Chipotle in the UK - Do They Franchise?

07/12/2018 18:00 | Fast Food Franchises

chipotle uk

There can be no doubt that Mexican cuisine has quickly risen to become a fast food option of choice in countries such as the US, Canada, France, and the UK. At the forefront of the Mexican fast-food movement is the popular outlet Chipotle. Here, we take a look at how Chipotle has expanded to become one of the worlds leading restaurant chains and whether they offer franchising opportunities in the UK.

Chipotle franchise UK

Chipotle Mexican Grill is one of the worlds most loved fast food restaurants and the most recognisable brand selling Mexican cuisine. Based in the USA, the chain encompasses around 2,250 restaurants, with locations in the US, Canada, Germany, France, and the United Kingdom. Over the last ten years, Chipotle has won numerous awards and has been in the top 10 best selling restaurant chains in the US repeatedly.

Steve Ells founded the business in 1993, in Denver, Colorado. Having worked as a line cook in San Francisco, Ells witnessed the popularity of Mexican food in US cities first hand and decided to try and introduce the cuisine to a state in which there was limited competition. This first store proved a remarkable success and the profits generated from this one store were sufficient to open a second within two years of opening.

In 1998, McDonalds made its first investment in the business, and by 2001 it had become Chipotles primary source of capital. This allowed the company to expand rapidly, growing to a network of 500 restaurants by 2005. In 2006, McDonalds divested and the business was floated on the stock market. Demand for stock forced share price to double on two separate occasions and, during its first day of trading, Chipotle shares rose in value by 100%.

In 2017, Steve Ells stepped down as company CEO and Brian Niccol, who previously acted as Taco Bell CEO, assumed the role.

Chipotle London

In the UK, Chipotle doesn't currently offer any franchising opportunities. The same can be said for its operations in other international markets, too. This means that the only way for investors to put their money into the company is to buy shares on the New York Stock Exchange (NYSE).

However, Chipotle has employed the franchise model in the past, and there were rumours that they might soon offer limited franchising opportunities in select locations. Up until 2006, the chain experimented with franchising as a possible means of facilitating expansion, but it was decided that the business should remain privately owned and the few restaurants that had been franchised out were bought back.

In July 2018, rumours concerning future franchising opportunities emerged once again. However, this is little more than hearsay and Chipotles official position is that they will not consider franchising the restaurant out any time in the foreseeable future.

Why dont Chipotle franchise?

Chipotle has explained their decision not to franchise in the following way. Chris Arnold, the company's Communications Director, argued that businesses franchise for one of two reasons. They either require the financial resources necessary to grow or they need more people to operate their restaurant locations. In the case of Chipotle, neither is true.

This is primarily due to the fact that Steve Ellis, the founder of the business, was able to utilise his professional contacts to encourage investment in Chipotle from other sources. Up until they divested in 2006, the biggest single investor in the company was McDonald's. Being able to rely on capital from McDonald's ensured that the business could grow quickly without having to adopt the franchise model, allowing it to retain control of how it evolved in the process.

When a business franchises too early, it inevitably faces more pressure from franchisees to alter the business plan and make compromises. This is due to the way in which most businesses that franchise quickly have to prove themselves. For instance, if Chipotle had chosen to franchise before its business model was a proven success, they may have faced pressure to abandon their policy of only using sustainable ingredients. Franchisees are always interested in cutting costs, though its not always in the franchises interest to do so. Chipotle recognised this and decided to take a different route.

How much to open a Chipotle franchise?

Because Chipotle no longer offers individuals the opportunity to invest in restaurant franchises, it is almost impossible to estimate the cost of a single, franchised Chipotle restaurant. However, we do have access to other critical financial data, including revenue and profit margins.

In 2018, Chipotle has posted impressive growth figures, even though many of the fast food industry's biggest names have been posting negative results. In the first nine months of the year, Chipotle had nine-month revenue growth of 9%. Its net income stats are also amongst the highest in the industry. Measured over the previous 12 months, it boasts a net income of $334 million.

Franchised alternatives to Chipotle

These impressive growth figures mean that its even more frustrating that Chipotle UK doesnt offer franchising opportunities. However, there are some alternatives to Chipotle and some impressive Mexican restaurants that it may be worth considering particularly if youre interested in becoming a franchisee.

Wrapchic

Wrapchic is making the most of the enormous growth in popularity of Mexican cuisine by marrying it with much-loved Indian food to bring a unique product to the UK market. With a burgeoning franchise network that consists of 10 restaurants, the business hopes to expand operations over the coming months and years, before taking the brand international. A Wrapchic franchise will typically set you back somewhere between £75,000 and £120,000, depending on location.

El Mexicana

El Mexicana has developed an attractive brand and an exciting restaurant aesthetic to become one of the most popular Mexican-styled eateries in the UK. Blessed with great ambition, drive, and dedication, the franchisor is well equipped to offer all franchisees a considerable amount of support and guidance. Franchisees will typically require around £100,000 to invest in the business, with at least half of this existing in the form of liquid capital.

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