Do you dream of filling burritos with Carne Asada, cheese, and black beans at your own Chipotle Mexican Grill location? Well, I’m sorry to be a dream killer. But Chipotle does not currently offer franchise opportunities.
Is Chipotle a Franchising Right Now? Chipotle, just like some other fast-casual restaurants like In-N-Out Burger and Starbucks don’t franchise. This means that all Chipotle units are wholly owned and operated by the corporation (Chipotle Mexican Grill, Inc.) itself, albeit with a few exceptions. In fact, back in 2006, the company even bought out the few units they had previously operated franchisees.
Just like company-owned fast-casual restaurants, Chipotle decided to take back these units since they don’t want the quality of their food and the experience “compromised.” Of course, we all well know that once you offer your business for the franchise, there’s an amount of control that’s given up and can create an inconsistent dining experience for guests dining across multiple locations.
Chipotle Mexican Grill Official Website.
So why are we giving you the idea of a Chipotle franchise? In case you missed it, back in April of 2018 Chipotle CEO Brian Niccol made headlines after suggesting Chipotle might reconsider franchising in the future. This, however, hasn’t come to fruition yet. But if it does happen, you’ll be better prepared to pounce on the opportunity after reviewing this analysis. If you don’t want to wait, take our quiz to be matched with business opportunities that are available to franchisees right now.
How Much Would A Chipotle Cost To Open? (Estimate)
Under this market analysis, I examine Chipotle’s revenue, earnings, and other financial information to make an educated guess as to what it would actually cost to open a franchise. In the rare event that the corporation chooses to reopen franchise opportunities, you’ll have a better understanding of the business operations.
Revenue
- Chipotle Mexican Grill’s sales for the fiscal year ended December 31, 2021, was at $7.547 billion, a 26.11 percent increase from the previous year.
- Chipotle Mexican Grill’s yearly sales in 2021 was $7.547 billion, a 26.11 percent increase over the previous year.
- Chipotle continues to prove that they have pricing power even after ingredient, shipping and labor expenses increase. Chipotle increased their menu prices across the board by 4% and found consumers were willing to pay for it.
Financial Requirements and Fees
Since Chipotle does not provide opportunities for franchising, I can’t share fees or requirements with it. What I can do though is provide you with a look into the startup cost to open Chipotle’s direct competitors to offer clues.
| Fees And Requirements |
Qdoba |
Moe’s Southwest Grill |
| Franchise Fee | $30,000 | $30,500 |
| Liquid Capital | $500,000 | $150,000 |
| Net Worth | $1,000,000 | $1,000,000 |
Qdoba VS Chipotle: The Ultimate Burrito Battle Royal
Between the two companies, Qdoba shares a lot of similarities with Chipotle especially in terms of what both companies went through in the past. Both are burrito eateries that initially opened their doors in the 1990s: Chipotle in 1993 and Qdoba in 1995. These restaurants launched their initial locations in Denver, Colorado. Both have headquarters stationed in Southern California: Chipotle in Newport Beach while Qdoba is in San Diego.
Both firms have a history of taking investment dollars from large burger chains. McDonald’s invested in Chipotle, and Qdoba was bought by Jack in the Box in 2003. Eerily familiar don’t you think?
Here are some fast facts about Qdoba:
- Year Established: 1995
- Headquarters: San Diego, CA
- Number Of Units: 755 (as of March 21, 2022)
- Franchising Since: 1997
- Initial Investment: $871,000 to $2,034,000
Moe’s Southwest Grill
Taco Bell is perhaps the most popular Mexican restaurant on the Entrepreneur Franchise 500 ranking 8th on their list, Moe’s, despite placing 219th on the list looks the closest to Chipotle in my opinion. Nachos, quesadillas, tacos, and burritos are also all available at this restaurant franchise.
A Moe’s restaurant is more affordable than McDonald’s to open, however, this does not mean it’s “cheap.” The parent company, Focus Brands requires a net worth of $1,000,000 and liquid cash of at least $150,000. Here are some more facts about starting a Moe’s Southwest Grill.
- Year Established: 2000
- Headquarters: Atlanta, GA
- Number Of Units: More than 700 units globally
- Franchising Since: 2001
- Initial Investment: $475,000 to $1,100,000
What’s The Profit Margin Of Chipotle?
As of December 31, 2021, Chipotle Mexican Grill’s net profit margin was 8.65%. Profit margin is, of course, a constantly moving metric in the restaurant industry. Each quarter, a different number will be reported because ingredient and shipping costs are always in flux.
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Fast-casual restaurants often termed as fast food or quick-service restaurants (QSRs), allow customers to order at a counter and perform self-service tasks. This cuts down on the amount of labor you need in a store. While factors such as franchise membership influence profit margin, fast-casual restaurants normally have a profit margin of 6-9 percent on average.
The data shows Chipotle Mexican Grill’s (CMG) present and average gross margin, operating margin, and net profit margin over the previous ten years. Upon deducting expenses, the profit margin is measured as the percentage of sales retained as income by a corporation.
What Makes The Operations Of Chipotle So Appealing?
