The restaurant investor world has been in this never-ending search for “the next Chipotle” for the better part of two decades, since the IPO of the aforementioned burrito chain in 2006.
And yet a steady stream of companies have come by with some promise to be “the next Chipotle,” such as Noodles & Co., Potbelly and El Pollo Loco. The vast majority never quite fulfilled that potential.
“I believe the next Chipotle is Chipotle,” said the chain’s CEO last week, according to a transcript on the financial services site AlphaSense.
Still, there are a handful of chains that are legitimate candidates. But three brands have established themselves as clear candidates for the “next Chipotle” mantle: Wingstop, Raising Cane’s and Jersey Mike’s. Let’s talk about each of them.
Wingstop's chicken sandwich has helped fuel that chain. | Photo courtesy of Wingstop.
Wingstop
The Dallas-based chicken wing chain is on fire right now. It just generated 22% same-store sales growth, on top of 20% same-store sales growth, a 40%, two-year number we haven’t seen since Popeyes released a chicken sandwich.
Wingstop has grown U.S. system sales by an average of nearly 23% over the past five years, including 27% last year, according to Ignite data from Restaurant Business sister company Technomic.
The brand has successfully navigated the volatile market for chicken wings by expanding sales of boneless items, thanks to its own sandwich introduction. It has also pushed digital effectively that helped it thrive through the pandemic and only pick up steam afterwards—70% of its sales come through digital. It is easily outperforming full-service competitor Buffalo Wild Wings and likely overtakes that chain in the next year or two.
And, as CEO Michael Skipworth noted on my podcast recently, the chain has plenty of room to grow, largely by getting its message out. “When we line up against other national brands, there is a double-digit gap in awareness,” he said. “We think that is a huge opportunity for us.”
Raising Cane's lured long lines in its drive-thrus during the pandemic and kept going. | Photo: Shutterstock.
Raising Cane’s
Cane’s is a theoretical competitor to Wingstop, in that it sells handheld chicken. But that’s all it sells. It sells only chicken fingers, giving it the simplest menu in the industry.
Like Wingstop, Cane’s has been a consistently strong growing chain that is intent on becoming a Top 10 chain. But it’s done so with strong unit volumes. A typical Raising Cane’s generates $5.7 million in average unit volumes, according to Technomic. That’s up 71% over the past five years. From chicken fingers.
Cane’s has averaged 26% system sales growth over the past five years, according to Technomic, enough that the brand has tripled in size over that period.
Its limited menu can be a risk. And fast-growing competitors like Dave’s Hot Chicken could prove problematic over time.
But chicken is a no-brainer right now, which is why there are two chicken chains among these three brands. The market for handheld chicken products continues to expand, rather than contract, despite all this sales growth.
Cane’s also has all kinds of room for unit growth, with fewer than 800 U.S. locations. And there are plenty of places in the U.S. that like chicken.
Jersey Mike's has the highest average unit volumes in its sector. | Photo: Shutterstock.
Jersey Mike’s
It’s a bit risky including a sandwich chain on this ranking. While Cane’s and Wingstop are leaders in their respective businesses, Mike’s is not. That title belongs to Subway, the country’s largest sandwich chain.
But Jersey Mike’s, like the aforementioned concepts, has surged into the Top 50 with consistently strong sales growth. System sales have grown an average of 24% over the past five years. And a lot of that came through improved unit volumes, which now top $1.3 million per store.
Nobody in its sector comes close to that. It has grown system sales by $2.1 billion over the past five years, while Subway has declined by $500 million over that period.
Subway was recently sold to Roark Capital for a reported price of $9.6 billion. Jersey Mike’s was reportedly offered $8 billion, though it is still one-fifth the size of its larger rival. Yet, as one banker told me recently, that $8 billion likely undervalues Jersey Mike’s.
Perhaps most important, Jersey Mike’s built its unit volumes the right way, by paying for remodels itself and profiting from the increase in royalties.
Other candidates
There are other potential options. A couple of years of growth at Cava could easily have that chain on this list. Perhaps Culver’s, but we were reticent to include a burger chain, particularly given that Freddy’s is also doing quite well, as is Whataburger. And maybe Popeyes, particularly if the company’s operations efforts take hold.
But to me it seems that the next big thing is already here, and they sell chicken and sandwiches.