Please ensure Javascript is enabled for purposes of website accessibility

Chipotle Still Fighting 'Owned by McDonald's' Myth

By Jamison Hill – Nov 7, 2013 at 11:19AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Once funded almost entirely by McDonald's, Chipotle has come a long way since, and now finds itself peddling vegetarian burritos and advocating for the humane treatment of animals.

The image of an idyllic farm with manicured fields turns out to be a faded mural on a factory wall. Our hero, "The Scarecrow," trudges into his job at Crow Foods Inc., ruefully doing his part to pump out "100% Beef-ish" products, a mechanical crow perched on his shoulder.

The animated short film (and accompanying app) produced by Chipotle (CMG 0.47%) is a clever, emotive, and well-crafted depiction of the stereotypical socially irresponsible corporation. 

Like The Scarecrow, who ultimately escapes to his farm to produce fresh food, Chipotle has emerged as a breath of fresh air, even as critics argue the company is merely blowing smoke at consumers. Once funded almost entirely by McDonald's (MCD -0.82%), Chipotle is not unlike any other profit-seeking company. It aims to reduce costs and boost revenue as much as possible. But the company's stance on issues such as humane treatment of animals and eco-friendly business practices serve as a competitive advantage in the food industry.

Photo: Chipottle Mexican Grill in Chicago, courtesy of Wikimedia Commons.

From hamburgers to tofu burritos

Pleasing investors and customers alike, Chipotle has managed to boost its reputation above its hamburger roots. The company  started as a 14-location experiment, initially funded by the company perhaps most synonymous with the meaty sandwich.

The world's largest hamburger chain started with a minority share of the company in 1998, and eventually built up a 90% stake by 2006, when the fast food giant cut ties. Since then, the restaurant with a motto of "food with integrity" has tried to distance itself from the fast-food behemoth. Chipotle even states on its website, "There is a popular misconception that Chipotle restaurants are owned by McDonald's."

Chipotle is now taking steps to further improve its reputation by offering "sofritas," or shredded organic tofu, a special vegetarian option. This option also comes as food prices are on the rise, including meat and produce. Perhaps not so coincidentally, meat substitutes like sofritas, are often much cheaper than actual meat. So much so that the textured vegetable and soy protein is also added as a filler in menu items offered by other chains such as Jack in the Box, and even in some prison cafeterias. 

The cost of social responsibility

Beyond diet accommodations, Chipotle also looks out for the environment by sourcing its produce within 350 miles of the restaurant it is served. Some commentators may not consider produce from a farm a six-hour drive away to be local, but it's much closer than some restaurants that import produce from out of the country. Buying locally sourced food may be more expensive due to the rising cost of ingredients like corn, but ultimately it evens out because transportation costs are reduced. 

Chipotle may also be cutting back by forgoing the organic labeling of its meats, saying instead, "we are careful in selecting the farms we work with and deciding when working with an organic producer is appropriate for our needs." While some may look at this declaration as a cop-out, it is actually quite smart from both a stance of social responsibility and cost reduction. Not only is meat and produce cheaper without the organic label, some farms treat livestock inhumanely even under the umbrella of organic labeling.

The Scarecrow

Back to The Scarecrow. In an attempt to further its reputation as a socially responsible enterprise, Chipotle released the animated short without pulling any punches on big agriculture. The ad, which likely cost millions of dollars in production and placement expenses, features an overwhelmingly anti-big agriculture message. While it does not specifically name corporations, such Monsanto or ConAgra Foods, the depiction of the socially irresponsible Crow Foods Inc. is an obvious shot at the likes of such companies. 


Chipotle has come a long way since its days funded by McDonald's, but is still obviously grappling with the cost of social responsibility. For the past seven years, Chipotle has been trying to improve its image of social responsibility, effectively repairing any harm that the association with McDonald's caused.

It may seem odd that Chipotle now essentially wants nothing to do with the parent company that helped it find prosperity, but then again, rarely is a business pairing meant to last, especially when the core values are such polar opposites. Moving forward, the Mexican-food chain will look to bolster its socially responsible image while reacting to the ebb and flow of food and transportation costs.  

Jamison Hill has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and McDonald's. The Motley Fool owns shares of Chipotle Mexican Grill and McDonald's. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.