1 What parenting advantages did McDonald’s perceive it might bring to Chipotle? Chipotle Mexican Grill had always done things rather differently to the rest of the restaurant industry. Its outlets were not in the busiest locations, it spent lots on food, rarely added to the menu, didn’t serve breakfast, do drivethroughs, franchises, or much advertising. And yet by 2015 it was a $22bn burrito empire. Despite its success, why did owner McDonald’s sell it, especially when McDonald’s own sales and stock price had dropped, as it became associated with America’s obesity epidemic?

Founded in 1993 in Denver, USA by Steve Ells, and relying initially on parents and wealthy friends for initial funding, Chipotle’s fast casual dining business soon needed significant capital to expand beyond its 13 stores. In 1998 McDonald’s made a $50m investment in Chipotle as part of the group’s expansion that included Boston Market, Donatos Pizza, Pret a Manger, Aroma Cafe. It also investigated other businesses such as dry cleaning, a maid service and mowing the lawn.

McDonald’s brought distribution systems, real estate expertise, construction knowledge and organisational structure along with its capital investment. To McDonald’s, Chipotle brought new products – fresh cilantro, red onions and avocados. ‘Our Portland distribution centre smelled like a produce house – our product is fresh but sealed in bags for shelf-life purposes’ (McDonald’s executive). Only one product was common to both companies – a five-gallon bag of Coca-Cola syrup.

Coming from a standardised, rules-based, efficiency-oriented culture, McDonald’s executives were startled when they first visited Chipotle’s headquarters. People brought their dogs into the office and Steve Ells walked around in blue jeans. Chipotle employees showed McDonald’s executives how they scrubbed the grill by hand – ‘there’s got to be a better system – maybe a power-tool’ (McDonald’s executive)?

They showed food could be customised as customers walked down the line. ‘If you want a bit more or less, nobody ever says no. They might charge you but it doesn’t slow the process.’