Two Nice Things That Happened To Chipotle On The Way To Greatness
“When you want something, the whole universe conspires to help you,” writes Paulo Coelho in his best-selling book The Alchemist.
Steve Ells didn’t have the whole universe conspiring to help him turn Chipotle into a great company. But a couple of nice things happened on the way to greatness—both having to do with the company’s relationship with McDonalds.
The fist thing happened back in the late 1990s, when McDonald’s got interested in Chipotle, and became the biggest investor in the company.That helped Chipotle gain the clout and the funds it needed to open up new stores quickly, growing from 16 stores in 1998 to over 500 by 2005.
(Photo credit: Wikipedia)
On the negative side, Chipotle’s tie-up with McDonald’s overshadowed the company’s image, making it difficult for Ells to carry his message to the street — that customization and sustainability can and should be a big part of the fast food industry. That’s why the tie-up of the two companies didn’t last for long.
In 2006, when the company went public in an IPO, McDonald’s cashed out its Chipotle chips — and a $360 million investment turned into a $1.5 billion.
That’s when the second nice thing happened for Chipotle.
The IPO gave Chipotle additional clout, this time around, in Wall Street. At the same time, it allowed Ells to bring his message about food customization and sustainability to Main Street.
The rest is history. Chipotle raced to greatness, while McDonald’s race in the other direction. Chipotle’s topped the list of fast-casual restaurants in Consumer Reports, while McDonald’s is nowhere near the list.
Top fast-casual restaurants:
· Firehouse Subs
· Five Guys Burgers and Fries
· Jason’s Deli
· Jersey Mike’s Subs
· Jimmy John’s Gourmet Sandwiches
· McAlister’s Deli
· McAlister’s Deli
· Panera Bread
· Schlotzsky’s
Source: Consumer Reports
Chipotle’s sales and earnings have been growing by leaps and bounds, while McDonald’s sales and earnings barely moved.
Panera Bread versus Chipotle and Starbucks SBUX -0.01%
| Company | Operating Margins | Return on Assets | Qtrly Revenue Growth(yoy) | Qtrly Earnings Growth(yoy) |
| Chipotle | 16.37% | 17.94% | 24.40% | 8.5% |
| McDonald’s | 30.12 | – | 1.40 | -.70 |
Source: finance.yahoo.com
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