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Chipotle's New Restaurant Hints at Major Menu Changes

Queso and Mexican food go together like marinara sauce and Italian food, but Chipotle (NYSE: CMG) has never had the popular cheese sauce on its menu. That's not for lack of trying or because consumers didn't want it. It's actually the item consumers have most requested the chain add to its menu, according to an internal memo published July 10 by Eater.com.

"All of our competitors sell queso, and we know some customers don't come to Chipotle because we don't offer it," wrote CEO Steve Ells in the memo reportedly sent to the company's approximately 65,000 employees on Monday. "But because we refuse to use industrial additives, added colors, flavors or preservatives in our food, it's very difficult to make queso that meets our standards."

That appears to no longer be the case as the company has the popular dip and sauce on the menu at its new NEXT Kitchen in New York. The restaurant, a public-facing test kitchen, is the first of its kind and it will be used, according to Eater, to test both food and new technology.

Chipotle has only changed its menu on rare occasions. Image source: Chipotle.

Any change is a big deal

The Mexican chain has been struggling for more than a year as it tries to win back the customers scared away by its food safety scandal. The chain posted same-store-sales growth in Q1, but shares dipped again in June when the company reported that food costs were increasing.

Recovery from its problems with E. coli has been a slow process but the company has been aggressively making it happen. To win back customers, the company has used everything from a short-term loyalty program, Chiptopia, to a rare major menu addition about a year ago when it added chorizo.

Chipotle is not a typical fast-food chain that makes a lot of menu changes. In fact, the spicy sausage was the first addition to the company's offerings since its tofu-based Sofritas were added in 2014. That's a shocking lack of change in a food market where even casual sit-down chains regularly run promotions with new food offerings.

It's possible, however, that Chipotle understands that it needs to give diners more new reasons to visit its stores. The company has already unveiled plans to add bunuelos, a traditional Mexican dessert made of fried tortilla strips with honey, cinnamon and sugar, to its menu later this year. That could be followed by a broad rolloutof queso, and perhaps even more new menu items not long after.

What's next for Chipotle?

In addition to testing queso, the Chipotle test kitchen also has some other innovations in the works. These include a frozen margarita machine as well as a new rice cooker that would allow for smaller batches to be made more frequently, according to Eater.

There's no guarantee that any of these items make the actual menu. That happening will depend upon consumer reaction to the new products as well as the test kitchen's ability to prepare and serve them in a manner that can be duplicated across the chain.

This is important

In a market where even competitors like Panera Bread, another company focused on food quality, roll out regular seasonal menu items, Chipotle has likely hurt itself by not doing that. It's admirable that the company wants to maintain standards and protect its "Food with Integrity" brand/marketing slogan, but it needs to balance that with engaging customers.

Adding queso may seem like a minor move, but its absence has been a glaring one on the company's menu. Rolling out the cheese sauce nationally would be an event that would win back some lapsed customers while also increasing how much diners spend.

Chipotle does not need to become a company that offers gimmicks and new menu items every month or even every season. The company does not need a Froot Loops burrito or tacos melded with snack chips, but it does need to respond to customer demand and to evolve its offerings accordingly. And it seems to be doing that.

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Daniel Kline has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool owns shares of Panera Bread. The Motley Fool has a disclosure policy.