Does McDonalds Own Chipotle? – Mailbag

Jun 29, 2009 | By: John Serrao

Controversy, Featured, Food, Mailbag

Hi – I was watching Nightline a couple weeks back and they had a special on Chipotle using free-range animals. Then I remembered that Chipotle is owned by McDonalds [America's #1 buyer of factory farm beef -ed]. Is this true?

- James, Minneapolis, MN

This is an excellent question we have also heard many times. After some research, the short answer is, no, Chipotle is not owned by McDonalds as of 2009 but it once was. The story is quite complicated actually.

How deep does the love go?

How deep does the love go?

Chipotle was founded in 1993 by Steve Ells in Denver, Colorado, funded by an $85,000 loan from his dad, according to an excellent article by the Rocky Mountain News, Denver’s now defunct paper. The restaurant was based upon Ells time in San Francisco where he studied the burrito stands in the city’s Mission district. His instincts were vindicated as the restaurant was an immediate success. Ells managed to open a chain of five stores around Denver by 1998.

After this initial success, McDonalds did enter the picture, purely as an investment partner in 1998, technically making Chipotle a subsidiary of McDonalds. That same article from the Rocky Mountain News mentions, very briefly, that Ells family connections to McDonalds helped pave the road for Chipotle’s massive expansion. We did not independently verify this fact, but it was published in a major American newspaper, giving it substantial weight in our minds.

From Investor to Owner

With McDonalds onboard, Chipotle started to build out beyond their Denver market – into Kansas City, Ohio and Minneapolis. That success that would lead McDonalds to become the majority owner of the firm in 2001, making Chipotle fully-owned subsidiary of McDonalds. This is when Chipotle ascended into a household name across the United States. From 2001 to 2006, Chipotle went from under 100 stores to 466 – expanding into more than 30 states [1].

It was then in January 2006 that McDonalds said goodbye to Chipotle, spinning off the company in an IPO on the NYSE, saying they wanted to concentrate on their core business.

Technically though, that was not the end. McDonalds continued to hold a large amount of class B shares of Chipotle for another 6 months, and these class B shares contained over 80% of the voting rights to the company [2]. McDonalds then authorized the final divestment deal in October of 2006 whereby their own shareholders could exchange McDonalds stock for the remaining class B voting shares of Chipotle. According to SEC documents, this was done for tax purposes [2].

So, since October 2006, Chipotle has not been owned by McDonalds but much of the company’s DNA and supply chain management is likely taken directly from McDonalds. Chipotle now trades as an independent company on the NYSE under the call sign, CMG [3].

Chipotle Vs. McDonalds

Here is the Nightline story and video James was referencing:

Chipotle and Pastured Pigs

Chipotle and Pastured Pigs

(Click picture to view video, its well done)

The video highlights Chipotle’s commitment to buying from pasture-raised hog rearing operations. Many of these operations are small in nature, so there is an implicit commitment to sustainable farming practices. We cannot be sure of exactly how local or regional Chipotle’s supply chain (those are trade secrets), but in the fast food arena, they are the leader in this space. Chipotle was the first restaurant to remove rBGH for all their milk products [4], buys from family farms [5] and makes a real, financial commitment to sustainable meat [6].

The real conundrum James is implying with this question of Chipotle’s ownership is how could McDonalds, known for poor food quality and nutrition, simultaneously invest in a company with such divergent values.

McDonalds is a business and will do whatever it takes to make money. Chipotle hit a nerve with the public and McDonalds likely did extremely well with their investment.

For their part, McDonalds does keep a “Values in Practice” section on the corporate responsibility portion of their website [7]. It mentions some laudable things – namely that:

In 2007, 91% of our fish was sourced from fisheries without any unsatisfactory sustainability ratings.

But, as is the case with most ingredient labels you see in the store, what isn’t said is usually more important than what is. McDonalds is well known as the leading buyer of meat from factory farming operations. And while McDonalds does certify that their operations are humane, whatever guidelines they are using as not publicly available so they cannot be verified.

Their operations are so large that even if they made a small commitment to sustainable farming practices, massive changes would occur throughout the supply chain – effecting what’s in the grocery store for everyone. Hopefully, that day is near.

In the mean time, you can enjoy either Chipotle or McDonalds foods knowing they are two, separate corporate entities.

Full Disclosure – This author owns no stake in either one of these companies.

Chipotle Nutrition Information

A late edition here, this is the nutrition information for the Chipotle menu.

  • http://www.antioxidants-for-health-and-longevity.com stan mrak

    The question I have is whether Chipotle uses food additives like MSG and others to spice up their meat.

    • http://www.nutritionwonderland.com John Serrao

      Good question…

      Chipotle does not publicly disclose the ingredients in their food. I have sent out an email to them. We’ll see what they say. I just uploaded the nutrition information chart for their burritos onto this page. Hope it helps.

  • http://www.antioxidants-for-health-and-longevity.com stan mrak

    The question I have is whether Chipotle uses food additives like MSG and others to spice up their meat.

    • http://www.nutritionwonderland.com John Serrao

      Good question…

      Chipotle does not publicly disclose the ingredients in their food. I have sent out an email to them. We’ll see what they say. I just uploaded the nutrition information chart for their burritos onto this page. Hope it helps.

  • http://www.nutritionwonderland.com John Serrao

    We received written confirmation from the Chipotle team that they do not use MSG or any of its chemical precursors like hydrolyzed wheat and autolyzed yeast extract in any of their foods.

  • http://www.nutritionwonderland.com John Serrao

    We received written confirmation from the Chipotle team that they do not use MSG or any of its chemical precursors like hydrolyzed wheat and autolyzed yeast extract in any of their foods.

