Last week, McDonald’s Corp. CEO Don Thompson announced his retirement, after the company reported one of the worst performances in its history.
This week, Chipotle Mexican Grill Inc. reported arguably the best year in its history, which is saying something, considering its track record of financial success.
Comparisons of the two companies have been relentless ever since, and it hasn’t been lost on many observers that McDonald’s was an important early investor in Chipotle.
The comparisons were fueled earlier this week in a definitive “oral history” of Chipotle in Bloomberg Businessweek.
Media outlets were quick to jump on some of the story’s nuggets. For instance, Quartz gives us “Four ways McDonald’s almost ruined Chipotle.”
Entrepreneur latched onto a story about how Steve Ells, Chipotle’s founder and co-CEO, was disgusted by a visit to a McDonald’s chicken farm in Arkansas.
CNNMoney noted that McDonald’s tried to turn Chipotle into another McDonald’s.
And there are plenty of interesting tidbits in Bloomberg’s story about the interaction between the two companies during the eight-year period from 1998 through 2006 when McDonald’s was Chipotle’s primary investor.
But Chipotle might not be the brand it is today had it not been for McDonald’s interest in the late ’90s. McDonald’s committed $50 million in Chipotle’s first year for a chain that had just 13 locations. During those years, Chipotle grew into a 500-unit, nationwide concept, and one of the hottest restaurant chains in recent history.
Chipotle not only got cash; it got access to McDonald’s supply chain and institutional knowledge, something that might not have come with a private-equity group. An equity investor might also have wanted more control in exchange for the amount of cash McDonald’s put into the business.
“If I had taken money from, say, venture capital, they would have wanted a certain return in a certain time period. McDonald’s, on the other hand, seemed very interested in my passion about creating this brand. I trusted them, and they did not really interfere with the brand,” Ells told Bloomberg.
And then there’s this, from former McDonald’s chief financial officer Matt Paull: “At a time when I was cutting back capital for McDonald’s, Chipotle got whatever it requested. The [performance] numbers didn’t lie.”
To be sure, by the time 2006 rolled around, Chipotle was apparently ready to be free of its benefactor. “As it turned out, we were a better company after, you know, the independence. Our own real estate, our own purchasing, our own distribution turned out to be better than what they had,” Ells said.
Since then, Chipotle has performed remarkably well. The company is pretty much the industry’s gold standard for operations and profitability. (And by the way, its sales are not coming at McDonald’s expense.)
Chipotle is almost a victim of its own success. Even one of the best years in its history can’t satisfy investors, who said the chain’s forecast for 2015 is too modest.
Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze
