ordering a flatbread loaded with pineapple salsa, tortilla strips, and cilantro at your neighborhood chicken restaurant. However, it wouldn't be a surprise if Yum! Brands begins incorporating some of the more successful menu items at its 4,500 stateside KFC stores.

It also wouldn't be a shock if a KFC redesign goes with KFC eleven's Chipotle-like assembly line and minimalist decor. The chain may even eventually embrace Square the way that KFC eleven has to offer a new way to close out the sale.

It will be a lot easier for KFC to take on the characteristics of KFC eleven than it is to ramp up a new chain, and that's reason enough for Chipotle investors to keep an eye on the success or lack thereof at Yum! Brands with this new concept.

It won't be the first time.

Hedge fund billionaire David Einhorn took bearish shots at Chipotle last year, arguing that Taco Bell's new Doritos Locos Tacos and Cantina Bowl menu items would eat into the burrito roller's growth. Chipotle has been able to sustain its positive comps, though the upticks have definitely slowed in recent quarters.

As for KFC, it may not necessarily seem broken. Sure, comps at China's KFC locations plunged a brutal 26% this past quarter, but closer to home the chain came through with a 3% increase in same-unit sales. However, the trend is undeniable. Fast casual is catching on -- led by Chipotle -- and that's resulting in fast food chains losing hungry patrons.

Yum! Brands knows who it's gunning for -- does Chipotle?

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Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill. The Motley Fool owns shares of Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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