The builders of a $22 billion burrito empire—the founder, his father, his college buddies, key execs, and a couple of pig farmers—open up about how they won the fast-food future. And yes, they dish about McDonald’s.
Which is strange, particularly when you consider that Chipotle spent roughly eight years under McDonald’s corporate arches. McDonald’s early investment in the burrito chain gave it capital to grow, an inside look at ultra-efficient supply-chain economics, the know-how it needed to manage its expansion from 13 stores in 1998 to almost 500 in 2006. For its investment — roughly $340 million by the time of Chipotle’s initial public offering — McDonald’s got a nice little return. It turned out to be the short end of the stick.
In the years since their split, Chipotle’s rapid growth and consistently astonishing financial results have made it a darling of investors. Its commitment to fresh, high-quality ingredients at only slightly higher prices has helped to define a new wave of “fast casual” dining. And McDonald’s … well, everyone knows what’s happened to McDonald’s. As consumers’ tastes changed, the chain became the poster-child for America’s obesity epidemic. Sales slumped, and, recently, the stock price followed. Last week, McDonald’s announced that Chief Executive Don Thompson would step down on March 1 and be replaced by Chief Brand Officer Steve Easterbrook. The incoming CEO has one job: to get the iconic chain back on some kind of track at a time when Chipotle and its disciples are ascendant.
DAVID CORSUN, Director, Fritz Knoebel School of Hospitality Management, University of Denver: “In 1993, you didn’t participate in your own food service in the $7 or $8 price range. You wanted to either be served or have it be dirt-cheap. …And the more you increase customer participation in a service setting, generally the less control you have over it. What Steve Ells did was show that’s not necessarily so.”