FINANCE
WHY BAJA FRESH NEVER BECAME CHIPOTLE
THE BOTTOM LINE: MORE THAN 20 YEARS AGO, BAJA FRESH WAS THE COUNTRY’S BIGGEST BURRITO CHAIN AND ATTRACTED A MASSIVE VALUATION IN A SALE TO WENDY’S. ITS SUBSEQUENT DOWNFALL OFFERS NUMEROUS LESSONS FOR EMERGING BRANDS TODAY.
BY JONATHAN MAZE
I n 2003, Greg Dollarhyde went to Las Vegas for the annual International Council of Shopping Centers (ICSC) exhi- bition. And he was feeling pretty good. He was CEO of Baja Fresh, which at the time was the largest burrito chain in the U.S. The previous year it had been sold to Wendy’s for $275 million, which represented an obscene multiple of 33 times projected 2005 EBITDA, or earnings before taxes, depreciation and amortization. Whatever euphoria Dollarhyde was feeling would be quickly tempered, however, when he saw the competition, the McDonald’s-owned Chipotle Mexican Grill, at the event’s restaurant section. “It was ridiculous,” Dollarhyde said. “They had about 30 people in brown Chipotle shirts, lots of food and stuff. And this guy who ran development for him, with McDonald’s money, was just blowing it out. And they weren’t there selling franchises. They were there to find real estate and talk about the big picture.” The event would crystalize what would happen over the next few years. When Wendy’s bought Baja Fresh in 2002, it was bigger than Chipotle, with stronger unit volumes.
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RESTAURANT BUSINESS JANUARY 2025
ILLUSTRATION BY NICO HEINS/MIDJOURNEY IMAGE BY NICO HEINS
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