Chipotle Mexican Grill is a Mexican grill restaurant with a small menu and a lot of meal customization options. The company initially opened its doors in 1993 and now has over 1700 locations in the United States and throughout the world.
In the early 2000s, McDonald’s owned a controlling stake in the restaurant but sold it after Chipotle’s first public offering (IPO) in 2006. Chipotle’s stock has climbed from $42 to over $650 since its IPO and is still regarded as a long-term investment.
A Small Menu With A Lot Of Options
Chipotle’s modest menu is one of the reasons for its success. There are three advantages to having a limited menu. Initially, because Chipotle only stores fresh produce, food waste is always a concern. The small menu cuts down the number of ingredients that must be kept on hand, reducing waste.
Secondly, smaller menus allow for faster overall service. In certain fast-food businesses, the kitchen can become overworked and make certain mistakes as a result of the volume of orders. Chipotle makes it almost impossible to slow-down the burrito assembly line: pick out a wrap, select meat and other fillings, and pay. Whenever the employee misses adding beans, the customer will notice and will be able to call out the oversight right away. It’s simple and quick, and customers appreciate the experience of watching their burrito get made.
Lastly, a modest menu ensures that clients are aware of what is available every time they visit the establishment. Chipotle does not have to create innovative foods or make spectacular commercials to let customers know what it has to offer.
Chipotle Tweets.
Company-Owned
Chipotle is able to keep a tight grip on all elements of its operations since it doesn’t have any franchises. In simple terms this means they hire managers to operate units and manage employees based on a proven operating process. While franchising might allow Chipotle to expand more quickly, it also runs the risk of losing control of its suppliers, flavor, and identity.
It’s no real surprise that franchisees occasionally cut corners by purchasing ingredients from a lower-cost source or attempting to reduce labor costs. Because Chipotle owns all of its locations, the company is able to assure that the layout, taste, and price are consistent from one location to the next. It also means that Chipotle management doesn’t need to “win-over” franchisees when they decide to make menu changes or switch suppliers.
Company Mantra
Chipotle’s mantra, “food with integrity,” expressed what founder Steve Ells thought about the state of the food industry in the United States. Ells became dedicated to preparing meals that were responsibly and organically produced, resulting in meat that Chipotle claims is better tasting and higher quality than that served by rival restaurants. Chipotle began using foods that were not genetically modified (no-GMO) in 2013.
And a large swatch of the public agreed with these claims. Even after raising prices due to higher food costs in 2014, Chipotle’s relatively similar revenues jumped by 16.8%, restaurant margins increased to 27.2 percent, while net profit soared by 36%. In 2014, Chipotle added 192 additional locations, with another 200 planned for 2015.
Fast forward to 2022 with higher food costs due to inflation, Chipotle has been able to pass along price increases to consumers yet again.
Sales Potential
Chipotle’s overall sales for 2021 was $7.5 billion, up 26.1 percent from the previous year. A 19.3 percent rise relative to restaurant profits and new restaurant additions fueled the growth. The company added 215 new restaurants during the year, increasing the total number of restaurants to 2,966. A “Chipotlane” was also added to 174 (or 81 percent) of the 215 new stores that launched this year. At the conclusion of the year, they had 355 Chipotlanes.
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In 2020, the operating margin at the restaurant level was 22.6 percent, up from 17.4 percent. The gain was mostly due to strength from similar restaurant sales and menu pricing increases, which were somewhat countered by rising wages, rising commodity inflation, mainly from shipments and meat, and third-party delivery charges.
In 2021, net earnings reached $653.0 million, or $22.90 per diluted share, up from $355.8 million, or $12.52 per diluted share, in 2020. Revised net earnings for 2021 was $724.8 million with adjusted diluted earnings per share of $25.42, after discarding the effects of modification charges relating to their 2018 PSUs, legal fees, corporate reorganization, restaurant asset impairment, and other expenditures. Not surprisingly, the stock price has reacted positively to these results in the short term.
Company Tech
Chipotle Mexican Grill had always been an innovator in the casual dining technology industry. Simply look at just how many restaurants have imitated Chipotlanes, the fast casual’s order-ahead drive-thru concept, or its additional makeline designated to digital orders. However, in its 4th quarter results report, the fast-growing company gave insight into the of future tech improvements.
The Newport Beach, California-based firm plans to use technology to manage personnel, labor utilization, and food service traffic in the future. Furthermore, the corporation stated that it is not averse to introducing robots to help with operations as long as automation by itself doesn’t eliminate the human aspect from the equation.
According to Chipotle’s Chief Restaurant Officer Scott Boatwright, “co-botics” might help the company keep its identity while simultaneously increasing productivity. Chipotle also announced the development of a new labor scheduling software that incorporates AI algorithms and data to help the company manage more effectively. Instead of depending on prior patterns, the system leverages actual data to help make decisions.
Chipotle’s internet sales increased 4 percent in the 4th quarter to $811 million, or 42 percent of total revenue. The restaurant’s digital sales for the full year were $3.4 billion, approximately 3.5 times what it had prior to the pandemic. The company stated that it will continue investing in technology in order to foster technological transformation and build its 26.5 million-strong rewards member program.
