Chipotle's IPO Sizzles Spicier than a Three-Alarm Hot Sauce!
The initial public offering of Chipotle Mexican Grill Inc.'s stock Thursday was spicier than a three-alarm hot sauce. Chipotle, which offers cafeteria-style made-to-order burritos (and a higher average ticket price than its competition) is owned by the McDonald's Corporation. The Denver-based quickservice restaurant chain's shares ended their first day of trading at $44 a share, up exactly twofold from its $22 price. It raised $173 million by offering 7.88 million shares priced above its $18-to-$20 price range. The Wall Street Journal ($$) euphorically writes about the event:"This has probably been the happiest experiment McDonald's has ever tried," says Malcolm M. Knapp, president of New York restaurant consultant Malcolm M. Knapp Inc., of the burger chain's 1998 investment in Chipotle. 'I think it's a very strong restaurant concept, it's got good management, they understand food quality, and they are in touch with their consumer base.'"
All is not euphoric though. There is also a word of caution.
"The first day's jump makes Chipotle the second-best restaurant-stock pop. Yet that puts it in a peer group that hasn't always held up: Boston Chicken Inc. -- later known as Boston Market -- soared nearly 143% on Day One of its IPO in 1993, Thomson Financial says, but the company expanded too fast, and filed for protection from creditors in 1998. It was bought out of bankruptcy-court protection by McDonald's two years later. Fresh Choice Inc. -- the second-best first-day performer before Chipotle -- rose more than 91% in its 1995 debut but also filed in bankruptcy court, emerging last month as a private company."
In this writer's opinion what all this means to individual franchisees is that the corporation now has considerable capital for major expansion. More capital means a lot more restaurants to compete with but also more market buzz and hence presumably more customer traffic on average in stores as Chipotle's name expands.
Photo: Logo from the Open Source Wikipedia, the free encyclopedia- "Chipotle Mexican Grill"
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