But by 2006, Wendy’s unloaded the chain for $31 million, an 89% reduction in valuation in just four years. That same year, Chipotle went public, generating a massive return for McDonald’s and be- coming one of the most successful restaurant IPOs of all time. The brand has since become a power- house. It is one of the 10 largest restaurant chains in the U.S. and remains one of the most admired stocks on Wall Street. Baja Fresh, on the other hand, is a zombie, a chain that cycled through owners and today is just a fraction of the size it was in 2002. Why Baja Fresh didn’t become Chipotle, or at least a rival on more equal footing, is an intriguing restaurant industry what-if. That it didn’t succeed offers numerous lessons for aspiring restaurant com- panies: Growth chains need invest- ment. Real estate is a major factor in success. Be careful of competi- tors. And culture matters. A lot.
said. “That really said fresh to peo- ple.” It was a revolution. Fast-food chains were largely known for their emphasis on speed and conve- nience over freshness. McDonald’s, for instance, premade its burgers and kept them in a warmer, which compromised on quality. Full-service restaurants, on the other hand, were not fast. And con- sumers were yearning for conve- nience. Fast-casual chains like Baja Fresh offered a compromise that, over time, would exert enormous influence on the restaurant busi- ness. The sector has been the source of a huge percentage of restaurant industry investment and develop- ment in the decades since then. Fast-casual chains have emerged to sell roughly everything, including burgers, pizza, and Mediterranean, Italian and Asian fare. No good idea in the restaurant industry ultimately goes uncopied. Baja Fresh certainly attracted a few competitors. In 1993, Steve Ells, a former line cook at Jeremiah Tower’s Stars in San Francisco, founded Chipotle in Denver. Two years later, invest- ment banker Anthony Miller and Robert Hauser created what would eventually become Qdoba. Dollarhyde, who had worked with a number of restaurant chains over the years, including Pizza Hut and Kenny Rogers Roasters, met the Magglos in 1996. He ultimate- ly helped recapitalize the company and later bought the chain for $27 million along with a group of inves- tors. By 2002, the company was ready to go public and filed documents with the U.S. Securities and Ex- change Commission on a $58 mil- lion IPO. THE BURRITO BATTLE There was little question who the king of the burrito world was by 2002.
It’s also a lesson in just how diffi- cult it is to pick a winner. My Tech- nomic colleague David Henkes pointed out the two chains’ 2002 standing to demonstrate that you can’t always tell who will ultimate- ly come out on top. So we sought out Dollarhyde, because we really wanted to know why the smaller chain ultimately won the race. Baja Fresh can stake every bit as big a claim to the title of fast-casual pio- neer as its rival Chipotle. The chain was founded by Jim and Linda Magglos in 1990, in New- bury Park, California. The concept promised higher-quality ingredi- ents in a limited-service format. The concept used fresh proteins for its menu. And it featured a self- serve salsa bar with authentic rec- ipes. “You walk in and smell and hear the chopping,” Dollaryhyde A BRIEF HISTORY OF BAJA FRESH
CHIPOTLE V. BAJA FRESH SYSTEM SALES
U.S. system sales for the two burrito chains have diverged sine 2003. Chi- potle has become one of the largest concepts in the country, while Baja Fresh has floundered.
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JANUARY 2025 RESTAURANT BUSINESS
PHOTO: ENVATO
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