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Chipotle, McDonald's Part Ways
Last Edited: Friday, 13 Oct 2006, 3:53 PM MDT
Created: Friday, 13 Oct 2006, 3:53 PM MDT
DENVER -- After an eight-year partnership, the Big Mac and the burrito have said a final goodbye.
McDonald's Corp., the world's largest fast-food company, has
divested its stake in Chipotle Mexican Grill Inc. after allowing
shareholders to exchange 16.5 million Chipotle Class B shares for
18.6 million of McDonald's own common shares.
The move, completed Friday, helps McDonald's focus on its core
brands while casual restaurant chain Chipotle gains more
flexibility for growth. Other than the ownership change, it will be
a stay-the-course mode for Chipotle.
"There really isn't going to be any sort of big change in the
way we run the business," Chipotle founder and Chief Executive
Officer Steve Ells said Friday. "Very, very much the same."
Analysts have applauded the move and have forecasted sustainable
growth for Chipotle over the long term.
"It's just a great company. Nothing there has changed," RBC
Capital Markets analyst Lawrence Miller said. "Their biggest
challenge is just maintaining the integrity of the brand."
J.P. Morgan analyst Steven Rees upgraded Chipotle shares from
neutral to overweight this week and estimated a 25 percent to 30
percent growth in earnings over the long term.
"Continued unit growth is supported by solid new-unit volume
performance, success with smaller format restaurants and very high
customer demand," he wrote in a research note published Monday.
Founded in Denver in 1993, Chipotle (pronounced chi-POAT-lay)
made its name by selling meal-sized burritos, tacos and salads.
McDonald's purchased a stake in 1998 when Chipotle had 14
Denver-area restaurants, helping finance Chipotle's growth and
allowing the company to leverage some of McDonald's resources.
McDonald's, based in Oak Brook, Ill., spun off a minority stake
in Chipotle in January so it could expand growth and create more
shareholder value and then decided to divest the rest of its stake
through the stock swap. The 16.5 million Chipotle shares that were
exchanged represented about 82.2 percent of the voting interest and
50.8 percent of the economic stake in Chipotle as of June 30.
Chipotle has grown to more than 500 restaurants in 23 states and
the District of Columbia, and the company estimates same-store
sales growth will be in the low double digits for 2006. Its revenue
climbed 31 percent in the second quarter.
Ells said they will continue to develop and expand sources for
its natural products and plan to add as many as 90 restaurants this
year and a few more than that in 2007 in mostly existing markets.
Chipotle's shares closed down 43 cents, or 0.75 percent, to
$56.80 on the New York Stock Exchange. In the past year, it has
traded between $39.51 a share and $67.77 a share.
Free Burrito Days
One free burrito per customer may be redeemed annually at participating Chipotle locations on select days:
Tax Day April 15. Pick up the mock tax form BurritoEZ from your local participating Chipotle restaurant before or on Tax Day. Bring in the completed form on Tax Day for your free burrito. Not every location participated in this promotion in 2006.
Halloween October 31. Come dressed as a burrito. A typical response to this requirement is to dress up in aluminum foil, creating the appearance of a burrito still in the wrapper. Starting in 2006, Boo-rrito Fest has been discontinued in many regions, due to abuse by customers. The abuses ranged from 1 person having the costume, going in getting a menu item and leaving the store, while promptly trading the costume with his friend and so on, to the ripping off of the costumes and leaving the trash outside the restaurants.
February 29. Occurs only on leap years. Buy a burrito on this day, and at the bottom of your receipt it will say you can redeem your receipt for a free burrito, valid for 2 weeks.
On Homecoming and Prom nights, young women receive a free burrito if they come wearing their dresses.
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