Will New Concepts From Starbucks and Yum! Brands Take Off?
Today every restaurant company is looking for the next Chipotle Mexican Grill . Even Chipotle itself is looking for the next hot new concept with its Pizzeria Locale and ShopHouse Southeast Asian Kitchens. The latest to get in on finding the next Chipotle are Starbucks and Yum! Brands . Can Starbucks or Yum! Brands deliver the next Chipotle for their investors?
Starbucks is looking to capitalize on its La Boulange concept
Starbucks has been trying to figure out what to do with La Boulange ever since it bought the French-themed bakery for $100 million in 2012. Starbucks originally planned to offer the pastries and baked goods from La Boulange at its locations to increase food sales. Unfortunately, this involved replacing many of the baked goods that customers loved at Starbucks, including Starbucks' famous lemon cake. After complaints from its customers, Starbucks brought back the lemon cake.
Now Starbucks is looking to launch a fast-casual version of La Boulange in Los Angeles. The new restaurant will open on June 12 and serve breakfast, lunch and dinner. It'll be open until 10:00 p.m. every day. The menu will include omelettes, sandwiches, salads, croissant burgers, cocktails, beer, and wine.
This is just the latest effort from Starbucks to continue driving sales
The new La Boulange restaurant is Starbucks' latest attempt to blow away the competition. Coffee sales are the lowest in the evening hours and Starbucks has been focused on increasing its business during those hours. Starbucks is moving forward with its Happy Hour plans to offer beer and wine at its locations.
Starbucks is also capitalizing on its acquisition of Teavana, which it purchased in 2012 for $620 million. In April, Starbucks launched Teavana Oprah Chai Tea in collaboration with Oprah Winfrey. Starbucks sees the potential in tea and hopes to be able to do for tea drinkers what it has been able to do for coffee drinkers.
Two new concepts from Yum! Brands
Yum! Brands has introduced two new restaurant concepts. One is called U.S. Taco Co. and Urban Taproom. Yum! Brands is hoping it'll be its Chipotle killer since Taco Bell wasn't. U.S. Taco Co. and Urban Taproom is designed to be a more upscale concept for Yum! Brands. The menu will have 10 premium tacos, thick-cut French fries, and milkshakes. The company will eventually add beer and wine as well as premium drinks like the "Mexican Car Bomb," which will contain vanilla ice cream, tequila caramel sauce, chocolate flakes, and Guinness Stout. The first location will open this summer in Huntington Beach, California.
The other concept Yum! Brands is developing is called Super Chix. This comes as KFC has been losing market share to Chick-fil-A and Popeye's Louisiana Kitchen. Yum! Brands has opened the first Super Chix location just outside of Dallas, Texas. Super Chix claims that it is the home of "the last true chicken sandwich." The Super Chix menu includes the chicken sandwich, chicken tenders, French fries, frozen custard, salads, coleslaw, hand-squeezed lemonade, and fresh-brewed iced tea.
Why develop new concepts?
For Starbucks, it's a way for the company to capitalize on its purchase of La Boulange. This will also help Starbucks capture business in the evening hours when its coffee business is the slowest. The good news for Starbucks is that its comparable sales are still growing. In the most recent quarter, U.S. comparable sales increased 6%.
For Yum! Brands, growing comparable sales in the U.S. remains challenging for all three of its core concepts. In the first quarter, U.S. comparable sales declined 3% at KFC, 5% at Pizza Hut, and 1% at Taco Bell. So for Yum! Brands, the new concepts could become an avenue for growth or the development of new menu items that it can add to its other concepts. Either way, Yum! Brands is looking to stop the slide in U.S. sales.
How do the shares compare?
Chipotle Mexican Grill
1 Year Return
Foolish final thoughts
We all know how competitive the restaurant environment is these days. It's tough enough to compete with Chipotle Mexican Grill, let alone to find a new concept with the same growth rate. Yum! Brands has a much harder task on its hands than Starbucks does. Starbucks has a loyal customer base that continues to help drive sales at the expense of its competition. Yum! Brands hasn't been able to build the sales gains of Starbucks, but it's trying. While it's too early to tell what impacts these new concepts will have for Starbucks or Yum! Brands, they are both following the restaurant mantra of "innovate or die." This Fool looks forward to seeing how customers react to these new concepts.
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The article Will New Concepts From Starbucks and Yum! Brands Take Off? originally appeared on Fool.com.Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and Starbucks. The Motley Fool owns shares of Chipotle Mexican Grill and Starbucks. 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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