How Much Does a Chipotle Franchise Cost?
Many potential investors are very interested in how to buy a Chipotle franchise. And why wouldn’t they be? Chipotle is one of the fastest growing restaurant chains in the United States. The restaurants generate good foot traffic, provide a high demand menu and do well financially. The company has a smart management team that clearly understands how to build and market a successful restaurant brand using 21st century marketing tactics. Instead of relying on the traditional marketing strategies that older restaurant chains use, such as expensive television commercials and mail-outs, Chipotle relies on social media marketing, web videos and word of mouth brand marketing. As a result, they are in high demand by any business owner and investor looking for a reliable and proven business model that they can invest in and produce a nice return on investment.
The Giant Foil-Wrapped Burrito…
… as big as your head. Well, perhaps Chipotle’s signature menu item isn’t quite that large, but it is big enough to drive a hugely successful marketing campaign and turn this restaurant chain into one of the most successful fast food franchises to come along in many years. Founder Steve Ells graduated from culinary school with a dream of opening his own fine dining establishment. When he found his funds lacking to achieve that goal immediately, he started Chipotle Mexican Grill in 1993 with the expectation that money earned from this venture would go toward helping him open the restaurant he really wanted to run. Based in Denver, Colorado, the operation soon won over a cadre of extremely loyal customers, attracting all sorts of attention and investment capital. All these years later, Ells has still not opened that upscale restaurant, but he sits at the head of a vastly successful food-service operation.
Chipotle Franchise Review
As of this date, Chipotle has continued to avoid operating a standard franchise model. As a result, there are no Chipotle franchises, no Chipotle franchises for sale, and no way to buy a Chipotle franchise – at least for now. McDonald’s Corporation invested a significant amount of money in Chipotle in 1998, holding an ownership stake in the firm until Chipotle went through an IPO (initial public offering) in 2006. The company has continued to be known for its high quality ingredients and amazing customer service, with an emphasis on all natural ingredients. The lack of a franchise model surprises many, especially since McDonald’s had such a great deal of influence on corporate operations during the eight years it was involved financially – spearheading the expansion that today encompasses 547 stores in 26 states. Ells has remained at the company’s helm through the transition from private enterprise to mega-restaurant sidekick to public corporation. While he does not rule out selling Chipotle franchises at some future date, his continued interest in keeping things as they are revolve around a desire to exert more control over the entire operation as well as giving his workers a chance to become general managers whenever he opens new locations. This promote-from-within culture is very strong at Chipotle.
Chipotle Franchise Information & Costs
Buying a franchise can be a very expensive proposition. Parent companies charge an upfront franchise fee that can reach $25,000 or more, plus an ongoing royalty that takes a share – often from four to eight percent – of every net dollar that comes in the door. Franchising is a great way for companies to raise capital while allowing others to run their own business with minimal everyday oversight, but the management team at Chipotle believes it has plenty of cash on hand to allow it to continue expanding without offering the opportunity to buy a Chipotle franchise. Long-term expectations by management predict financial growth to continue at a 25 percent annual pace, with the expectation that Chipotle will open somewhere around a hundred restaurants a year over the next five years. Because it is a public company, financials are readily available for analysis. Market capitalization is around $1.8 billion, with annual revenue in the range of $775 million or so. Net income is estimated at $34 million annually, with a profit margin of just below five percent – about average for the fast food industry. The company carries a relatively small debt load – in the neighborhood of $4 million – which helps emphasize the company’s future prospects for continued profitability and prosperity.
Waiting With Baited Breath
Most franchising experts agree that the ability to buy a Chipotle franchise is at or near the top of every prospective fast food franchisee’s wish list. In the event the company decides to start selling Chipotle franchises, don’t be surprised to see the flood gates open wide. Of course, you have to open wide anyway to manage one of those giant burritos the company sells.
The One Way You Can Invest In Chipotle
While you cannot start a Chipotle franchise or open up a Chipotle restaurant in any way, there is one op-tion that is available to you if you want to invest in this business. Chipotle is a publicly traded company. That means you can buy and sell shares of the company on the stock exchange and participate in the growth of the company.
Chipotle has posted some excellent financial returns for the parent company. The following are some of the highlights from the financial annual report filed at the end of 2013:
• The company did over 3 billion dollars in sales revenue, which is an increase of over 17%
• Restaurant sales are up over 5% from the previous year.
• The company is opening a lot of new restaurants, almost 200 new restaurants for the year.
If Chipotle was to launch a franchise model, would you be interested in investing in a Chipotle franchise?