How McDonald's Inadvertently Created A Huge Competitor In Chipotle

ChipotleAssociated PressA bicyclist pedals pass Chipotle Mexican Grill Monday, March 13, 2006, in Beverly Hills, Calif. This photo was taken shortly after Chipotle went public.

Chipotle is changing the fast food industry and taking market share from McDonald’s.

Analysts attributes Chipotle’s meteoric success to its classic menu, speedy service, and ethical values.

Chipotle’s popularity “point[s] to a longer-term trend of fast casual chains growing market share at a much faster pace” than fast food restaurants like McDonald’s, Stephen Anderson, analyst at Miller Tabak, said in a note.

“It would be tough to bet against Chipotle becoming the next McDonald’s or bigger,” analyst Brian Nichols writes for The Motley Fool.

But Chipotle actually owes much of the credit to former parent company McDonald’s.

McDonald’s took a stake in Chipotle when it had 14 locations based in Denver, Roben Farzad wrote in Businessweek last year.

By 2005, McDonald’s had a 90% stake — and Chipotle had 460 locations.

Without the deep investor pockets of McDonald’s, Chipotle would not have been able to expand so rapidly.

Being associated with McDonald’s also gave Chipotle more visibility in the business world than it would have had on its own.

But McDonald’s spun off Chipotle in 2006 to focus on burgers and fries.

Chipotle chartCiti Investment Research & AnalysisChipotle’s profit margin has been surged in the past decade.

Since then, the burrito chain has gone public and tripled its number of locations.

Chipotle posted a 9.3% sales gain in 2013. Meanwhile, McDonald’s saw sales fall by 1.4%.

Chipotle founder Steve Ells has less-than-kind things to say about McDonald’s.

In an interview with The Huffington Post’s Joe Satran, Ells explain
ed why Chipotle couldn’t reach its full potential with McDonald’s in the picture.

“Think about the systems at McDonald’s,” Ells said. “It’s a very mechanised 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?”

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