Chipotle announced Tuesday it has signed an agreement with Kuwait-based Alshaya Group, its first-ever franchise partner, to open locations in the Middle East next year.
Chipotle currently has just over 50 locations in Canada and Europe. All are company owned and operated, as are its roughly 3,200 U.S. locations. The Alshaya agreement marks the first time Chipotle has enlisted a local franchise retail operator as it moves into a new market.
Chipotle CEO Brian Niccol told CNBC in an interview that the initial plan calls for two locations each in Dubai and Kuwait, with exact locations yet to be determined.
The Alshaya Group, which works with other major brands including Starbucks, Shake Shack and Texas Roadhouse, was the right fit for the deal given its proven market experience and commitment to Chipotle’s “Food with Integrity” proposition, Niccol said.
Keeping ingredients fresh and real, with local menu tweaks that echo the U.S. experience will be key, he added.
“They’ve got great brands, great operations, great people programs, which just gave us confidence that they’d be able to execute the Chipotle proposition effectively in the Middle East,” Niccol said.
In evaluating the Middle East market, Niccol said it was important to partner up to ensure success in everything from real estate to hiring to supply chain.
Niccol said if the first few Middle East locations are successful, there will hopefully be hundreds more in the region down the line. He added the agreement could serve as a new model as the company looks to other markets.
“As we look around the world, we’ll be evaluating all the elements of what makes Chipotle great and if there’s an area where we believe we need a partner, then we’ll consider a partner for it,” Niccol said.
While the brand has enlisted a franchise partner in this specific expansion journey, don’t expect the franchising opportunity to arise in the U.S. Niccol said there is “no intention” to pursue that path right now.
“Our return on invested capital in the U.S. is industry-leading,” he said. “We’ve got the balance sheet and capital available where we can handle the growth with our own capital capability, and I think we’ve demonstrated the ability to operate restaurants effectively.”
Chipotle stock is up over 50% in 2023 and is one of the best performers in the restaurant sector.
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