What Are Some Franchise Alternatives To Chipotle?
We know by now that Chipotle has not yet opened up its business to franchising opportunities to maintain the quality of its core business. In the meantime, consider some of these franchise alternatives while waiting for Chipotle to open up.
McDonald’s
McDonald’s is an easy choice for this given that the fast-food giant has an established franchising model and operating globally over the years. It has also invested in Chipotle in the past, associating the two companies together and exhibiting McDonald’s belief in Chipotle’s operations and food offerings. Here’s a glimpse of what you need to know about one of the world’s established franchisers.
- CEO: Steve Easterbrook
- Business headquarters: Oak Brook, Ill.
- Franchising since: 1955
- Initial investment: $1,008,000 to $2,214,080
- Initial franchise fee: $45,000
- Global Sales: $93,317,000,000
- US Units: 13,679
- International Units: 25,519
- Total Units: 39,198
Qdoba
Next on the list was already mentioned earlier in this article. Qdoba Mexican Grill is a fast-casual Mexican restaurant brand in the United States and Canada that serves tacos, quesadillas, salads, and burritos.
Certain Qdoba establishments include full-service bars with craft beer and specialty cocktails and are known for their three-cheese queso and complimentary guacamole with meals. Private equity firm Apollo Global Management owns the Qdoba chain, which has sites in both the United States and Canada.
- CEO: Leonard Comma
- Business headquarters: San Diego, Calif.
- Franchising since: 1997
- Initial investment: $871,000 to $2,034,000
- Initial franchise fee: $30,000
- Global Sales: $825,000,000*
- US Units: 730
- International Units: 11
- Total Units: 741
Moe’s Southwest Grill
Another casual food establishment already mentioned earlier is Moe’s Southwest Grill. Moe’s is an Atlanta-based fast-casual Tex-Mex restaurant chain. The brand was founded in 2000 by Raving Brands, and it is now owned by Focus Brands. Tacos, quesadillas, and burritos with odd pop-culture influenced names like Alright Alright Alright and Wrong Doug are available made-to-order at Moe’s locations.
According to the corporate website, “Moe” stands for “Musicians, Outlaws, and Entertainers,” and was created to celebrate outstanding performers who left this world far too soon. They are also known for their annual “Free Queso Day,” which offers patrons free chips and queso at participating locations.
Moe’s has a large number of outlets around the United States, as well as foreign locations in Russia and Turkey.
- CEO: Bruce Schroder
- Business headquarters: Atlanta, Ga.
- Franchising since: 2001
- Initial investment: $368,930 to $956,400
- Initial franchise fee: $30,000
- Global Sales: $563,450,028
- US Units: 681
- International Units: 1
- Total Units: 682
The History of Chipotle Mexican Grill
Chipotle Rewards.
Chipotle, going by its corporate name as Chipotle Mexican Grill, Inc., is an American fast-casual restaurant company with locations in the United States, France, Germany, Canada, and the United Kingdom. They are known for their tacos and burritos created to order in front of the customer. Their name is derived from chipotle, the Nahuatl term for dried and smoked jalapeño chili pepper. The corporation is traded on the NYSE under the ticker code CMG.
Chipotle was founded by Steve Ells on July 13, 1993, after working as a line cook for Jeremiah Tower at Stars in San Francisco. While working with the restaurant, he noticed the popularity of burritos and taquerias in the Mission District. Through an $85,000 loan from his father, he opened the first-ever Chipotle restaurant in a recently vacated Dolly Madison Ice Cream store at 1644 East Evans Avenue near the University of Denver campus in Denver, Colorado.
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Ells and his father determined that in order for the business to be viable, they would have to sell 107 burritos every day. The initial eatery sold over 1,000 burritos each day after only one month. Chipotle’s income stream was used to open the second location in 1995, and an SBA loan was used to open the third location in 1997. Ells’ father put up $1.5 million to support more expansion. Ells then formed a board of directors and developed a business strategy, which helped the company raise an extra $1.8 million. Ells had intended to use the proceeds from the first Chipotle to create a fine-dining restaurant, but after the restaurants’ success, he decided to focus on Chipotle Mexican Grill.
McDonald’s And Succeeding Years
McDonald’s Corporation would become a major investment partner of Chipotle in 1998, and the brand had grown to over 500 sites by the time McDonald’s totally divested itself from it in 2006. Chipotle reported a net profit of $475.6 million and a workforce of over 45,000 people in 2015, spread across over 2,000 locations.
Chipotle announced in May 2018 that its headquarters would be relocated from Denver to Newport Beach, California, in Southern California. Corporate services now managed in their Denver and New York offices had been relocated to Newport Beach or perhaps a preexisting Columbus, Ohio branch. This migration would have an effect on 400 employees with some receiving relocation and retention benefits. The business announced the closure of 65 poor-performing restaurants in June of the same year. Ells severed all links with the firm in March 2020, when he resigned as chairman and left the board of directors.
If you’re looking for a franchise opportunity serving Mexican cuisine, take our 8-minute quiz. We’ll match you with a business opportunity that takes into account your career experience, personal finances, and interests.
