It's not a stretch to say that Chipotle changed the fast-casual restaurant industry. Sure, there are Mexican chains that have been around longer, but Chipotle caught people's attention (and wallets) in a way that other fast food chains hadn't before. If you're a Chipotle fan, you probably know a lot about the restaurant chain. But we bet you don't know the answer to this one question: Does McDonald's own Chipotle?
It might come as a surprise, but the answer was, at one point, yes. The two fast food chains have a history together, and the Mexican chain could have been very different because of it. Here's a little bit of Chipotle's history with the McDonald's brand.
How McDonald's and Chipotle Collided
Chipotle Mexican Grill was founded in 1993 in Denver, Colorado by Steve Ells. Ells was a graduate of the Culinary Institute of America in New York and then worked for Jeremiah Tower at Stars in San Francisco. The first Chipotle, located near the University of Denver, was wildly successful, with store sales of over 1000 burritos a day.
Ells had originally wanted to take the profit from the burrito shop to open a fine-dining restaurant, but when Chipotle did so unexpectedly well, he decided to focus his efforts on expansion. He opened 13 Chipotle restaurant locations in the Denver area in the first five years of the chain's operation.
Then came McDonald's.
In 1998, Ells was ready to grow some more. The company's board of directors, almost all family friends, had invested in the company but to really expand, they needed some serious money. According to a history of the McDonald's and Chipotle relationship put together by Bloomberg, one of the board members had a friend who worked for McDonald's as a business developer and he managed to get Ells invited to a McDonald's board meeting. Ells brought burritos and tacos, and the McDonald's board loved it.
That first year, McDonald's invested $50 million into the Mexican food restaurant. Over the next seen years, Chipotle opened almost 500 new restaurants, and by 2005 McDonald's investment had grown to 90 percent, basically meaning that the golden arches did own Chipotle.
But the story isn't as easy as that. McDonald's also offered the new chain access to its supply chain and gave them advice on running a larger chain. But they also brought ideas, which would have changed the Chipotle's we know today. First, they wanted to change the name to Chipotle Fresh Mexican Grill, thinking that would better let the chain compete with other Mexican chains like Baja Fresh. Then they suggested serving breakfast. They encouraged the chain to do drive-throughs.
McDonald's wanted Chipotle to change up their menu in different parts of the country, adding things like barbecue in Kansas City. And McDonald's wanted the burrito chain to allow franchisees to own Chipotle restaurants.
For the most part, Chipotle ignored all the advice and kept doing thing their own way. In 2006, McDonald's decided to get out of the Chipotle business and sold all its shares of Chipotle back to the chain. According to Steve Easterbrook, who McDonald's CEO from 2015 through 2019, the burger chain had decided to focus on its core business. Around the same time, McDonald's also divested from Donatos Pizza and Boston Market.
Chipotle bought back the eight franchised restaurants, and then in 2006 the company went public. The initial public offering was a huge success, doubling the Chipotle stock price from $22 to $44 on the first trade.
Since then, Chipotle has had its ups and downs, including multiple issues with food safety and strong competition from other fast casual chains trying to replicate the Chipotle model. They've also had some management changes. Chipotle founder Steve Ells is now executive chairman of the board, while Brian Niccol, who ran Taco Bell for three years, is now the company's chief executive officer.
In spite of the challenges, Chipotle is still one of the most popular fast casual chains in the country. It ranks in the #12 spot on the Restaurant Business and Technomic report, and falls only behind Taco Bell in the Mexican food category. By sticking to their own vision, and not allowing McDonald's to change them, Chipotle has succeeded.
