Buffalo Wild Wings or Chipotle: Which Will Win the Battle for Pizza?
Doing for pizza what Chipotle has done for Mexican food is the dream of many restaurant operators. Last year, I called it the holy grail of opportunity for restaurant operators. Chipotle is looking to apply its burrito magic to a Colorado chain called Pizzeria Locale.
Source: Chipotle Mexican Grill
However, Chipotle is not alone. Buffalo Wild Wings is looking for pizza profits with its concept PizzaRev. Buffalo Wild Wings is an investor in PizzaRev and a franchisee. The company opened the first PizzaRev location in Minnesota earlier this year. This Fool asks: which company is the better bet to capture our pizza dollars?
Source: Buffalo Wild Wings
Pizza is a really big deal
Even the U.S. Department of Agriculture has weighed in on pizza. In a report earlier this year, the department looked at America's love affair with pizza. Some highlights of the report included:
One in eight Americans consume pizza each day.
Americans spend an estimated $37 billion each year on pizza.
The U.S. accounts for one third of global pizza consumption.
Twenty-five percent of American males between the age of six and 19 eat pizza each day.
One out of six males between the ages of two and 39 will eat pizza for either breakfast, lunch, or dinner today.
Adults usually ate pizza for dinner. Children ate pizza for lunch and dinner just as often.
Per capita consumption of cheese is up 41% since 1995 due to America's love for pizza.
A closer look at Chipotle's efforts
Chipotle is keeping quiet about its strategy with Pizzeria Locale. On the company's recent earnings call, Founder Steve Ells did not offer much in the way of an update. All he said was "we're seeing the traffic increase and we're seeing patterns that are very similar to what we saw with Chipotle in the early days and we find that to be very encouraging and so, but we're not disclosing volumes."
Here's what we know so far. Pizzeria Locale opened its first location in Denver in May 2013 with funding from Chipotle. The first location is actually in the same shopping center as a Chipotle Mexican Grill. The partnership remained quiet until December of last year when Chipotle announced its partnership with Pizzeria Locale. When the news broke, there was a line out the door the next day with customers looking to get a taste of the "Chipotle of pizza."
Pizzeria Locale uses only fresh, high-quality ingredients just like Chipotle. The restaurant makes the dough from scratch and keeps it at a constant 72 degrees Fahrenheit. The menu includes 10 classic pizzas, including four American favorites. Customers can also build their own custom pizza, just like they can build their own burrito bowl at Chipotle. The restaurant then cooks each pizza in a gas-and-infrared-powered rotational oven in two minutes. A 10-inch pizza costs $6.50 on average. The menu also includes side items, salads, red and white Italian wine, bottled beers, and desserts.
The roll-out of PizzaRev has been faster
While Chipotle has chosen to cloak its relationship with Pizzeria Locale in a veil of mystery, Buffalo Wild Wings wants everyone to know about its relationship with PizzaRev. When Buffalo Wild Wings opened its first franchised PizzaRev, the company issued a press release stating "Buffalo Wild Wings Heats Up the PizzaRev-olution with Grand Opening of First PizzaRev in Minnesota."
The new restaurant is the first PizzaRev location outside of California. There are already eight company-owned locations in California. Buffalo Wild Wings owns a piece of these locations since it's a minority investor in PizzaRev. CEO Sally Smith sits on the board of PizzaRev as well. Buffalo Wild Wings plans to open several more PizzaRev locations in its home state of Minnesota.
PizzaRev allows guests to build their own 11" pizzas. The restaurants have homemade dough and over 30 fresh toppings to choose from. The restaurant makes each pizza in front of each customer and then they get to watch it get cooked in a 900 degree, stone-hearth oven. The restaurant cooks each pizza in under three minutes and this produces a thin and crispy Roman-style pizza.
Foolish final thoughts
For investors, PizzaRev and Pizzeria Locale represent new concepts that, if done properly, can keep the growth stories going for both Chipotle and Buffalo Wild Wings. Both stocks have had good runs in the past year with Buffalo Wild Wings and Chipotle posting gains of 58% and 55%, respectively. Shares of Buffalo Wild Wings look slightly cheaper at 27 times next year's earnings. Chipotle, on the other hand, looks a little more expensive at 37 times next year's earnings.
If this were a race, I would say Buffalo Wild Wings and PizzaRev are in the lead. In addition to the opening by Buffalo Wild Wings in Minnesota, PizzaRev plans to open franchise locations in Utah, North Dakota, South Dakota, Missouri, Texas, and Orange County and San Diego in California. However, that doesn't mean Chipotle is out of the race. It has chosen to take a more measured approach and it looks like Chairman Steve Ells wants everything to be perfect before he ramps up his expansion plans. Once he does, all I can say is look out.
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The article Buffalo Wild Wings or Chipotle: Which Will Win the Battle for Pizza? originally appeared on Fool.com.Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Buffalo Wild Wings and Chipotle Mexican Grill. The Motley Fool owns shares of Buffalo Wild Wings and 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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