  • http://stores.shop.ebay.co.uk/Discount-Quality-Ties bow tie

    Great blog. Thanks for the interesting article. Will send others your way.

  • http://stores.shop.ebay.co.uk/Discount-Quality-Ties bow tie

    Great blog. Thanks for the interesting article. Will send others your way.

  • Max

    Last week, I saw a McDonald’s 18-wheeler unloading some boxes at Chipotle a little after midnight. Does McDonald’s transport their food for them?

  • Max

    Last week, I saw a McDonald’s 18-wheeler unloading some boxes at Chipotle a little after midnight. Does McDonald’s transport their food for them?

  • http://www.nutritionwonderland.com John Serrao

    Max-
    Chipotle very well could continue to use McDonald’s supply chain infrastructure, as we mentioned in the article, but, now that they are separate corporate entities, Chipotle would have to draft an agreement between themselves and McDonalds to use their facilities.

    It may seem like a small difference but the two firms are now competitors so I would imagine any trade secret type best practices information sharing is strictly off limits.

  • http://www.nutritionwonderland.com John Serrao

    Max-
    Chipotle very well could continue to use McDonald’s supply chain infrastructure, as we mentioned in the article, but, now that they are separate corporate entities, Chipotle would have to draft an agreement between themselves and McDonalds to use their facilities.

    It may seem like a small difference but the two firms are now competitors so I would imagine any trade secret type best practices information sharing is strictly off limits.

  • jimbo

    The McDonalds 18-wheeler unloading at Chipotle is misleading. The trucks that deliver McDonalds products aren’t owned by McDonalds, but by the distribution center. Each distribution center has several clients, but McDonalds is far and away the largest. I would imagine that they contribute a LARGE amount of money to advertise on the trucks, but i can guarantee that they don’t actually own the vehicles themselves.

  • jimbo

    The McDonalds 18-wheeler unloading at Chipotle is misleading. The trucks that deliver McDonalds products aren’t owned by McDonalds, but by the distribution center. Each distribution center has several clients, but McDonalds is far and away the largest. I would imagine that they contribute a LARGE amount of money to advertise on the trucks, but i can guarantee that they don’t actually own the vehicles themselves.

  • Neelie47

    I live in Pittsburgh, PA and needed to talk to a “corporate” person from Chipotle. I called about six area Chipotles and found that not one manager or GM knows a corporate phone number! This was very confusing to me. Is there such a number that I can contact the Steve Ells people? I have a very disturbing situation and find that no one can help me. Furthermore, the Baum Blvd. restaraunt is always out of organic meat! What is up with that? Anyhow, I read the article about McDonald’s not owning the stores. Who does? Again I find it so strange that I can’t call someone about my unfortunate situation with Chipotle’s Peeps.

    • Nurse Ratchet

      If you are trying to warn them about the space aliens again, it’s no wonder they won’t give you any phone numbers. Just put your aluminum foil helmet back on and go hide in the bunker. I’ll ask the nurse to mix your meds in with your pudding.

  • Guru

    I believe your piece is inaccurate in its catagorization of the Chipotle and McDonald’s ties. The term “fully-owned subsidiary” is not accurate in describing McD’s role in the Denver chain.

    As for corporate DNA the man himself had this to say back during the buy back… Steve Ells, founder, chairman and CEO of Chipotle, said of McDonald’s disinvestment plan, “We’ve always operated independently and that won’t change as McDonald’s continues to reduce its investment.”

    To be completely fair however, Chipotle hasn’t truly been independent. It relied on McDonald’s for a corporate services: Chipotle used McDonald’s real estate personnel to open new stores as well as for for legal, insurance and benefits service, and most importantly on its accounting services.

    Just wanted to make sure people didn’t think the Big Mac and Barbacoa meat were in any way connected. This is a high linked article to McDonalds/Chipotle search queries so I hope people realize the main answer to your question “no, Chipotle is not owned by McDonalds as of 2009 but it once was” goes much further than how it sounds at first blush.

  • Binigirmay

    I heard the purpose of opening chipotle is to attract to the people who found out that mcdonalds food are not healthy any more then mcdonalds came up with the new idea by oppening chipotle. is these true?

  • batman

    5-8-11 chipotle uses aluminum pots to cook their beans and sauces in. I got this directly from their customer service via email. I will not eat there anymore.

  • Dwnuelle

    How are the pigs killed humanely?  Does the pig’s “sustainability” end @ it’s
    death, or more likely at the end of your digestive cycle?

    I raised pigs in pasture growing up. Don’t miss the stupid beasts and i can
    assure you they do not have a lasting memory. Animals have a brain but not
    a mind…but that is a theological issue for another day.

    • TheNotPorkEater

      And yet, they test out as smart as dogs. SO I wonder what ethnocentric snobbery we exhibit to make fun of the “Korean dog eaters” when we commit equal slaughter?

  • Dwnuelle

    I have no problem w chipotle using their niche as a marketing gimmick. I DO think any product or company that has to demonize it’s competitors with innuendo or hyperbole to increase sales is a loser. I like their food but can do without it for the aforementioned reasons.

  • Msims625

    For the purpose of nanny winning the bet, McDonald’s does own chipotle Mexican grill

    • Anonymous

      no it doesnt

  • Meliylino

    My Daughter is allergic to Cinnamon. Is this ingredient used in any of Chipotle’s meat or bean recipes?

  • yourmom

    you just explained how they’re still intrinsically connected, then ended by saying they’re separate. they’re not. If McDonalds (and it’s executives) kept a large amount of shares and voting rights after the IPO, they don’t just still largely own the company – they control it.

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