McDonald's Once Owned 90% Of Chipotle: Why It Sold Stake Too Early, Missed $73 Billion Opportunity

Fast-food giant McDonald's Corporation MCD is one of the most valuable restaurant companies in the world, valued at more than $225 billion and consistently putting out quarterly results with billions of dollars in revenue.

It turns out that the company could have been even more valuable if it had retained its ownership stake in Chipotle Mexican Grill CMG.

McDonald's Ownership of Chipotle: McDonald's invested in several restaurant companies during the late 1990s and early 2000s including taking an initial stake in Chipotle in 1998.

The fast-food giant was instrumental in Chipotle’s rapid expansion, helping to grow the chain from 14 to more than 500 locations in seven years.

McDonald's initially invested $50 million into the fast casual company and invested around $340 million total during its time holding a stake in the company, as reported by Bloomberg. At one time, McDonald's owned around 90% of Chipotle.

Chipotle went public on Jan. 26, 2006, at $22 a share. Its stock opened for trading at $44 and gained huge interest and a soaring valuation. The company had an initial valuation of approximately $700 million at the time of its IPO, but by the end of 2006, it had grown to $1.85 billion.

McDonald's sold a portion of its ownership in Chipotle during the IPO and exited its position completely by October 2006.

While it is unknown how much McDonald's made on their multiple sales of Chipotle stock, it turns out they could have made a lot more by holding or selling at a later date.

Chipotle’s current market capitalization is $82 billion. McDonald's 90% stake in Chipotle would be worth $73.8 billion today, assuming it held the entire ownership amount.

Read Also: Chipotle Mexican Grill Q2 Earnings: Revenue Beat, EPS Beat, Comps Up 11% On ‘Stronger Demand Trends’ And More

Why McDonald's Sold: Chipotle was one of several restaurant companies McDonald's invested in, a list that includes Donato's Pizza, Aroma Café, Boston Market, Pret A Manger and a joint venture with Fazoli's.

The investment in Chipotle was one of the keys for McDonald's and the larger restaurant company tried to influence business decisions of the smaller brand with ideas like launching a breakfast menu, franchising locations and adding drive-thru locations.

While Chipotle reluctantly added franchised locations, former CEO and co-founder Steve Ells fought back against drive-thru windows and breakfast.

McDonald's was asked about its decision to sell its Chipotle stake at a shareholder meeting. Then CEO Steve Easterbrook said Chipotle and other restaurant investments took attention away from the core McDonald's brand, labeling them a distraction, according to a report from Entrepreneur.

Easterbrook said the sale of Chipotle and other restaurant stakes would ensure that everyone was putting 100% of their time and focus into the core McDonald's brand.

Ells has openly discussed the differences between where he wanted to take Chipotle and where McDonald's wanted to go, which may also have led to the sale.

"What we found at the end of the day was that culturally we're very different," Ellis told Bloomberg. "There are two big things that we do differently. One is the way we approach food, and the other is the way we approach our people culture. It's the combination of those things that I think make us successful."

McDonald's divested all its ownership stakes in restaurant companies but later ventured into the creation of Redbox, a movie kiosk business. The company eventually sold a stake in Redbox to Coinstar before fully exiting the business.

What's Next: McDonald's continues to be one of the largest restaurant companies in the world and competes for market share from consumers in the highly competitive fast-food space.

Chipotle and other fast-casual brands have taken market share from the fast-food sector over the years. Chipotle continues to grow and has over 3,000 locations in the United States, Canada, and several other countries.

After the sale of its stake by McDonald's, Chipotle bought back the franchised locations. The company now owns all of its U.S. locations in a decision to focus on consistent quality and service at all locations as part of its "Food with Integrity" promise.

Chipotle opened its first location in Dubai in October 2024. The restaurant is part of the company's first-ever international franchise partnership that will see more locations open in the Middle East in the future.

While Chipotle moved away from the franchise model that McDonald's advocated, the company did adopt one key idea from its former investor. Today, most Chipotle locations, including the majority of new builds, feature a drive-thru lane. This addition aligns with McDonald's influence and has become a significant feature in Chipotle's operations.

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