McDonald's Dumped Chipotle Years Ago. Is It Time for a Drunk Dial?

Moneybox
A blog about business and economics.
Oct. 30 2013 7:47 AM

McDonald's Dumped Chipotle Years Ago. Is It Time for a Drunk Dial?

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A line and crowd of people are seen inside a Chipotle restaurant eating burritos, not Big Macs.

Photo by Tim Boyle/Getty Images

We all have regrets. We make mistakes, miscalculate, even if it seemed like—or even was—a good idea at the time. It’s hard not to look back and think, what if? Not in a Winklevoss kind of way, more in a Steve Wozniak way. That’s particularly the case if you’re McDonald’s and your young love was Chipotle.

Retrospect isn’t really fair, but let’s start with the fact that Mexican food is killing it in America these days. And McDonald’s doesn’t really serve any. (Breakfast burritos don’t count.) But, McDonald’s did once try its hand at Mexican cuisine, buying up a minority part of Chipotle in 1998, when the burrito joint was but a local 14-location franchise with a dream. By 2005, according to Bloomberg Businessweek, McDonald’s owned 90 percent of the chain, and Chipotle had gone viral, with 460 outlets across the country and 100 more opening its doors each year.

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Then, in 2006, McDonald’s decided to get back to basics, to focus on slinging burgers, and to exit the burrito-rolling business. The Golden Arches still represent the biggest restaurant company on the planet, and it did take home $1.5 billion in the sale of its Chipotle shares. But its Chipotle breakup, no matter how amicable, must still smart a bit.

A quick look at the numbers will show you why. Chipotle, now in its 20th year, has more than 1,500 locations worldwide and is valued at more than $13 billion. And, by Bloomberg Businessweek's calculations, Chipotle shares are up 44 percent this year and 1,316 percent since it went public in 2006. Chipotle’s earnings and sales are also increasing at more than 10 times the rate of McDonald’s.

So, Chipotle is doing just fine—and is clearly over its McDonald’s dalliance, right? "I've never thought that we reached Chipotle, the brand's, full potential during the time with McDonald's," Chipotle founder Steve Ells told Huffington Post this year. "And the reason why was because, while we had some great people, and we had a lot of really good people, not everyone was really a top performer. … Think about the systems at McDonald's. It's a very mechanized world, where you take out a highly processed patty. This frozen puck. You put it on a grill. You put it on a machine. You push a button. It beeps when it's done, right? How are you going to attract top performers to fill that function?"

Well, almost over it.

Elliot Hannon is a writer in Washington, D.C. Follow him on Twitter.

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