The pumpkin spice latte could be getting a new step-sibling: the pumpkin spice slow bowl.
What happened: Starbucks has reportedly explored a takeover of the quick-serve giant Chipotle, a deal that, if completed, would mark the largest merger ever in the restaurant industry, per the Financial Times. The coffee chain's CEO, Brian Niccol, previously ran Chipotle for over six years — a tenure that saw the company’s stock soar 800%.
The Mexican chain’s fortunes have reversed since Niccol left. The company had to pull some produce over a salmonella outbreak, rising food and labour costs have cut into profits, and its stock has plummeted over 41% since its CEO swap.
Meanwhile, Starbucks has begun to turn things around. After a menu and cafe overhaul, same-store sales and profits have started to grow.
Why it’s happening: Does Brian Niccol just really miss his old job? Probably not (Starbucks gave him his own private jet for commuting). While the prospective deal is a bit puzzling, some analysts have suggested that Starbucks could follow a similar model as Yum Brands, the owner of brands like KFC and Taco Bell.
The idea is that you allow the restaurants to operate as standalone chains, but bring together the real estate and supply chain operations to make all of the brands more profitable.
There’s also the potential for Starbucks, which has over 40,000 stores globally, to open Chipotle up to new markets, which the chain has so far struggled to do.
Yes, but: Our very own Tim Hortons is an example of how deals like this can sour the customer experience. After being bought by private equity group 3G, Tims went through aggressive cost-cutting measures that led to protests from franchisees, degraded product quality, and ultimately damaged the Canadian chain’s brand at home.—LA
