By Andrea Felsted | Updated on Oct 08, 2026 at 06:53 PM
Starbucks Corp. has reportedly explored a takeover of Chipotle Mexican Grill Inc. in what would be the biggest restaurant deal of all time. It’s unclear whether Starbucks is still pursuing a tie-up, or if it has dropped the idea. It should do the latter and avoid creating a slop bowl with a side of cold brew.
On the face of it, a transaction between the two mega-brands does have some merits. Starbucks boss Brian Niccol ran the burrito chain from 2018 to 2024, so he knows the business well. That operating knowledge would enable him to identify cost savings from putting the two companies’ head offices and other back-office functions together. The enlarged company also would have more clout with suppliers and landlords, further helping the bottom line.
What’s more, one of Niccol’s missions at Starbucks has been to improve the coffee chain’s food offerings. Chipotle’s supply chain could bolster the menu and help to keep popular items in stock. And while Niccol didn’t want Chipotle serving breakfast when he was in charge there, it’s not a stretch to envision either chain serving a breakfast burrito alongside a Starbucks coffee.
Finally, a move on Chipotle looks opportunistic. The shares have halved over the past two years.
Now, the downsides.
Even with the slump in the target’s value, Chipotle would be a huge mouthful. Starbucks has a market capitalization of just over $100 billion. Assuming that it paid the standard takeover premium of 30%, Chipotle would be valued somewhere between $50 billion and $55 billion.
Chipotle is not highly leveraged, but even so, Starbucks would need to use its equity, and this would require backing from its investors.
That’s where the situation gets trickier. Niccol is only part way through his turnaround of the coffee chain. Thanks to sprucing up stores and simplifying the menu, plus some viral marketing and buzzy drinks like fruity Refreshers, the CEO has lifted sales. He has begun to improve margins too, but there is much further to go. Profitability remains below its level when Niccol joined, and last month Starbucks said it would close about 250 poorly performing North American stores.
Adding Chipotle might help him juice margins. But with Niccol’s revival still work in progress, he may not yet have enough credibility with investors to embark on what would be a huge transaction. It also would make it more difficult to distinguish the elements of any recovery from Niccol’s original strategic blueprint, and those from the deal. While Chipotle’s shares rose · as much as 9%, Starbucks slipped by as much as 7% to their lowest level since March after the Financial Times confirmed the deal rumors that were surfaced a day earlier by Semafor . Starbucks’ shares pared the losses, but the market’s verdict is clear.
A precedent is Estee Lauder Cos.’ €10 billion ($11.2 billion) attempt to take over Puig Brands SA earlier this year. Although Estee Lauder CEO Stephane de la Faverie’s reboot was nearing its completion, and was bearing fruit, he couldn’t convince shareholders that the owner of Tom Ford and Too Faced could successfully integrate the Spanish fragrance company. The talks ended in May.
In the restaurant world, Niccol has watched companies like Yum! Brands collect different dining concepts under one roof and make them work. (Niccol was CEO of Yum’s Taco Bell chain before he ran Chipotle.) But given where Starbucks is on its turnaround journey, it would be smarter for him to learn from Estee Lauder’s experience and avoid a grande-sized gamble right now.
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