No, McDonald's Doesn't Regret Chipotle Spinoff


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Eight years ago, almost to the day, McDonald's spun off its fast-casual burrito chain, Chipotle, in an IPO. Chipotle doubled in price on its first day, to $44 a share. It has been on an amazing, upward trajectory ever since. Today it closed at $494 a share.

And then this afternoon the burrito king offered up yet another healthy dose of financial information from its most recent quarter. Comps went up 9.3 percent, which is particularly good considering that weather and online shopping and the economy seemingly held down same-store sales at numerous other concepts. Its restaurant level operating margins are 25.6 percent. Revenue rose 20.7 percent. Ho hum.

The stock is up another 12 percent after-hours, to $552. That would be a new 52-week high.

In short, Chipotle is arguably the most successful restaurant chain to hit the public markets since, well, McDonald's.

All of which tends to generate some comments about whether McDonald's did something stupid back in 2006 when it released Chipotle out into the wild.

Which makes it worth reminding folks of a couple of key points that make the McDonald's spinoff of Chipotle into a massive win for both brands.

The Chicago-based burger behemoth has done pretty well itself since it unloaded Chipotle. Its stock price has nearly tripled, from $35.16 to $93.80. And its market cap has more than doubled, increasing by $49.1 billion over that time.

By comparison, Chipotle's total market cap is $15.3 billion.

It has been widely said that McDonald's decision to divest itself of its ownership in different concepts, including Boston Market, has helped the company focus on its single brand, contributing to the company's success. Though the chain has been losing market share more recently, it still had an incredibly strong run for such a big company.

Perhaps more importantly is the fact that Chipotle itself would not have accomplished what it has over the past eight years if it was still part of McDonald's. The spinoff helped Chipotle  get out from under its owner's shadow, and enabled the company to market itself as a break from traditional fast food. And the chain's founder, Steve Ells, said as much in an October interview with Huffington Post when he said he thought that the chain didn't reach its full potential as part of McDonald's.

Indeed, Chipotle's marketing strategy, which decries industrial farming and mass produced food, would look awfully hollow if it were still owned by the largest quick-service restaurant chain in the world.

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