Who wouldn’t want to be the owner of a branch of one of the most wildly successful new everyman eateries in decades? Chipotle has almost everything going for it — huge growth rate, great media coverage, and an excellent reputation as a restaurant that combines healthy food, ‘green’ business, and good prices. Even the downsides of owning a Chipotle aren’t really all that down. But what are they?
Chipotle By The Numbers
Unfortunately, Chipotle’s didn’t release any financial information regarding franchise costs for 2014 (keep reading to learn why). But they did release some pretty startling and impressive numbers in general. Let’s take a look at some highlights from their 2014 Annual Report:
- 1,755 Chipotle restaurants are currently operational in the US, with another 17 operating in Canada and Europe.
- The average startup cost for all Chipotles that have opened in the U.S. to date (as of the report) was $843,000.
- The money made by a typical Chipotle goes toward:
- 30% Food, Beverage, and Packaging Costs
- 20% Labor Costs
- 7% Administrative Costs
- 5% Occupancy Costs
- 2% Depreciation and Amortization
- 1% Losses
- 10% Other Costs
- 25% Gross Profit
What Were Those Downsides Again?
25% profits is a pretty huge attraction in an industry where margins are often in the single digits. So what are the downsides? According to Chipotle itself, the challenges that is faces in the near future — at least, the ones relevant to the scope of an individual store — are as follows:
- The time-to-profitability is meaningfully longer for a typical Chipotle branch than it is for many of their competitors — 24 months or longer (industry standard hovers around 8 months).
- The market is starting to get saturated; it’s becoming difficult to find a truly attractive place to put a new Chipotle.
- Profitability is largely dependent on Corporate’s ability to predict and preemptively respond to changes in the food supply. It’s difficult to maintain the high degree of “food integrity” that Chipotle does!
- Secondarily, profitability is somewhat dependent on keeping labor costs low. This means that the growing minimum-wage movement, should it be realized, may significantly cut into profits (though this is unproven.)
All things considered, most big chains suffers from the second and last issues — those are essentially to be expected no matter what franchise you open unless you pick an unproven up-and-comer rather than an established name. The third item is practically Chipotle’s main selling point (besides the guacamole), so it’s not so much a ‘downside’ as ‘the reason you’d want to do this in the first place.’
But You Can’t.
Sorry — Chipotle isn’t, and has absolutely no plans to, develop a franchise model. They want to maintain complete control over their company (and with numbers like that, who can blame them?) Fortunately, while Chipotle isn’t available to franchise, there are hundreds of other food-industry franchises — many of which have the same commitment to high-quality, healthy food at decent prices — that you can get into.
Wondering what those other franchises might be? At Franchise City, we work with over 600 franchise brands across a wide range of industries, including many in the fast food space. Through a proven multi-step process, we are able to match prospects with the franchise business that best suits your passion, skills and budget. Our service is completely free, and there are never any additional charges or hidden fees to acquire a franchise through us. For additional information, fill out the form at the bottom of this page.