Starbucks has been exploring a takeover of Chipotle Mexican Grill, the Financial Times reported Thursday, aiming to reunite CEO Brian Niccol with the burrito chain he ran before joining the coffee giant two years ago.
The potential deal comes as restaurant chains grapple with uncertain demand from consumers fatigued by inflation and rising operating costs, prompting companies to seek new avenues for growth while facing pressure to improve profitability.
Starbucks has been working with advisors in recent months on a proposed takeover of Chipotle, the FT reported, citing people familiar with the matter.
Starbucks and Chipotle did not immediately respond to Reuters requests for comment.
Shares of Chipotle, which has a market capitalization of nearly $39 billion, were up about 6% on Thursday, while shares of Starbucks were down about 3%. Starbucks is worth about $107 billion, according to LSEG data.
Analysts say any acquisition would likely be costly for Starbucks, which continues to invest heavily in its turnaround efforts.
“A deal could require “significant borrowing or issuing shares,” said Lale Akoner, global market strategist at eToro. “Without compelling financial arguments, investors could see the deal as a costly diversion.”
Starbucks is in the midst of a turnaround under Niccol, who has prioritized customer satisfaction through investments in staff and store improvements aimed at reducing wait times and restoring the cafe atmosphere that helped make the chain a global brand.
Since Niccol joined the company in September 2024, Starbucks has committed at least $500 million in workforce investments as part of its reorganization, helping to put pressure on profitability. In the fiscal third quarter, adjusted operating margin was 14.4%, down from 16.7% in the same quarter two years earlier, according to LSEG data.
Starbucks “reported four straight quarters of comparable sales growth under Niccol, but in July it said, ‘We still have work to do.’
“The timing would be a bit odd, given that Starbucks is in the middle of its transformation and has yet to show the margin improvement that investors are likely hoping for. Instead of reigniting the transformation, on the surface it looks more like jumping the shark,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management.
Chipotle, meanwhile, is facing slowing traffic as consumers forgo discretionary spending, while rising food and labor costs have put pressure on margins across the restaurant industry. Its shares have almost halved since Niccol left the company.
A possible deal could accelerate Chipotle’s international expansion, some analysts say.
“What I like about this potential is the opportunity for CEO Brian Niccol to leverage Starbucks’ licensing partnerships in Europe to grow Chipotle more aggressively,” said Jim Sanderson, an analyst at Northcoast Research.
As of late last year, Chipotle had nearly 4,000 restaurants in the United States and about 100 international locations. Starbucks, meanwhile, has about 40,000 stores worldwide, including about 18,000 in North America.
Niccol joined Starbucks in 2024 after spending six years at Chipotle, where he was credited with leading the company through its food safety crises and growing its digital business, helping to drive years of strong sales growth.
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