Chicago - McDonald's Corp. said it agreed to acquire a minority stake in World Foods, operator of 14 Chipotle Mexican Grill restaurants in the Denver area, the first time the fast-food giant has taken a stake in another restaurant chain.
The terms of the deal, expected to close soon, were not disclosed.
Oak Brook, Ill.-based McDonald's, which has been struggling to stave off stiff competition in its U.S. market, said its intent is eventually to franchise the Chipotle Mexican Grill chain. McDonald's said this would come only after a couple of years of evaluation and development.
McDonald's was quick to point out that the stake does not mean the company is taking its eye off its core hamburger-and-fries business.
"It clearly doesn't indicate any change in our U.S. strategy of growing our hamburger restaurant business," said Patrick Flynn, executive vice president of McDonald's USA and the company's relationship partner to Chipotle Mexican Grill.
"We remain very confident and excited about the possibilities of our core business, and that's absolutely where our focus is going to be," Flynn said in an interview.
Chipotle Mexican Grill, named like the Chipotle chili pepper, is a quick-service restaurant with an upscale, adult appeal, Flynn said.
The founder, president and chief executive of Chipotle, Steven Ells, is a chef and has won awards for the architecture in his restaurants, Flynn said.
In addition, Flynn said Chipotle's marketing efforts are "more subtle" and much is based on word of mouth.
"I'm intrigued by the thoroughness by which Steve has put this thing together," Flynn said. "We looked at it being franchisable ... that's clearly our intent."
Ells and others will retain the majority stake in Chipotle, McDonald's said.
Flynn said the stake also gives McDonald's the opportunity to learn about the food business from a different perspective. McDonald's could use the new knowledge across the organization, but would not consider incorporating the Chipotle menu into its current offerings, he said, nor would it dictate the Chipotle menu.
"They are two entirely separate organizations," Flynn said.
Industry analysts were cautious about the prospects of the venture.
"I was very surprised," Jeffrey Omohundro, an analyst with investment bankers Wheat First Butcher Singer, said. "It's hard for me to endorse it given the substantial international opportunities where I think the company should focus."
But Flynn said McDonald's international growth is continuing at a rapid pace. In 1997, McDonald's opened 2,110 restaurants -- one every four hours -- with 1,824 of them outside the United States.
"At the end of the day, we're only talking an investment in 14 stores by a $35-plus billion company," Flynn said. "It's really an insignificant amount of money when you look at the broad picture."
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